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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-K

                      Annual Report Pursuant to Section 13
                 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended                          Commission File No. 811-05703
December 31, 2001

                          Franklin Capital Corporation
               (Exact name of registrant specified in its charter)

         Delaware                                    13-3419202
--------------------------------            ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
  incorporation or organization)

450 Park Avenue, 10th Floor, New York, New York                    10022
-----------------------------------------------               ------------------
(Address of principal executive offices)                         (Zip Code)

Registrant's telephone number, including area code       (212) 486-2323
                                                     ---------------------------

         Securities registered pursuant to Section 12(b) of the Act:
                         Common Stock, $1.00 par value
         Securities registered pursuant to Section 12(g) of the Act:

                                      None

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Corporation was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X__ No ___

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this form 10-K or any amendment to this
Form 10-K. ____

The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of April 1, 2002 was $2,414,807 based on the last sale price as
quoted by The American Stock Exchange on such date (officers, directors and 5%
stockholders are considered affiliates for the purposes of this calculation).

The number of shares of common stock outstanding as of April 1, 2002 was
1,074,700.


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                                TABLE OF CONTENTS

<TABLE>
<S>      <C>
PART I

         Item 1.  Business
         Item 2.  Properties
         Item 3.  Legal Proceedings
         Item 4.  Submission of Matters to a Vote of Security Holders

PART II

         Item 5.  Market Prices of the Registrant's Common Equity and Related Stockholder
                        Matters
         Item 6.  Selected Financial Data
         Item 7.  Management's Discussion and Analysis of Financial Condition and Results of
                        Operations
         Item7a.  Quantitative and Qualitative Disclosures about Market Risk
         Item 8.  Financial Statements and Supplementary Data
         Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial
                  Disclosure

PART III

         Item 10. Directors and Officers of the Corporation
         Item 11. Executive Compensation
         Item 12. Security Ownership of Certain Beneficial Owners and Management
         Item 13. Certain Relationships and Related Transactions

PART IV

         Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K

SIGNATURES

EXHIBIT INDEX
</TABLE>

                           FORWARD LOOKING STATEMENTS

WHEN USED IN THIS ANNUAL REPORT ON FORM 10-K, THE WORDS "BELIEVES,"
"ANTICIPATES,""EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. STATEMENTS LOOKING FORWARD IN TIME ARE INCLUDED IN
THIS ANNUAL REPORT ON FORM 10-K. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS
AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY,
INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH IN "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." READERS ARE
CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH
SPEAK ONLY AS OF THE DATE HEREOF. THE CORPORATION UNDERTAKES NO OBLIGATION TO
PUBLICLY REVISE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR
CIRCUMSTANCES OCCURRING AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.



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                                     PART I

ITEM 1.           BUSINESS

         Franklin Capital Corporation (the "Registrant", "Franklin," or the
"Corporation") is a Delaware corporation operating as a business development
company ("BDC") under the Investment Company Act of 1940 (the "1940 Act"). The
Corporation's common stock, par value $1.00 per share, has been listed on The
American Stock Exchange since October 1, 1987.

         As a BDC, the Corporation's objective is to achieve capital
appreciation through long-term investments in businesses believed to have
favorable growth potential. In the past the Corporation participated in start-up
and early stage financing, expansion or growth financing, leveraged buy-out
financing and restructurings in a variety of industries. Since 1997, investment
activity has been focused principally on securities issued by companies involved
in early stage high technology sectors, such as telecommunications services,
Internet software and information services. At December 31, 2001, Franklin had
$4,098,866 in assets.

ACQUISITION OF EXCELSIOR RADIO NETWORKS

         On August 28, 2001, Franklin along with Sunshine Wireless LLC
("Sunshine") purchased the assets of Winstar Radio Networks, Global Media and
Winstar Radio Productions (collectively "WRN") for a total purchase price of
$6.25 million. Change Technology Partners, Inc. ("Change"), a public company,
provided $2.25 million of senior financing for the deal.

         The acquisition was consummated through eCom Capital Inc., subsequently
renamed Excelsior Radio Networks, Inc. ("Excelsior"), a then wholly owned
subsidiary of Franklin. Franklin's total investment was $2.5 million consisting
of $1.5 million in cash and a $1 million note payable to WRN. The note was due
February 28, 2002 with interest at 3.54% and has a right of set-off against
certain representations and warranties made by WRN. Pursuant to the terms of the
loan from Change, if Franklin and Change had not mutually agreed to a term sheet
regarding a business combination on or before December 31, 2001, Change would
have had the right to accelerate the payment of all principal and interest due
on the loan. Change also received a warrant to purchase 482,955 shares of common
stock of Excelsior Radio Networks at an exercise price of $1.125 per share. In
October 2001, a legal proceeding was filed against WRN, which also named
Franklin as a defendant, in which the representations and warranties made by WRN
have been challenged. Until the time that this action is settled the due date of
the note is extended indefinitely. Additionally, Franklin provided a $150,000
note receivable to Excelsior. In connection with this note, Franklin was granted
warrants to acquire 12,879 shares of Excelsior common stock at an exercise price
of $1.125 per share. The note bears interest at 10% per annum and is issued for
a ninety-day rolling period. As of December 31, 2001, $75,000 of this note has
been repaid. In addition, Franklin has the right to nominate four directors to
Excelsior's seven-person board of directors. Change has the right to nominate
one director to Excelsior's board.

         At the closing, Franklin entered into a services agreement with
Excelsior whereby Franklin will provide Excelsior with certain management
services. In consideration for the services provided, for a period of six months
from the closing of the transaction, Franklin will receive $30,000 per month and
be reimbursed for all direct expenses. Subsequently, Franklin's monthly fee will
be determined by a majority of the non-Franklin directors on Excelsior's board;
however, the management fee will be no less than $15,000 per month and Franklin
will continue to be reimbursed for all direct expenses. Finally, Franklin's
chief financial officer will serve as Excelsior's chief financial officer, and
his salary and benefits will be allocated between Excelsior and Franklin 80% and
20%, respectively. During the year ended December 31, 2001, Franklin earned
$120,000 in management fees and was reimbursed $40,156




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for salary and benefits for Franklin's chief financial officer, which was
recorded as a reduction of expenses of Franklin.

         On April 3, 2002, Dial Communications Global Media, Inc. ("Newco"), a
newly formed wholly-owned subsidiary of Excelsior Radio Networks, Inc.
("Excelsior"), completed the acquisition of substantially all of the assets of
Dial Communications Group, Inc. ("DCGI"), and Dial Communications Group, LLC
("DCGL" and together with DCGI, the "Dial Entities") used in connection with the
Dial Entities' business of selling advertising relating to radio programming
(the "Dial Acquisition"). The Dial Acquisition was completed pursuant to the
Asset Purchase Agreement (the "Purchase Agreement"), dated as of April 1, 2002,
by and among the Dial Entities, Franklin and Excelsior. Immediately prior to the
closing of the transactions contemplated by the Purchase Agreement, Excelsior
assigned all of its rights and obligations under the Purchase Agreement, as well
as certain other assets and liabilities relating to the portion of Excelsior's
business dedicated to the sale of advertising relating to radio programming, to
Newco.

         The total purchase price for the Dial Acquisition will be an amount
between $8,880,000 and $13,557,500. The initial consideration for the Dial
Acquisition consisted of $6,500,000 in cash and a three year promissory note
bearing interest at 4.5% issued by Newco in favor of DCGL in the aggregate
principal amount of $460,000. In addition, the Purchase Agreement provides for
the minimum payment of $1,920,000 of additional consideration, which is subject
to increase to a maximum amount of $6,597,500 based upon the attainment of
certain revenue and earnings objectives in 2002 and 2003. The additional
consideration will be comprised of both cash and two additional promissory notes
bearing interest at 4.5% issued by Newco in favor of DCGL, each with an initial
aggregate principal amount of $460,000 that is subject to increase upon the
attainment of such revenue and earnings objectives. Each of the promissory notes
issued in consideration of the Dial Acquisition is convertible into shares of
Franklin's common stock at a premium of 115% to 120% of the average closing
prices of Franklin's common stock during a specified pre and post closing
measurement period. The promissory notes are not convertible for at least a
one-year period. Excelsior has paid to Franklin an amount equal to $300,000 in
consideration of Franklin's obligations in connection with any Franklin common
stock that may be issued pursuant to the terms of the Purchase Agreement or the
promissory notes issued in consideration of the Dial Acquisition.

         Change and Sunshine, both existing stockholders of Excelsior, loaned
Excelsior an aggregate amount of $7,000,000 to finance the initial consideration
of the Dial Acquisition. The obligations under the loans are secured by certain
of Excelsior's assets.

PROPOSED MERGER WITH CHANGE TECHNOLOGY PARTNERS, INC.

         On December 4, 2001, Change and Franklin entered into a definitive
agreement and plan of merger pursuant to which Change will be merged with and
into Franklin. Under the terms of the merger agreement, Change's common
stockholders will receive one share of Franklin for each 40.985 shares of Change
common stock that they own. Change's Series A preferred stockholders will
receive one share of Franklin Series B preferred stock for each share of Change
Series A preferred stock they own. As a result of the merger, Franklin will
issue approximately 4,442,000 shares of its common stock and 645 shares of its
Series B preferred stock to Change stockholders.

         Upon closing of the transaction, Change stockholders will own
approximately 80% of Franklin common stock with the balance being held by
Franklin's current stockholders. The boards of both companies have approved the
transaction, subject to stockholder approval by both Franklin and Change common
and preferred stockholders and the satisfaction or waiver of conditions to the
merger.



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         Concurrently with the execution of the merger agreement, the parties
entered into a stock purchase agreement pursuant to which Change agreed to
purchase 250,000 shares of common stock of Excelsior from Franklin for an
aggregate purchase price of $250,000. In the event the merger between Franklin
and Change is terminated, Franklin is required to repurchase all of such common
stock from Change at a repurchase price equal to $250,000, plus interest thereon
at an annual rate of 10% from December 4, 2001 to the date of repurchase. As a
result of this transaction, Franklin owns 50.8% of Excelsior on a fully diluted
basis and has 58.2% of voting control and Change owns 16.5% on a fully diluted
basis and has 6.5% of voting control.

         The transactions contemplated by the merger agreement are intended to
result in Franklin no longer being subjected to the 1940 Act because of the
change in the nature of its business; however, Franklin cannot change the nature
of its business so as to cease to be regulated as a BDC unless such change is
approved by Franklin's stockholders in accordance with the 1940 Act. At the
special meeting to approve the merger with Change, Franklin stockholders will
also be asked to approve the withdrawal of Franklin's election to be regulated
as a BDC.

CURRENT PORTFOLIO OF INVESTMENTS

         The Corporation invests primarily in equity securities, for example
common stock, preferred stock, convertible preferred stock or other equity
derivatives such as options, warrants or rights to acquire stock. As of December
31, 2001, the Corporation's portfolio of investments is a composite of illiquid
investments in developing companies and one security in a publicly traded
development-stage company.

         The Corporation has invested a substantial portion of its assets in
private development stage or start-up companies. The current portfolio, other
than Excelsior is invested in securities issued by companies involved in early
stage high technology sectors such as wireless communications, other
telecommunications services, Internet software and information services.

Excelsior

         Franklin's most significant investment is in Excelsior. As of December
31, 2001, Franklin owned 50.8% of Excelsior on a fully diluted basis and had
58.2% of Excelsior's voting control.

         If the merger with Change is consummated, Franklin will change its name
to Excelsior Communications Corporation. The business of the new combined
company will focus on creating, producing and selling programs to the radio
industry. In order to develop its business, Excelsior Communications will expand
and grow the business of its wholly-owned subsidiary, Excelsior Radio Networks,
Inc. through acquisitions, joint ventures and other efforts.

        Excelsior is a majority-owned subsidiary of Franklin and was
incorporated in 1999 under the laws of the State of Delaware. Excelsior Radio
had no operations until August 2001 when a group led by Franklin invested in
Excelsior Radio for the purpose of acquiring certain assets from Winstar Radio
Networks, LLC, Winstar Global Media, Inc. and Winstar Radio Productions, LLC.
Excelsior Radio's principal executive offices are located at 450 Park Avenue,
10th Floor, New York, NY 10022.

         On April 3, 2002, Excelsior purchased Dial Communications, whose assets
will be combined with Excelsior's Global Media division to create a national
radio sales representation company with 2001 advertising sales revenues of
almost $50 million and a client roster of over forty independent radio
production companies.



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        Excelsior creates, produces, distributes and is a sales representative
for national radio programs and offers other miscellaneous services to the radio
industry. Excelsior offers radio programs to the industry in exchange for
commercial broadcast time, which Excelsior sells to national advertisers.
Excelsior currently offers approximately 100 programs to over 2,000 radio
stations across the country. The group of radio stations who contract with
Excelsior to broadcast a particular program constitutes a radio network.
Excelsior derives its revenue from selling the commercial broadcast time on its
radio networks to advertisers desiring national coverage.

        Excelsior currently produces 23 network programs targeting the most
popular radio formats, including adult contemporary, rock, urban oldies, album
oriented rock, comedy and country. Excelsior produces both short form and long
form programs. Short form features are two to three minute daily vignettes and
include such programs as "African Americans Making History." Long form programs,
such as "Walt `Baby' Love's The Countdown" and "Gospel Traxx," "Keeping The
Seventies Alive," "Behind the Hits" and "All Star Mix Party" are programs that
range from one to four hours in length. Excelsior offers these programs to radio
stations free of charge. The radio stations airing these programs become
networks for Excelsior to sell advertising time. Excelsior sells the commercial
broadcast time inside of these networks to advertisers desiring national
coverage.

        If the merger with Change is consummated, the combined company through
Excelsior, intends to aggressively expand its operations over the next one to
three years through acquisitions, joint ventures and internally generated
efforts. Beginning with radio syndication, the combined company's goal will be
to enhance the value of Excelsior's current network. In order to do this, the
combined company will increase its marketing efforts to radio stations across
the United States. The marketing efforts will focus primarily on the top 50
media markets. By increasing its network presence in the top 50 media markets,
the combined company will be able to charge a higher spot rate for its
advertising time. The spot rate is the price a national advertiser pays per
commercial aired on Excelsior network. Excelsior currently has a network of over
2,000 radio affiliates, and with over 10,000 radio stations in the United
States, Excelsior anticipates significantly expanding its network. However,
there can be no assurance that Excelsior will be able to expand its operations.

        Excelsior intends to focus its programming growth with both short-form
and long-form programs. For example in February 2002, Excelsior announced the
launching of two new shows: "Rock the Nation with Eddie Trunk" and the "Ross
Brittain Morning Prep Show." "Rock the Nation with Eddie Trunk" is a long-form
heavy metal music show that originates in New York. "Ross Brittain Morning Prep
Show" is a morning prep show written by Mr. Brittain, a nationally recognized
morning disc jockey. Excelsior believes that it has developed a niche in
short-form programming specifically in the prep services that it provides to
radio stations. Moreover, Excelsior believes that it has a strong presence in
urban programming. Developing more programming that complements its existing
programs will provide Excelsior with more broadcast commercial inventory to sell
on its network. A typical short form program will have 2 to 4 commercials
available for sale while a typical long form program has 8 to 48 commercials
available for sale. Excelsior intends to offer additional programming in the
future through internal development, joint ventures, and the acquisition of
businesses or assets that complement Excelsior operations.

        The creation of a radio network allows Excelsior to sell the acquired
commercial broadcast inventory to advertisers desiring national coverage. Rates
for the sale of network advertising are established on the basis of audience
delivery or ratings and the demographic composition of the listening audience.
Thus, if Excelsior expands its network, as previously discussed, it will be able
to charge more for broadcast commercial time on the network. In addition to
being able to charge more for its advertising time, by expanding its
programming, there will also be more commercial broadcast inventory available
for sale by Excelsior.



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         Excelsior sells commercial broadcast time by guaranteeing certain
ratings and demographics. There can be no assurance that the guarantee will be
achieved. If the radio network on which the commercial broadcast time is sold
does not achieve the guarantee, Excelsior may be obligated to offer the
advertiser additional advertising time on the same radio network or on an
alternate radio network. These "make goods" or "bonus spots" are the predominant
means whereby Excelsior satisfies such obligations to advertisers.
Alternatively, Excelsior could be obligated to refund or credit a portion of the
advertising revenue derived from such sales. Historically, Excelsior has not had
to refund any cash received as revenues.

         According to the National Association of Broadcasters ("NAB"), there
are approximately 10,000 commercial radio stations in the United States.
Excelsior currently has broadcast commercial time on over 2,000 of these radio
stations. Radio is one of the most cost effective forms of advertising given its
wide reach and low cost in comparison to print and television media. Radio
advertising is attractive to advertisers for a variety of reasons:

         o        short lead time between commercial production and broadcast
                  time;

         o        low cost of commercial production; and

         o        the fact that most radio listening occurs away from home,
                  closer to the point of purchase.

         Radio stations attempt to develop formats, such as news/talk, music or
other types of entertainment programming, in order to appeal to a target
listening audience that will attract local, regional, and national advertisers
to their station. Most radio stations do not have the creative and financial
resources to produce nationally accepted programming. As a result, radio
stations look to syndicators, such as Excelsior, to enhance their existing local
programming. As a national network, Excelsior licenses radio stations to air its
programs in exchange for commercial broadcast time on the station. Excelsior
then resells the advertising time to advertisers requiring national coverage.
The commercial broadcast time may vary from market to market within a specified
time period depending on the requirements of the particular radio station. The
advertising rates are based upon audience ratings for the specific demographic
the advertiser is trying to reach. These ratings are determined by Arbitron
Research Company which periodically measures the percentage of the radio
audience in a market area listening to a specific radio station during a
specific time period.

         Competition

         Competition for radio advertising is very intense. The industry is made
up of a variety of competitive forces, including: (1) ownership groups, which
own blocks of radio stations across the industry; (2) syndicators, like
Excelsior Radio, that offer programming and marketing services to radio
stations; and (3) independent producers and distributors that offer programs or
services to radio stations. Several of Excelsior's syndicating competitors also
are associated with major radio station group owners. In addition, many of these
competitors have recognized brand names and will pay compensation to radio
stations to broadcast their network commercials.

         Excelsior's largest competitors that are associated with an ownership
group are Westwood One, Premier Radio Networks, and ABC Radio Networks.
Excelsior estimates that these competitors account for about 80% of the network
advertising revenues. Excelsior is a leader of the syndication companies not
associated with an ownership group. The principal competitive factors in the
radio industry are the quality and creativity of programming and the ability to
provide advertisers with a cost-effective method of reaching the target
demographic. In this respect, Excelsior has



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positioned itself by adding top producers like Walt "Baby" Love, Mike Harvey,
John Tesh, M.G. Kelly, Ed Mann and Jefferson Pilot. Excelsior's principal
operating strategy is to continue to provide high quality programming in the
most popular formats. Excelsior has developed and expanded its network through
internal operations and will look to continue this in the future as well as
acquire assets and businesses that compliment Excelsior Radio's operations.

         Government Regulations

         Radio broadcasting and station ownership are regulated by the Federal
Communication Commission ("FCC"). Excelsior, as a producer and distributor of
radio programs, is generally not subject to regulation by the FCC. The FCC
regulates the radio stations that air Excelsior's programs. The radio station
affiliates are ultimately responsible for what material is broadcast on their
airwaves.

         Employees

         As of February 1, 2002, Excelsior had 42 full time and 45 total
employees. In addition, Excelsior maintains continuing relationships with over
40 independent hosts, writers, and producers. Excelsior is not party to any
collective bargaining agreements. Excelsior Radio believes its relationship with
its employees and independent contractors is good.

OTHER INVESTMENTS

         See " Item 7 - Management's Discussion and Analysis of Financial
Condition."

PRESENTATION OF FINANCIAL INFORMATION

         Franklin presents its financial statements in accordance with
Securities and Exchange Commission ("SEC") regulations in the format applicable
to investment companies and with accounting principles generally accepted in the
United States. Generally, investments are reported at fair market value rather
than cost, including investments in wholly-owned subsidiaries. Because of such
reporting requirements, the operating results of Excelsior are not included in
the consolidated operating results of Franklin, and instead, Franklin reports
only the fair value of its investment in such companies. If the merger with
Change is consummated, Franklin will consolidate Excelsior's operations with its
own operations and unrealized gains and losses on its other investments will be
shown as accumulated other comprehensive income (loss) in stockholders' equity.

ILLIQUIDITY OF INVESTMENTS

         A majority of the Corporation's investments consist of securities
acquired directly from the issuer in private transactions. They may be subject
to restrictions on resale or otherwise be illiquid. Franklin anticipates that
there may not be an established trading market for such securities.
Additionally, many of the securities that the Corporation may invest in will not
be eligible for sale to the public without registration under the Securities Act
of 1933, which could prevent or delay any sale by the Corporation of such
investments or reduce the amount of proceeds that might otherwise be realized
therefrom. Restricted securities generally sell at a price lower than similar
securities not subject to restrictions on resale. Further, even if a portfolio
company registers its securities and becomes a reporting corporation under the
Securities Exchange Act of 1934, the Corporation may be considered an insider by
virtue of its board representation and would be restricted in sales of such
corporation's securities.



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MANAGERIAL ASSISTANCE

         The Corporation, as a BDC, is required by the 1940 Act to make
significant managerial assistance available to its portfolio companies. "Making
available significant managerial assistance" as defined in the 1940 Act with
respect to a BDC such as Franklin means (a) any arrangement whereby a BDC,
through its directors, officers, employees or general partners, offers to
provide, and if accepted, does so provide significant guidance and counsel
concerning the management, operations or business objectives and policies of a
portfolio company; or (b) the exercise of a controlling influence over the
management or policies of a portfolio company by a BDC acting individually or as
a part of a group acting together which controls such portfolio company. The
nature, timing and amount of managerial assistance provided by the Corporation
vary depending upon the particular requirements of each portfolio company.

         In connection with its managerial assistance, the Corporation may be
represented by one or more of its officers or directors on the board of
directors of a portfolio company. The Corporation's goal has been to assist each
portfolio company in establishing its own independent and effective board of
directors and management.

         If the merger with Change is consummated, Franklin intends to focus on
creating, producing and selling programs to the radio industry, which it will
principally accomplish through Excelsior.

NEED FOR FOLLOW-ON INVESTMENTS

         Following its initial investments in portfolio companies, the
Corporation has made additional investments in such portfolio companies as
"follow-on" investments, in order to increase its investment in a portfolio
company, and exercised warrants, options or convertible securities that were
acquired in the original financing. Such follow-on investments may be made for a
variety of reasons including: 1) to increase the Corporation's exposure to a
portfolio company, 2) to acquire securities issued as a result of exercising
convertible securities that were purchased in a prior financing, 3) to preserve
or reduce dilution of Franklin's proportionate ownership in a subsequent
financing, or 4) in an attempt to preserve or enhance the value of the
Corporation's investment. There can be no assurance that the Corporation will
make follow-on investments or have sufficient funds to make such investments;
the Corporation will have the discretion to make any follow-on investments as it
determines, subject to the availability of capital resources. The failure to
make such follow-on investments may, in certain circumstances, jeopardize the
continued viability of a portfolio company and the Corporation's initial
investment, or may result in a missed opportunity for the Corporation to
increase its participation in a successful operation. Even if the Corporation
has sufficient capital to make a desired follow-on investment, the Company may,
under certain circumstances be prohibited from doing so if such an investment
would result in non-compliance with BDC regulations. If the merger with Change
is consummated, Franklin does not intend on making follow-on investments in any
portfolio company other than through Excelsior.

COMPETITION

         Numerous companies and individuals are engaged in the venture capital
business and such business is extremely competitive. The Corporation competes
for attractive investment opportunities with venture capital partnerships and
corporations, merchant banks, venture capital affiliates of industrial and
financial companies, Small Business Investment Companies, other investment
companies, pension plans, other BDCs and private individual investors. Many of
these competitors have significantly greater resources and managerial
capabilities than the Corporation to obtain access to venture capital
investments. There can be no assurance that the Corporation will be able to
compete against those competitors for attractive investments.



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         If the merger with Change is consummated, Franklin and Excelsior will
compete with radio syndication companies and independent distributors that offer
programs and services to radio stations as well as other representation firms.
Several of these competitors also are associated with major radio station group
owners. In addition, many of these competitors have recognized brand names and
will pay compensation to radio stations in order to broadcast their network
commercials.

DETERMINATION OF NET ASSET VALUE

         Security investments that are publicly traded on a national exchange or
Nasdaq Stock Market are stated at the last reported sales price on the day of
valuation, or if no sale was reported on that date, then the securities are
stated at the last quoted bid price. The Board of Directors of the Corporation
may determine, if appropriate, to discount the value where there is an
impediment to the marketability of the securities held.

         Investments for which there is no ready market are initially valued at
cost and, thereafter, at fair value based upon the financial condition and
operating results of the issuer and other pertinent factors as determined by the
Board of Directors. The financial condition and operating results have been
derived utilizing both audited and unaudited data. In the absence of a ready
market for an investment, numerous assumptions are inherent in the valuation
process. Some or all of these assumptions may not materialize. Unanticipated
events and circumstances may occur subsequent to the date of the valuation and
values may change due to future events. Therefore, the actual amounts eventually
realized from each investment may vary from the valuations shown and the
differences may be material. Franklin reports the unrealized gain or loss
resulting from such valuation in the Statements of Operations.

         If the merger with Change is consummated and Franklin withdraws its
election to be regulated as a business development company, Franklin will not be
required to determine its net asset value pursuant to the 1940 Act.

EMPLOYEES

         At December 31, 2001, the Corporation had four employees.

GOVERNMENT REGULATIONS IMPACTING FRANKLIN

         Franklin operates in a highly regulated environment as a BDC. The
following discussion generally summarizes certain regulations.

         A BDC is defined and regulated by the 1940 Act. It is an investment
company that primarily focuses on investing in or lending to small private
companies and making managerial assistance available to them. A BDC may use
capital provided by public stockholders and from other sources to invest in
long-term, private investments in growing small businesses. A BDC provides
stockholders the ability to retain the liquidity of a publicly traded stock,
while sharing in the possible benefits, if any, of investing in privately-owned
growth companies.

         As a BDC, Franklin may not acquire any asset other than "Qualifying
Assets" unless, at the time the acquisition is made, Qualifying Assets represent
at least 70% of the value of the total assets (the "70% test"). The principal
categories of Qualifying Assets relevant to Franklin's business are:

         (1)      securities purchased in transactions not involving any public
                  offering, the issuer of which is an eligible portfolio
                  company. An eligible portfolio company is defined to include
                  any issuer that (a) is organized and has its principal place
                  of business in the United States, (b) is not an




                                       10
<PAGE>

                  investment company other than an SBIC wholly-owned by a
                  business development company, and (c) does not have any class
                  of publicly traded securities with respect to which a broker
                  may extend margin credit;

         (2)      securities received in exchange for or distributed with
                  respect to securities described in (1) above or pursuant to
                  the exercise of options, warrants, or rights relating to such
                  securities; and

         (3)      cash, cash items, government securities and high quality debt
                  securities (within the meaning of the 1940 Act), maturing in
                  one year or less from the time of the investment.

         To include certain securities described above as Qualifying Assets for
the purpose of the 70% test, a BDC must make available to the issuer of those
securities significant managerial assistance such as providing significant
guidance and counsel concerning the management, operations, or business
objectives and policies of a portfolio company, or making loans to a portfolio
company.

         As a BDC, Franklin is entitled to issue senior securities in the form
of stock or senior securities representing indebtedness, including debt
securities and preferred stock, as long as each class of senior security has an
asset coverage of at least 200% immediately after each such issuance.

         Franklin has adopted a Code of Ethics that establishes procedures for
personal investments and restricts certain transactions by its personnel.

         The Corporation is permitted to adopt either a profit-sharing plan
pursuant to which management (including disinterested directors) could receive
up to 20% of the net after-tax profits of the Corporation or an option plan
covering up to 20% of the stock of the Corporation. Presently the Corporation
has incentive plans in effect covering 46,875 shares (3.8% on a diluted basis).
See "Item 11 Executive Compensation - Compensation Plans - Stock Option Plans."

RISK FACTORS

         There are significant risks inherent in the Corporation's venture
capital business. The Corporation has invested a substantial portion of its
assets in small private companies and one bulletin board listed public
corporation. Because of the speculative nature of these investments, there is
significantly greater risk of loss than is the case with traditional investment
securities. The Corporation expects that from time to time its venture capital
investments may result in a complete loss of the Corporation's invested capital
or may be unprofitable. Other investments may appear likely to become
successful, but may never realize their potential. Neither the Corporation's
investments nor an investment in the Corporation is intended to constitute a
balanced investment program. The Corporation has in the past relied and
continues to rely to a large extent upon proceeds from sales of investments
rather than investment income to defray a significant portion of its operating
expenses.

RISKS RELATED TO FRANKLIN

         INVESTING IN PRIVATE COMPANIES INVOLVES A HIGH DEGREE OF RISK. The
Corporation's portfolio consists primarily of investments in private companies.
Investments in private businesses involve a high degree of business and
financial risk, which can result in substantial losses and accordingly should be
considered speculative. There is generally no publicly available information
about the companies in which Franklin invests, and Franklin relies significantly
on the diligence of its employees and agents to obtain information in connection
with the Corporation's investment decisions. In addition, some smaller
businesses have narrower product lines and market shares than their competitors,
and may be more





                                       11
<PAGE>

vulnerable to customer preferences, market conditions or economic downturns,
which may adversely affect the return on, or the recovery of, the Corporation's
investment in such businesses.

         THE PORTFOLIO OF INVESTMENTS IS ILLIQUID. Franklin acquires most of its
investments directly from private companies. The majority of the investments in
its portfolio will be subject to restrictions on resale or otherwise have no
established trading market. The illiquidity of most of the portfolio may
adversely affect Franklin's ability to dispose of loans and securities at times
when it may be advantageous to liquidate such investments.

         FRANKLIN'S PORTFOLIO INVESTMENTS ARE RECORDED AT FAIR VALUE AS
DETERMINED BY THE BOARD OF DIRECTORS IN ABSENCE OF READILY ASCERTAINABLE PUBLIC
MARKET VALUES. Pursuant to the requirements of the 1940 Act, the Corporation's
board of directors is required to value each asset quarterly, and Franklin is
required to carry the portfolio at a fair market value as determined by the
board of directors. Since there is typically no public market for the loans and
equity securities of the companies in which Franklin makes investments, the
board of directors estimates the fair value of these loans and equity securities
pursuant to written valuation policy and a consistently applied valuation
process. Unlike banks, Franklin is not permitted to provide a general reserve
for anticipated loan losses; instead, Franklin is required by the 1940 Act to
specifically value each individual investment and record an unrealized loss for
an asset that it believes has become impaired. Without a readily ascertainable
market value, the estimated value of the portfolio of loans and equity
securities may differ significantly from the values that would be placed on the
portfolio if there existed a ready market for the loans and equity securities.
Franklin adjusts quarterly the valuation of the portfolio to reflect the board
of directors' estimate of the current realizable value of each investment in the
Corporation's portfolio. Any changes in estimated value are recorded in the
Corporation's statement of operations as "Net unrealized gains (losses)."

         FRANKLIN OPERATES IN A COMPETITIVE MARKET FOR INVESTMENT OPPORTUNITIES.
Franklin competes for investments with many other companies and individuals,
some of whom have greater resources than does Franklin. Increased competition
would make it more difficult to purchase or originate investments at attractive
prices. As a result of this competition, sometimes Franklin may be precluded
from making otherwise attractive investments.

         QUARTERLY RESULTS MAY FLUCTUATE AND MAY NOT BE INDICATIVE OF FUTURE
QUARTERLY PERFORMANCE. The Corporation's quarterly operating results could
fluctuate, and therefore, you should not rely on quarterly results to be
indicative of Franklin's performance in future quarters. Factors that could
cause quarterly operating results to fluctuate include, among others, variations
in the investment origination volume, variation in timing of prepayments,
variations in and the timing of the recognition of realized and unrealized gains
or losses, the degree to which Franklin encounters competition in its markets
and general economic conditions.

         FRANKLIN IS DEPENDENT UPON KEY MANAGEMENT PERSONNEL FOR FUTURE SUCCESS.
Franklin is dependent for the selection, structuring, closing and monitoring of
its investments on the diligence and skill of its senior management members and
other management members. The future success of the Corporation depends to a
significant extent on the continued service and coordination of its senior
management team, particularly the Chairman and Chief Executive Officer. The
departure of any of the executive officers or key employees could materially
adversely affect the Corporation's ability to implement its business strategy.
Franklin does not maintain key man life insurance on any of its officers or
employees.

         THERE IS SUBSTANTIAL DOUBT AS TO FRANKLIN'S ABILITY TO CONTINUE AS A
GOING CONCERN. Franklin has determined that it may not have sufficient cash and
cash equivalents to meet its working capital requirements over the next fiscal
year. Franklin's independent auditors have issued an opinion in




                                       12
<PAGE>

which the independent auditors have indicated that there is substantial doubt as
to Franklin's ability to continue as a going concern as noted in their
explanatory paragraph within their opinion, which is noted in Franklin's
financial statements. If the merger with Change Technology is not consummated,
Franklin will be required to seek alternative sources of financing to continue
operating through the current fiscal year. If funds were not raised, Franklin
may not be able to continue its operations. See Note 11 to Franklin's financial
statements for further information.

RISKS RELATED TO THE MERGER WITH CHANGE

         THE PROPOSED MERGER MAY NOT OCCUR. If the merger agreement is
terminated or if the merger is not completed for any reason, Franklin may not be
as well positioned to effectuate its developing business plan. The success of
Franklin depends on its ability to effectuate such a plan subsequent to the
merger. If the merger is not consummated, Franklin will be forced to reassess
its position and future business strategy. If the merger is not completed for
any reason, Franklin may be subject to a number of other risks, including:

         o        Franklin may be required under certain circumstances to pay
                  Change a termination fee of $750,000.

         o        The price of the common stock may decline.

         o        Transaction costs related to the merger, such as financial,
                  advisory, legal, accounting and printing fees must be paid
                  even if the merger is not completed. The amount of the
                  transaction costs may substantially exceed our estimates and,
                  could have an adverse effect on the business, financial
                  condition and operating results of the combined company.

         o        If the merger is terminated and the board of directors seeks
                  another merger or business combination or other sources of
                  financing, Franklin's stockholders cannot be certain that
                  Franklin will be able to find a partner or other financing.

         NO FAIRNESS OPINION WAS OBTAINED REGARDING THE MERGER. Because the
terms of the merger were negotiated at arm's length between the management of
Franklin and Change, and taking into consideration the time and expense that
would be incurred in obtaining an investment banker's opinion on the fairness of
the terms of the merger, Franklin has not sought or obtained such an opinion.
Accordingly, there can be no assurance that consummation of the merger will be
fair from a financial point of view to stockholders of Franklin.

         THE COMBINED COMPANY MAY BE UNABLE TO REALIZE THE BENEFITS ANTICIPATED
BY FRANKLIN AND CHANGE. The merger involves the integration of two companies
that have previously operated independently. There can be no assurances that the
companies will not encounter significant difficulties in integrating their
respective operations or that the benefits expected from such integration will
be realized. Incurring unexpected costs or delays in connection with such
integration could have a material adverse effect on the combined company's
business, financial condition or results of operations.

         THE COMBINED COMPANY MAY EXPERIENCE ADVERSE EFFECTS FROM COMBINING
OPERATIONS OF FRANKLIN AND CHANGE. The boards of directors approved the merger
and the merger agreement with the expectation that the merger will result in a
number of benefits, including operating efficiencies, revenue enhancements and
other synergies. However, as a result of the merger, the management of the
combined company will be faced with unfamiliar business issues. In addition, the
current management of Change,





                                       13
<PAGE>

who will take on management positions in Franklin upon consummation of the
merger, have no experience with Franklin's radio business.

ITEM 2.           PROPERTIES

         Franklin maintains its offices at 450 Park Avenue, 10th Floor, New
York, New York 10022, where it leases approximately 3,600 square feet of office
space pursuant to a lease agreement expiring December 31, 2003. As of December
31, 2001, Franklin had a sublet arrangement with one subtenant for a portion of
Franklin's office space.

ITEM 3.           LEGAL PROCEEDINGS

         On October 15, 2001, Jeffrey A. Leve and Jeffrey Leve Family
Partnership, L.P. filed a lawsuit against Franklin, Sunshine Wireless, LLC
("Sunshine") and four other defendants affiliated with Winstar Communications,
Inc. in the Superior Court of the State of California for the County of Los
Angeles. The lawsuit, which has subsequently been removed to the United States
District Court for the Central District of California, alleges that the Winstar
defendants conspired to commit fraud and breached their fiduciary duty to the
plaintiffs in connection with the acquisition of the plaintiffs' radio
production and distribution business. The complaint further alleges that
Franklin and Sunshine joined the alleged conspiracy. The business was initially
acquired by certain entities affiliated with Winstar Communications and,
subsequently, the assets of such business were sold to Franklin and Sunshine.
Concurrently with such purchase, Franklin transferred such assets to Excelsior.
The plaintiffs seek recovery of damages in excess of $10,000,000, costs and
attorneys' fees. On January 7, 2002, Franklin filed a motion to dismiss the
lawsuit or, in the alternative, to transfer venue to the United States District
Court of the Southern District of New York. The plaintiffs filed a motion
opposing Franklin's request on January 28, 2002. Franklin's motion for dismissal
was granted on February 25, 2002, due to improper venue. The plaintiff may
refile in New York. Franklin believes that plaintiffs' claims are without merit
and intends to defend this lawsuit vigorously, though the outcome cannot be
predicted at this time. An unfavorable outcome in this lawsuit may have a
material adverse effect on Franklin's business, financial condition and results
of operations.

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         On October 11, 2001 the Corporation held an annual meeting of its
common and preferred stockholders. Stephen L. Brown, Irving Levine, Jonathan A.
Marshall, Michael P. Rolnick, Peter D. Gottlieb and David T. Lender were elected
to serve as directors of the Corporation for a term of one year or until their
successors are duly elected and qualified. The number of common and preferred
shares, voting together as a single class, voted for and against each director
is as follows:

<TABLE>
<CAPTION>
------------------------------- ---------------------------- ----------------------------
                                FOR                          WITHHELD
------------------------------- ---------------------------- ----------------------------
<S>                             <C>                          <C>
Stephen L. Brown                975,456                        6,725
------------------------------- ---------------------------- ----------------------------
David Lender                    982,106                           75
------------------------------- ---------------------------- ----------------------------
Jonathan A. Marshall            981,981                          200
------------------------------- ---------------------------- ----------------------------
Michael P. Rolnick              982,106                           75
------------------------------- ---------------------------- ----------------------------
Irving Levine*                   11,250                            0
------------------------------- ---------------------------- ----------------------------
Peter D. Gottlieb*               11,250                            0
------------------------------- ---------------------------- ----------------------------
</TABLE>

* - Only preferred stockholders voted for these directors.

         In addition, stockholders were asked to ratify the selection of Ernst &
Young LLP as the Corporation's independent auditors for the fiscal year ended
December 31, 2001. 931,848 shares voted




                                       14
<PAGE>

for, 1,125 shares voted against and 52,883 shares abstained from ratifying Ernst
& Young LLP as the Corporation's independent auditors.

                                     PART II

ITEM 5. MARKET PRICES OF THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

STOCK TRANSFER AGENT

         Mellon Investor Services, 85 Challenger Road, Overpack Center,
Ridgefield Park, NJ 07660 (Telephone (800) 851-9677) serves as transfer agent
for the Corporation's common stock. Certificates to be transferred should be
mailed directly to the transfer agent, preferably by registered mail.

MARKET PRICES

         The Corporation's common stock is traded on The American Stock Exchange
under the symbol "FKL." The following table sets forth the range of the high and
low selling price of the Corporation's shares during each quarter of the last
two years, as reported by the American Stock Exchange.

<TABLE>
<CAPTION>
         2001 QUARTER ENDING                         LOW               HIGH
         -------------------                         ---               ----
         <S>                                         <C>               <C>
         March 31                                    $  5.875          $   8.125
         June 30                                     $  4.875          $   5.750
         September 30                                $  4.650          $   5.050
         December 31                                 $  4.090          $   4.870
</TABLE>

<TABLE>
<CAPTION>
         2000 QUARTER ENDING                         LOW               HIGH
         -------------------                         ---               ----
         <S>                                         <C>               <C>
         March 31                                    $  6.833          $ 31.000
         June 30                                     $  7.333          $ 21.000
         September 30                                $  8.250          $  9.500
         December 31                                 $  7.500          $  8.750
</TABLE>

DIVIDENDS

         The Corporation paid $115,150 and $98,633 in dividends to preferred
stockholders during 2001 and 2000, respectively, and has not paid any dividends
to common stockholders during the past two years.

RECENT SALES OF UNREGISTERED SECURITIES

         On February 22, 2000, the Corporation issued 16,450 shares of
unregistered convertible preferred stock under Section 4 (2) of the Securities
Exchange Act of 1934 as a private placement at a price of $100 per share. The
convertible preferred stock was issued with a 7% coupon convertible into the
Corporation's common stock at $13.33 per share. The preferred stock is
convertible into common stock at the discretion of the preferred stock holder
beginning one year after issuance and continuing until 10 years after issuance.

         The preferred stock offered was purchased by officers, directors and
other accredited investors. (See Item 12 -- Security Ownership of Certain
Beneficial Owners and Management).



                                       15
<PAGE>

STOCKHOLDERS

         As of April 1, 2002, there were 583 registered shareholders of record
of the Corporation's common stock. The Corporation has 5,000,000 shares of
common stock authorized, of which 1,505,888 are issued and 1,074,700 are
outstanding at April 1, 2002. The Corporation has 5,000,000 shares of
convertible preferred stock authorized, of which 16,450 were issued on February
22, 2000 and are outstanding at April 1, 2002. (See Item 7 Management's
Discussion and Analysis of Financial Condition - Liquidity and Capital
Resources.)

ITEM 6.           SELECTED FINANCIAL DATA

         The following tables should be read in conjunction with the Financial
Statements included in Item 8 of this form 10-K.

BALANCE SHEET DATA
FINANCIAL POSITION AS OF DECEMBER 31:

<TABLE>
<CAPTION>
                                                      2001            2000           1999           1998           1997*
                                                    ----------     ----------     ----------     ----------     ----------
<S>                                                 <C>            <C>            <C>            <C>            <C>
Total assets                                        $4,098,866     $5,766,712     $8,995,965     $6,548,696     $7,718,458

Liabilities                                         $1,177,121     $  187,632     $  555,583     $  233,143     $  375,326

Net asset value                                     $2,921,745     $5,579,080     $8,440,382     $6,315,553     $7,343,132

Net asset value per share attributable to common

stockholders                                        $     1.19     $     3.58     $     7.70     $     5.61     $     6.11

Net asset value per share, as if converted basis    $     2.44     $     4.57     $     7.55     $     5.61     $     6.11

Shares outstanding                                   1,074,700      1,098,200      1,095,882      1,126,029      1,201,797
</TABLE>

OPERATING DATA FOR THE YEAR ENDED DECEMBER 31:

<TABLE>
<CAPTION>
                                                      2001           2000**          1999          1998          1997
                                                   -----------    -----------    -----------    -----------    -----------
<S>                                                <C>            <C>            <C>            <C>            <C>
Investment income                                  $   192,697    $   115,015    $    72,382    $   263,323    $   497,021

Expenses                                           $ 1,579,382    $ 2,372,797    $ 1,621,780    $ 1,620,408    $ 2,400,850

Net investment loss from operations                $(1,386,685)   $(2,257,782)   $(1,549,398)   $(1,357,085)   $(1,903,829)

Net realized gain on portfolio of
     investments, net of current income taxes      $   522,131    $ 1,195,875    $   688,259    $ 1,628,004    $ 3,105,165

Net (decrease) increase in
     unrealized appreciation of investments, net
     of deferred income taxes                      $(1,553,756)   $(3,365,513)   $ 3,086,958    $(1,015,091)   $(1,130,879)
</TABLE>



                                       16
<PAGE>
<TABLE>
<S>                                                <C>            <C>            <C>            <C>            <C>
Net (decrease) increase in net
     assets attributable to common stockholders    $(2,533,460)   $(4,526,053)   $ 2,225,819    $  (744,172)   $    70,457

Basic net (decrease) increase in net
       assets from operations per weighted
       average number of shares outstanding        $     (2.34)   $     (4.14)   $      1.98    $     (0.63)   $      0.06

Diluted net (decrease) increase in
     net assets from operations per weighted
     average number of shares outstanding          $     (2.34)   $     (4.14)   $      1.98    $     (0.63)   $      0.06
</TABLE>


         *        A special distribution of $2.17 per share was declared in July
                  1997.

         **       Expenses in the year ended December 31, 2000 include non-cash
                  compensation of $349,644 due to the exercise of employee
                  incentive stock options.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

The information contained in this section should be read in conjunction with the
Corporation's 2001 Financial Statements and Notes thereto in Item 8.

CRITICAL ACCOUNTING POLICIES

         Franklin's discussion and analysis of its financial condition and
results of operations are based upon the Corporation's financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires the Corporation to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses and related
disclosure of contingent assets and liabilities. On an ongoing basis, the
Corporation evaluates its estimates, the most critical of which are those
related to the fair value of the portfolio of investments.

STATEMENT OF OPERATIONS

         The Corporation accounts for its operations under accounting principles
generally accepted in the United States for investment companies. On this basis,
the principal measure of its financial performance is captioned "Net (decrease)
increase in net assets from operations," which is composed of the following:

         o        "Net investment loss from operations," which is the difference
                  between the Corporation's income from interest, dividends and
                  fees and its operating expenses;

         o        "Net realized gain on portfolio of investments," which is the
                  difference between the proceeds received from dispositions of
                  portfolio securities and their stated cost;

         o        any applicable income tax (benefits) provisions; and

         o        "Net (decrease) increase in unrealized appreciation of
                  investments," which is the net change in the fair value of the
                  Corporation's investment portfolio, net of any (decrease)
                  increase in deferred income taxes that would become payable if
                  the unrealized appreciation were realized through the sale or
                  other disposition of the investment portfolio.



                                       17
<PAGE>

         "Net realized gain (loss) on portfolio of investments" and "Net
(decrease) increase in unrealized appreciation of investments" are directly
related. When a security is sold to realize a gain, the net unrealized
appreciation decreases and the net realized gain increases. When a security is
sold to realize a loss, the net unrealized appreciation increases and the net
realized gain decreases.

FINANCIAL CONDITION

         The Corporation's total assets and net assets were, respectively,
$4,098,866 and $2,921,745 at December 31, 2001 versus $5,766,712 and $5,579,080
at December 31, 2000. Net asset value per share attributable to common
stockholders and on an as if converted basis was $1.19 and $2.44 at December 31,
2001, respectively, versus $3.58 and $4.57, respectively, at December 31, 2000.
The change in total assets and net assets is primarily attributable to a
decrease in the fair market value of the Corporation's investments.

         The Corporation's financial condition is dependent on the success of
its investments. A summary of the Corporation's investment portfolio is as
follows:

<TABLE>
<CAPTION>
                                                  DECEMBER 31, 2001               DECEMBER 31, 2000
                                                  -----------------               -----------------
<S>                                                  <C>                             <C>
Investments, at cost                                 $ 3,911,105                     $ 3,627,390
Unrealized (depreciation) appreciation,
         net of deferred taxes                          (182,233)                      1,371,522
                                                     -----------                     -----------
Investments, at fair value                           $ 3,728,872                     $ 4,998,912
                                                     ===========                     ===========
</TABLE>

INVESTMENTS

         The Corporation's financial condition is dependent on the success of
its investments. The Corporation has invested a substantial portion of its
assets in thinly capitalized development stage companies that may lack
management depth and have little history of operations.

         Alacra Corporation

         At December 31, 2001, the Corporation had an investment in Alacra
Corporation ("Alacra"), valued at $1,000,000, which represents 24.4% of the
Corporation's total assets and 34.2% of its net assets. Alacra, headquartered in
New York and London, is a leading provider of Internet-based online information
services. Alacra provides a service called .xls, which aggregates and
cross-indexes over 70 premier business databases, delivering information
directly to Microsoft Excel, HTML, Microsoft Word or PDF formats at the desktop.
Other products include privatesuite(TM), a fast, easy, cost-effective way to
identify and retrieve profiles of privately held companies around the world;
compbook(TM), a tool for company peer analysis; and Portal BTM, a fully
integrated business information portal.

         On April 20, 2000, the Corporation purchased $1,000,000 worth of Alacra
Series F Convertible Preferred Stock. In connection with this investment,
Franklin was granted observer rights on Alacra board of directors meetings.

         Excelsior Radio Networks

         At December 31, 2001, the Corporation had an investment in Excelsior
Radio Networks, Inc. ("Excelsior"), formerly known as eCom Capital, Inc., valued
at $2,325,000, which represents 56.7% of the Corporation's total assets and
79.6% of its net assets. Excelsior produces and syndicates programs and services
heard on more than 2,000 radio stations nationwide across most major formats.
Through its





                                       18
<PAGE>

Global Media sales unit, Excelsior sells the advertising inventory radio
stations provide in exchange for the Excelsior content. The programming and
content includes prep services as well as long form and short form programming.
Additionally, Global Media has a number of independent producer clients, which
range from talk and music programs to news and traffic services. See Item 1
Business - Current Portfolio Investments - Excelsior.

         On August 28, 2001, the Corporation purchased $2,500,000 worth of
Excelsior Common Stock and issued a secured note for $150,000. In connection
with this note, Franklin was granted warrants to acquire 12,879 shares of
Excelsior common stock at an exercise price of $1.125 per share. On November 28,
2001, $75,000 of the secured note was paid back to Franklin. As part of the
merger agreement between Franklin and Change, Franklin sold to Change 250,000
shares of its common stock in Excelsior.

         On April 3, 2002, Excelsior purchased Dial Communications, whose assets
will be combined with Excelsior's Global Media Division to create a national
radio sales representation company with 2001 advertising sales revenues of
almost $50 million and a client roster of over forty independent radio
production companies.

         Excom Ventures, LLC

         At December 31, 2001, the Corporation had an investment in Excom
Ventures, LLC ("Excom"). Excom was formed as a limited liability holding company
for the purpose of investing in Expert Commerce, Inc. ("Expert Commerce").
Expert Commerce is a Business-to-Business purchase evaluation engine that
simulates the way people make decisions. Based on intelligent and proven
technology, the engine helps structure complex decisions and provides an audit
trail to justify transactions, empowering buyers to make purchase decisions with
confidence.

         On June 26, 2000, the Corporation purchased $140,000 worth of Excom
Units. At December 31, 2001, the Board of Franklin has determined that this
investment has no value and has marked these securities down to reflect that
determination.

         Primal Solutions, Inc.

         The Corporation has an investment in Primal Solutions, Inc. ("Primal")
valued at $19,197 at December 31, 2001, which represents 0.5% of the
Corporation's total assets and 0.7% of its net assets. Primal's common stock is
quoted on the OTC Electronic Bulletin Board under the symbol "PSOL." Primal,
based in Irvine, California, is a leading provider of Web-based integrated
customer management and intelligence solutions that allow rapidly evolving
communications and Internet service providers to stay connected with and grow
their customers. It does this through an integrated suite of applications that
can track and analyze customer behavior and preferences, collect usage
information, and support billing and customer care back-office requirements,
including those of emerging IP billing markets.

         On February 13, 2001, Primal was spun-off from Avery Communications,
Inc. ("Avery"). As a result of this spin-off Franklin received 1,533,938 fully
registered and marketable shares of common stock of Primal at an allocated cost
basis of $245,430. During the year ended December 31, 2001, Franklin sold
1,150,000 shares of common stock realizing a loss of $130,139.

         Structured Web, Inc.

         At December 31, 2001, the Corporation had an investment in Structured
Web, Inc. ("Structured Web") valued at $350,000, which represents 8.5% of the
Corporation's total assets and 12.0% of its net assets. Structured Web develops
web building blocks to enable small businesses to create and manage their own
digital nerve system easily and at an affordable price. Structured Web's
object-based proprietary technology enables customers to choose from a growing
selection of "WebBlocks" including content, communication, commerce and
services.



                                       19
<PAGE>

         On August 8, 2000, the Corporation purchased $350,000 worth of
Structured Web convertible preferred stock. In connection with this investment,
Franklin was granted observer rights on Structured Web's board of directors.

RESULTS OF OPERATIONS

         Investment Income and Expenses

         The Corporation's principal objective is to achieve capital
appreciation through long-term investments in businesses believed to have
favorable growth potential. Therefore, a significant portion of the investment
portfolio is structured to maximize the potential for capital appreciation and
provides little or no current yield in the form of dividends or interest. The
Corporation earns interest income from loans, preferred stock, corporate bonds
and other fixed income securities. The amount of interest income varies based
upon the average balance of the Corporation's fixed income portfolio and the
average yield on this portfolio.

         The Corporation had interest and dividend income of $72,697 in 2001,
$93,015 in 2000, and $72,382 in 1999. The decrease in 2001 from 2000 was the
result of the sale of the Avery preferred stock on February 1, 2001. The
Corporation earned $120,000 in management fees from its majority-owned affiliate
Excelsior. The Corporation had $22,000 in other income during 2000 representing
a patent infringement settlement.

         Operating expenses were $1,579,382 in 2001, $2,372,797 in 2000, and
$1,621,780 in 1999. A majority of the Corporation's operating expenses consist
of employee compensation (which for 2000 included a non-cash charge of $349,644
due to the cashless exercise of incentive options), office and rent expense,
other expenses related to identifying and reviewing investment opportunities and
professional fees. Professional fees consist of general legal fees, audit and
tax fees, consulting fees and investment related legal fees.

         Net investment losses from operations were $1,386,685 in 2001,
$2,257,782 in 2000, and $1,549,398 in 1999.

         The Corporation has relied and continues to rely to a large extent upon
proceeds from sales of investments rather than investment income to defray a
significant portion of its operating expenses. Because such sales cannot be
predicted with certainty, the Corporation attempts to maintain adequate working
capital to provide for fiscal periods when there are no such sales.

         Net Realized Gains and Losses on Portfolio of Investments

         During the three years ended December 31, 2001, 2000, and 1999, the
Corporation realized net gains before taxes of $520,455, $1,215,875, and
$688,259, respectively, from the disposition of various investments.

         During 2001, Franklin realized a gain of $598,617 from the sale of
434,024 shares of Go America, Inc. ("Go America") common stock, an investment
Franklin has held since 1995, a gain of $87,013 from the sale of 1,183,938
shares of Avery common stock, and a gain of $50,750 from the sale of 350,000
shares of Avery preferred stock. These gains were offset by a loss of $130,139
from the sale of 1,150,000 shares of Primal common stock as well as a realized
net loss of $85,786 from the sale of various marketable securities.



                                       20
<PAGE>

         During 2000, Franklin realized a gain of $956,576 from the sale of
241,131 shares of Communication Intelligence Corporation ("CIC") common stock,
an investment Franklin has held since 1996, a gain of $161,531 from the sale of
202,000 shares of Avery common stock, and a gain of $843,663 from the sale of
105,760 shares of Go America common stock. Additionally, gains of $3,819 were
realized on tail payments from partnerships liquidated during 1999. These gains
were offset by a loss of $440,057 from the write-off of the Corporation's
investment in eMattress.com and a loss of $300,626 from the write-off of the
Corporation's investment in TradingNews, Inc as well as a realized net loss of
$9,031 from the sale of various marketable securities.

         During 1999, Franklin realized a gain of $922,118 from the sale of
775,000 shares of CIC common stock as well as a gain of $92,300 from the
liquidation of Seneca and $36,622 from the liquidation of the investment in the
FMA High Yield Income Limited Partnership. Additionally, the Corporation
realized $73,797 in gains from the sale of various marketable securities. These
gains were offset by a loss of $226,023 from the liquidation of the
Corporation's investment in Codman Research Inc., and $148,014 from the write
off of the Corporation's investment in Pacific Healthcare Group. Additionally,
the Corporation realized losses of $62,541 from the sale of various marketable
securities.

         Unrealized Appreciation of Investments

         Unrealized appreciation of investments, net of deferred taxes,
decreased by $1,553,756 during the year ended December 31, 2001, primarily from
the sale of Franklin's position in Go America common stock and the sale of
Franklin's position in Avery Communications. The changes in the value of the
investments occurred during a period of extreme volatility of publicly traded,
small capitalization, high technology stocks. The volatility of the overall
market will continue to impact on the performance of the Corporation's
investments. The value of the Corporation's investments will vary on a quarterly
basis.

         Unrealized appreciation of investments, net of deferred taxes,
decreased by $3,365,513 during the year ended December 31, 2000, primarily from
the decreased value of Avery Communications and the sale of Franklin's position
in CIC common stock and CIC Standby Ventures, L.P. ("CIC Ventures").

         Unrealized appreciation of investments, net of deferred taxes,
increased by $3,086,958 during the year ended December 31, 1999, primarily from
the increased value of CIC and CIC Ventures and the increased value of Go
America.

         Taxes

         Franklin does not qualify for pass through tax treatment as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code for income
tax purposes. The Corporation is taxed under Regulation C of the Code and,
therefore, it is subject to federal income tax on the portion of its taxable
income and net capital as well as such distribution to its stockholders.

         Liquidity and Capital Resources

         The accompanying financial statements have been prepared assuming that
the Corporation will continue as a going concern. For the years ended December
31, 2001, 2000 and 1999, the Corporation has incurred a net investment loss from
operations of approximately $1.4 million, $2.3 million and $1.5 million,
respectively, a net (decrease) increase in net assets from operations of
approximately $(2.4 million), $(4.4 million) and $2.2 million, respectively, and
has a working capital deficiency of approximately $800,000 at December 31, 2001.
These conditions raise substantial doubt about the Corporation's ability to
continue as a going concern. The Corporation has entered into a proposed merger
with Change Technology Partners, Inc., which management believes will alleviate
the doubt as to whether





                                       21
<PAGE>

the Corporation, as the surviving company in the merger, will be able to
continue as a going concern, although there can be no assurance in this regard.
See Note 11 to the Franklin financial statements. The Corporation expects the
merger to occur on or before June 30, 2002. The merger is subject to a number of
conditions, however, and therefore there can be no assurance that the merger
will be completed on or before June 30, 2002 or at all. In the event merger is
not completed, in order to alleviate the substantial doubt about the
Corporation's ability to continue as a going concern, the Corporation would
likely seek another merger partner or seek alternative financing. There can be
no assurance that the Corporation would be able to find a suitable merger
partner or be able to obtain alternative financing. The financial statements do
not include any adjustments to reflect the possible future effects on the
recoverability of assets or the amounts of liabilities that may result from the
outcome of this uncertainty.

         On February 22, 2000, the Corporation issued $1,645,000 of convertible
preferred stock. The stock was issued at a price of $100 per share and has a 7%
quarterly dividend. The stock is convertible into Franklin common stock at a
conversion price of $13.33 per share.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Corporation's business activities contain elements of risk. The
Corporation considers a principal type of market risk to be valuation risk.
Investments are stated at "fair value" as defined in the 1940 Act and in the
applicable regulations of the Securities and Exchange Commission. All assets are
valued at fair value as determined in good faith by, or under the direction of,
the Board of Directors.

         Neither the Corporation's investments nor an investment in the
Corporation is intended to constitute a balanced investment program. The
Corporation has exposure to public-market price fluctuations to the extent of
its publicly traded portfolio.

         The Corporation has invested a substantial portion of its assets in
private development stage or start-up companies. These private businesses tend
to be thinly capitalized, unproven, small companies that lack management depth
and have not attained profitability or have no history of operations. Because of
the speculative nature and the lack of public market for these investments,
there is significantly greater risk of loss than is the case with traditional
investment securities. The Corporation expects that some of its venture capital
investments will be a complete loss or will be unprofitable and that some will
appear to be likely to become successful but never realize their potential.

         Because there is typically no public market for the equity interests of
the small companies in which the Corporation invests, the valuation of the
equity interests in the Corporation's portfolio is subject to the estimate of
the Corporation's Board of Directors. In making its determination, the Board may
consider valuation information provided by an independent third party or the
portfolio company itself. In the absence of a readily ascertainable market
value, the estimated value of the Corporation's portfolio of equity interests
may differ significantly from the values that would be placed on the portfolio
if a ready market for the equity interests existed. Any changes in valuation are
recorded in the Corporation's consolidated statements of operations as "Net
increase (decrease) in unrealized appreciation on investments."



                                       22
<PAGE>

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          FRANKLIN CAPITAL CORPORATION

                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

<TABLE>
<CAPTION>
                                                                              Page
                                                                              ----
<S>                                                                           <C>
Report of Ernst & Young LLP..........................................         24

Balance Sheets as of
         December 31, 2001 and 2000..................................         25

Statements of Operations for the years
         ended December 31, 2001, 2000 and 1999......................         26

Statements of Cash Flows for the years
         ended December 31, 2001, 2000 and 1999......................         27

Statements of Changes in Net Assets for the years
         ended December 31, 2001, 2000 and 1999......................         28

Financial Highlights for the years ended December 31,
         2001, 2000, 1999, 1998 and 1997.............................         29

Portfolio of Investments as of
         December 31, 2001...........................................         30

Notes to Financial Statements........................................        31-42
</TABLE>

The schedules for which provision is made in the applicable regulation of the
Securities and Exchange Commission are not required under the related
instruction or are inapplicable and, therefore, have been omitted


                                       23
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS

To the Stockholders and Board of Directors
Franklin Capital Corporation

We have audited the accompanying balance sheets of Franklin Capital Corporation
as of December 31, 2001 and 2000, including the portfolio of investments as of
December 31, 2001, and the related statements of operations, cash flows and
changes in net assets for each of the three years in the period ended December
31, 2001, and the financial highlights for each of the four years in the period
ended December 31, 2001. These financial statements and financial highlights are
the responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included the
confirmation of securities owned as of December 31, 2001 by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Franklin Capital Corporation at December 31, 2001 and 2000, the results of its
operations, cash flows and changes in net assets for each of the three years in
the period ended December 31, 2001, and the financial highlights for each of the
four years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming that Franklin
Capital Corporation will continue as a going concern. As more fully described in
Note 1, the Corporation has incurred recurring operating losses and has a
working capital deficiency. These conditions raise substantial doubt about the
Corporation's ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1 and include a proposed
merger with Change Technology Partners, Inc., which is more fully described in
Note 11. The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability of assets or the amounts of
liabilities that may result from the outcome of this uncertainty.


                                                     ERNST & YOUNG LLP
New York, New York
February 1, 2002, except for Note 13
   as to which the date is April 3, 2002

                                       24




<PAGE>
                          FRANKLIN CAPITAL CORPORATION
================================================================================

BALANCE SHEETS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
DECEMBER 31,                                                                          2001                   2000
---------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>                     <C>
ASSETS

Marketable investment securities, at market value (cost: December 31,
    2001 - $34,675; December 31, 2000 - $122,231)  (Note 2)                        $   34,675             $  112,019
Investments, at fair value (cost: December 31, 2001 - $3,876,430;
    December 31, 2000 - $3,505,159)  (Note 2)
         Excelsior Radio Networks, Inc.                                             2,325,000                      -
         Avery Communications, Inc.                                                         -              1,198,389
         Excom Ventures, LLC                                                                -                140,000
         Other investments                                                          1,369,197              3,548,504
                                                                                    ---------              ---------
                                                                                    3,694,197              4,886,893
                                                                                    ---------              ---------

Cash and cash equivalents (Note 2)                                                    279,728                647,565
Other assets                                                                           90,266                120,235
                                                                                   ----------             ----------

                                                                                   $4,098,866             $5,766,712
                                                                                   ==========             ==========
TOTAL ASSETS
---------------------------------------------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Notes payable (Note 6)                                                             $1,000,000               $      -
Accounts payable and accrued liabilities                                              177,121                187,632
                                                                                    ---------               --------

TOTAL LIABILITIES                                                                   1,177,121                187,632
                                                                                    ---------               --------

Commitments and contingencies  (Note 5)

STOCKHOLDERS' EQUITY

Convertible preferred stock, $1 par value, cumulative 7% dividend:
    5,000,000 shares authorized; 16,450 issued and outstanding at
    December 31, 2001 and 2000
    (Liquidation preference $1,645,000) (Note 4)                                       16,450                 16,450
Common stock, $1 par value: 5,000,000 shares authorized;
    1,505,888 shares issued: 1,074,700 and 1,098,200 shares outstanding
    at December 31, 2001 and 2000, respectively  (Note 7)                           1,505,888              1,505,888
Paid-in capital                                                                    10,271,610             10,271,610
Unrealized (depreciation) appreciation of investments,
    net of deferred income taxes  (Notes 2 and 3)                                    (182,233)             1,371,522
Accumulated deficit                                                                (6,170,614)            (5,190,908)
                                                                                  -----------            -----------

                                                                                    5,441,101              7,974,562
Deduct: 431,188 and 407,688 shares of common stock held in treasury,
    at cost, at December 31, 2001 and 2000, respectively  (Note 4)                 (2,519,356)            (2,395,482)
                                                                                  -----------            -----------

Net assets (Note 9 for per share information)                                       2,921,745              5,579,080
                                                                                  -----------            -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                        $ 4,098,866            $ 5,766,712
                                                                                  ===========            ===========
---------------------------------------------------------------------------------------------------------------------
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       25
<PAGE>

                          FRANKLIN CAPITAL CORPORATION
================================================================================

 STATEMENTS OF OPERATIONS

--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,                                                       2001               2000              1999
                                                                                ----------------------------------------------------
<S>                                                                                   <C>                <C>               <C>
INVESTMENT INCOME
    Interest on short term investments and money market accounts                      $45,953            $51,015           $30,382
    Dividend income                                                                    26,744             42,000            42,000
    Income from majority-owned affiliates  (Note 6)                                   120,000                  -                 -
    Other income                                                                            -             22,000                 -
                                                                                 ------------       ------------        ----------

                                                                                      192,697            115,015            72,382
                                                                                 ------------       ------------        ----------

EXPENSES

    Salaries and employee benefits  (Note 7)                                          933,081          1,419,941           870,820
    Professional fees                                                                 168,618            367,629           350,998
    Rent  (Note 5)                                                                    126,134            104,332            83,905
    Insurance                                                                          41,955             42,314            41,301
    Directors' fees                                                                    18,802             67,981            48,850
    Taxes other than income taxes                                                      40,394             45,306            28,980
    Newswire and promotion                                                              5,707              6,823             4,424
    Depreciation and amortization                                                      19,994             21,468            22,402
    General and administrative                                                        224,697            297,003           170,100
                                                                                 ------------       ------------        ----------

                                                                                    1,579,382          2,372,797         1,621,780
                                                                                 ------------       ------------        ----------

Net investment loss from operations                                                (1,386,685)        (2,257,782)       (1,549,398)

Net realized gain (loss) on portfolio of investments: Investment securities:

          Affiliated                                                                    7,613          (278,526)                 -
          Unaffiliated                                                                512,842          1,490,582           559,337
                                                                                 ------------       ------------        ----------
     Total investment securities                                                      520,455          1,212,056           559,337

     Other than investment securities                                                       -              3,819           128,922
                                                                                            -       ------------        ----------

Net realized gain on portfolio of investments                                         520,455          1,215,875           688,259

(Benefit) provision for current income taxes                                           (1,676)            20,000                 -
                                                                                 ------------       ------------        ----------

Net realized loss                                                                    (864,554)        (1,061,907)         (861,139)

Increase (decrease) in unrealized appreciation of investments, net of deferred
    income taxes:

     Investment securities:
          Affiliated                                                                  279,699         (1,771,744)         (196,487)
          Unaffiliated                                                             (1,833,455)          (992,907)        2,790,030
                                                                                 ------------       ------------        ----------
     Total investment securities                                                   (1,553,756)        (2,764,651)        2,593,543

     Other than investment securities                                                       -           (951,862)          844,415

     Deferred income tax benefit (expense)                                                  -            351,000          (351,000)
                                                                                            -       ------------        ----------

(Decrease) increase in unrealized appreciation of investments,
 net of deferred income taxes                                                      (1,553,756)        (3,365,513)        3,086,958
                                                                                 ------------       ------------        ----------

Net (decrease) increase in net assets from operations                              (2,418,310)        (4,427,420)        2,225,819

Preferred dividends                                                                   115,150             98,633                 -
                                                                                 ------------       ------------                 -

Net (decrease) increase in net assets attributable
   to common stockholders                                                         ($2,533,460)       ($4,526,053)       $2,225,819
                                                                                 ============       ============        ==========

Basic and diluted net (decrease) increase in net assets per share
  attributable to common stockholders (Note 8)                                         ($2.34)            ($4.14)            $1.98
                                                                                 ============       ============        ==========
</TABLE>

--------------------------------------------------------------------------------

   The accompanying notes are an integral part of these financial statements.



                                       26
<PAGE>

                          FRANKLIN CAPITAL CORPORATION
================================================================================

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,                                                      2001              2000            1999
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>               <C>              <C>
Cash flows from operating activities:

  Net (decrease) increase in net assets from operations                           $(2,418,310)      $(4,427,420)     $ 2,225,819
  Adjustments to reconcile net (decrease) increase in net assets from operations
    to net cash used in operating activities:
      Depreciation and amortization                                                     19,994            21,468          22,402
      Non-cash compensation expense from cashless exercise of officer options                -           349,644               -
      Decrease (increase) in unrealized appreciation of investments,
           net of deferred taxes                                                     1,553,756         3,365,513      (3,086,958)
      Net realized gain on portfolio of investments, net of current income taxes      (522,131)       (1,195,875)       (688,259)
      Changes in operating assets and liabilities:
        Decrease (increase) in receivable from disposal of investments                       -           231,308        (231,308)
        Decrease (increase) in other assets                                              9,963            (7,763)        169,083
        Decrease in accounts payable and accrued liabilities                            (8,835)          (36,951)        (28,560)
                                                                                  ------------      ------------     -----------

          Total adjustments                                                          1,052,747         2,727,344      (3,843,600)
                                                                                  ------------      ------------     -----------

          Net cash used in operating activities                                     (1,365,563)       (1,700,076)     (1,617,781)
                                                                                  ------------      ------------     -----------

Cash flows from investing activities:

  Proceeds from sale of majority-owned affiliate                                       250,000                 -               -
  Proceeds from sale of affiliate                                                    1,564,282           379,527               -
  Proceeds from sale of other investments                                            1,044,782           950,151         766,308
  Proceeds from sale of marketable investment securities                               543,927         1,259,323       2,483,077
  Return of capital from investments                                                         -                 -          36,622
  Loan payments received from majority-owned affiliate                                  75,000                 -               -
  Loan payments received from investments                                                    -                 -          66,667
  Loan to majority owned affiliate                                                    (150,000)                -               -
  Purchases of investment in majority-owned affiliate                               (1,500,000)          (56,311)       (375,000)
  Purchase of investment in affiliate                                                        -          (140,000)              -
  Purchases of other investments                                                       (49,095)       (1,575,625)       (529,346)
  Purchases of marketable investment securities                                       (542,146)         (257,239)     (1,247,440)
  Purchases of fixed assets                                                                  -                 -          (2,402)
                                                                                  ------------      ------------     -----------

          Net cash provided by investing activities                                  1,236,750           559,826       1,198,486
                                                                                  ------------      ------------     -----------

Cash flows from financing activities:

  Proceeds from issuance of preferred stock                                                  -         1,645,000               -
  Payments of preferred dividends                                                     (115,150)          (98,633)              -
  Cash paid to common stockholders in lieu of fractional shares due to
    stock split of common shares                                                             -            (1,448)              -
  Purchases of treasury stock                                                         (123,874)         (328,445)       (109,737)
                                                                                  ------------      ------------     -----------

          Net cash provided by (used in) financing activities                         (239,024)        1,216,474        (109,737)
                                                                                  ------------      ------------     -----------

Net (decrease) increase in cash and cash equivalents                                  (367,837)           76,224        (529,032)

Cash and cash equivalents at beginning of year                                         647,565           571,341       1,100,373
                                                                                  ------------      ------------     -----------

Cash and cash equivalents at end of year                                          $    279,728      $    647,565     $   571,341
                                                                                  ============      ============     ===========

---------------------------------------------------------------------------------------------------------------------------------

Supplemental disclosure of cash flow information:

  Non-cash liability issued in connection with purchase of majority owned
      affiliate                                                                    $1,000,000                 -                -

---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       27
<PAGE>

                          FRANKLIN CAPITAL CORPORATION
================================================================================

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,                                      2001                      2000                     1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>                       <C>                      <C>
(Decrease) increase in net assets from operations:

   Net investment loss                                               $(1,386,685)              $(2,257,782)             $(1,549,398)
   Net realized gain on portfolio of investments,
       net of current income taxes                                       522,131                 1,195,875                  688,259
   (Decrease) increase in unrealized appreciation of
       investments, net of deferred income taxes                      (1,553,756)               (3,365,513)               3,086,958
                                                                     -----------               -----------              -----------

       Net (decrease) increase in net assets from operations          (2,418,310)               (4,427,420)               2,225,819

Capital stock transactions:
   Issuance of stock from treasury to majority owned                           -                         -                    8,747
       affiliate, net
   Issuance of preferred stock                                                 -                 1,645,000                        -
   Payment of dividends on preferred stock                              (115,150)                  (98,633)                       -
   Issuance of stock from treasury for exercise of officer                     -                   349,644                        -
       options

   Cash paid to common shareholders in lieu of fractional                      -                    (1,448)                       -
       shares

   Purchase of treasury stock                                           (123,874)                 (328,445)                (109,737)
                                                                     -----------               -----------              -----------

       Total (decrease) increase in net assets                        (2,657,334)               (2,861,302)               2,124,829
                                                                     -----------               -----------              -----------


Net assets at beginning of year                                        5,579,080                 8,440,382                6,315,553
                                                                     -----------               -----------              -----------


Net assets at end of year                                            $ 2,921,745               $ 5,579,080              $ 8,440,382
                                                                     ===========               ===========              ===========
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

   The accompanying notes are an integral part of these financial statements.




                                       28
<PAGE>
                          FRANKLIN CAPITAL CORPORATION
================================================================================

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,                                                    2001(3)    2000(3)  1999     1998   1997(1)
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>       <C>       <C>      <C>    <C>
PER SHARE OPERATING PERFORMANCE (2):
Net asset value attributable to common stockholders,
     beginning of year                                                              $ 3.58    $ 7.70   $5.61   $ 6.11  $ 8.22
                                                                                    ------    ------   -----   ------  ------

        Net investment loss                                                          (1.28)    (2.07)  (1.38)   (1.14)  (1.58)
        Net gain on portfolio of
          investments (realized and unrealized) after taxes                          (0.95)    (1.98)   3.35     0.51   1.64
                                                                                    ------    ------  ------   ------  ------

Total from investment operations                                                     (2.23)    (4.05)   1.97    (0.63)   0.06
                                                                                    ------    ------  ------   ------  ------

Less dividends and distributions:
        Distributions from accumulated
           deficit and earnings                                                       0.00      0.00    0.00     0.00   (2.17)
                                                                                    ------    ------  ------     ----  ------

Total dividends and distributions                                                     0.00      0.00    0.00     0.00   (2.17)
                                                                                    ------    ------  ------   ------  ------

Capital stock transactions                                                           (0.16)    (0.07)   0.12     0.12    0.00
                                                                                    ------    ------  ------   ------  ------

Net asset value attributable to common stockholders,
     end of year                                                                    $ 1.19    $ 3.58  $ 7.70   $ 5.61  $ 6.11
                                                                                    ======    ======  ======   ======  ======

Market value per share, end of year                                                 $ 4.18    $ 8.00  $ 6.83   $ 3.50  $ 4.33
                                                                                    ======    ======  ======   ======  ======

TOTAL INVESTMENT RETURN:
Based on market value per share (%)                                                 (47.75)     17.13   95.24  (19.23) (16.62)

RATIOS TO AVERAGE NET ASSETS:
Expenses (%)                                                                         37.67     25.99   24.97    23.73   28.97
Net investment loss from operations (%)                                             (33.08)   (24.73) (23.86)  (19.88) (22.97)

RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000 omitted)                                           $2,922    $5,579  $8,440   $6,316  $7,343
Portfolio turnover rate (%)                                                             89        24      36       39      77
</TABLE>

--------------------------------------------------------------------------------

(1) - Audited by predecessor auditor.

(2) - Calculated based on weighted average number of shares outstanding during
      the period.

(3) - Includes liquidation preference of preferred stockholders.

   The accompanying notes are an integral part of these financial highlights.


                                       29
<PAGE>

                          FRANKLIN CAPITAL CORPORATION
================================================================================

PORTFOLIO OF INVESTMENTS

--------------------------------------------------------------------------------

MARKETABLE INVESTMENT SECURITIES

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                  NUMBER OF
                                                                  SHARES OR                     MARKET
                                                                  PRINCIPAL                     VALUE
DECEMBER 31, 2001 (3)                                             AMOUNT ($)       COST(1)     (NOTE 2)
-----------------------------------------------------------------------------------------------------------------
<S>                                                               <C>              <C>          <C>
Certificate of Deposit - 2.20%, due 01/03/2002                                     $34,675      $34,675
                                                                                   -------      -------
     Total Marketable Investment Securities (0.9% of total
        investments and 1.2% of net assets)                                        $34,675      $34,675
                                                                                   =======      =======
</TABLE>

--------------------------------------------------------------------------------
INVESTMENTS, AT FAIR VALUE
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                              NUMBER OF
                                                                                              SHARES OR                  DIRECTORS'
                                                                                    EQUITY    PRINCIPAL                  VALUATION
DECEMBER 31, 2001 (3)                                         INVESTMENT           INTEREST   AMOUNT ($)     COST(1)      (NOTE 2)
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>                         <C>        <C>           <C>          <C>

MAJORITY OWNED AFFILIATE

Excelsior Radio Networks, Inc.                               Common stock           90.00%      2,250,000   $2,250,000   $2,250,000
Excelsior Radio Networks, Inc.                            Note Receivable (2)          -           75,000       75,000       75,000
                                                                                                            ----------   ----------
Total Excelsior Radio Networks, Inc. (62.4%
      of total investments and 79.6% of net assets)             50.81%                                       2,325,000    2,325,000
     (Radio production and advertising sales)               (fully diluted)

AFFILIATES

Excom Ventures, LLC (0.0% of total investments and
     0.0% of net assets)                                         Units              18.64%        140,000      140,000            -
     (Purchase evaluation software)

OTHER INVESTMENTS

Alacra Corporation (26.8% of total investments
     and 34.2% of net assets)                         Convertible Preferred Stock    1.68%        321,543    1,000,000    1,000,000
    (Internet-based information provider)

Primal Solutions, Inc. (0.5% of total investments
      and 0.7% of net assets)                                Common Stock            1.90%        383,938       61,430       19,197
     (Internet-based Voice over IP billing software)

Structured Web, Inc. (9.4% of total investments
      and 12.0% of net assets)                        Convertible Preferred Stock    3.60%        188,425      350,000      350,000
                                                                                                            ----------   ----------
    (Internet-based application service provider)
Total Other Investments                                                                                      1,411,430    1,369,197
                                                                                                            ----------   ----------
     Investments, at Fair Value                                                                              3,876,430    3,694,197
                                                                                                            ==========   ==========
</TABLE>
--------------------------------------------------------------------------------

   (1) Book cost equals tax cost for all investments

   (2) Income producing security and in addition received 12,379 warrants.

   (3) Total investments refers to investments and marketable investment
       securities.

   The accompanying notes are an integral part of these financial statements.



                                       30
<PAGE>
FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001

1. DESCRIPTION OF BUSINESS

Franklin Capital Corporation ("Franklin", or the "Corporation") is a Delaware
corporation operating as a Business Development Company ("BDC") under the
Investment Company Act of 1940 (the "Act"). A BDC is a specialized type of
investment company under the Act. A BDC must be primarily engaged in the
business of furnishing capital and making available managerial expertise to
companies that do not have ready access to capital through conventional
financial channels. Such companies are termed "eligible portfolio companies".
The Corporation, as a BDC, generally may invest in other securities; however,
such investments may not exceed 30% of the Corporation's total asset value at
the time of any such investment.

The accompanying financial statements have been prepared assuming that the
Corporation will continue as a going concern. For the years ended December 31,
2001, 2000 and 1999, the Corporation has incurred a net investment loss from
operations of approximately $1.4 million, $2.3 million and $1.5 million,
respectively, a net (decrease) increase in net assets from operations of
approximately $(2.4 million), $(4.4 million) and $2.2 million, respectively, and
has a working capital deficiency of approximately $800,000 at December 31, 2001
(working capital is defined as total liabilities less liquid assets). These
conditions raise substantial doubt about the Corporation's ability to continue
as a going concern. The Corporation has entered into a proposed merger with
Change Technology Partners, Inc. (see Note 11), which management believes will
alleviate the doubt as to whether the Corporation, as the surviving company in
the merger, will be able to continue as a going concern, although there can be
no assurance in this regard. The Corporation expects the merger to occur on or
before June 30, 2002. The merger is subject to a number of conditions, however,
and therefore there can be no assurance that the merger will be completed on or
before June 30, 2002 or at all. In the event the merger is not completed, in
order to alleviate the substantial doubt about the Corporation's ability to
continue as a going concern, the Corporation would likely seek another merger
partner or seek alternative financing. There can be no assurance that the
Corporation would be able to find a suitable merger partner or be able to obtain
alternative financing. The financial statements do not include any adjustments
to reflect the possible future effects on the recoverability of assets or the
amounts of liabilities that may result from the outcome of this uncertainty.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

STATEMENTS OF CASH FLOWS

For purposes of the Statements of Cash Flows, Franklin considers only highly
liquid investments such as money market funds and commercial paper with
maturities of 90 days or less at the date of their acquisition to be cash
equivalents.

On January 25, 1999, the Corporation issued 30,069 shares of treasury stock
valued at $175,000, the Net Asset Value ("NAV") on the date of the transaction,
as part of an investment in a controlled affiliate. On




                                       31
<PAGE>

FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


September 30, 1999, 28,566 of these shares valued at $166,252, were canceled and
placed back into treasury (See Note 6).

The Corporation paid no interest during the years ended December 31, 2001, 2000
and 1999. The Corporation paid $2,000 in income taxes during the year ended
December 31, 1999.

At December 31, 2001 and 2000, the Corporation held cash and cash equivalents
primarily in money market funds at two commercial banking institutions, and two
and one broker/dealers, respectively.

VALUATION OF INVESTMENTS

Security investments which are publicly traded on a national exchange or Nasdaq
Stock Market are stated at the last reported sales price on the day of
valuation, or if no sale was reported on that date, then the securities are
stated at the last quoted bid price. The Board of Directors of Franklin (the
"Board of Directors") may determine, if appropriate, to discount the value where
there is an impediment to the marketability of the securities held.

Investments for which there is no ready market are initially valued at cost and,
thereafter, at fair value based upon the financial condition and operating
results of the issuer and other pertinent factors as determined in good faith by
the Board of Directors. The financial condition and operating results have been
derived utilizing both audited and unaudited data. In the absence of a ready
market for an investment, numerous assumptions are inherent in the valuation
process. Some or all of these assumptions may not materialize. Unanticipated
events and circumstances may occur subsequent to the date of the valuation and
values may change due to future events. Therefore, the actual amounts eventually
realized from each investment may vary from the valuations shown and the
differences may be material. Franklin reports the unrealized gain or loss
resulting from such valuation in the Statements of Operations.

GAINS (LOSSES) ON PORTFOLIO OF INVESTMENTS

Amounts reported as realized gains (losses) are measured by the difference
between the proceeds of sale or exchange and the cost basis of the investment
without regard to unrealized gains (losses) reported in the prior periods. Gains
(losses) are considered realized when sales or dissolution of investments are
consummated.

INCOME TAXES

Franklin does not qualify for pass through tax treatment as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code for income
tax purposes. Therefore, the Corporation is taxed under Regulation C.

Franklin accounts for income taxes in accordance with the provision of Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). The significant components of deferred tax assets and liabilities are
principally related to the Corporation's net operating loss carryforward and its
unrealized appreciation of investments.



                                       32
<PAGE>

FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DEPRECIATION AND AMORTIZATION

Depreciation is recorded using the straight-line method at rates based upon
estimated useful lives for the respective assets. Leasehold Improvements are
included in other assets and are amortized over their useful lives or the
remaining life of the lease, whichever is shorter.

NET INCREASE (DECREASE) IN NET ASSETS PER COMMON SHARE

Net increase (decrease) in net assets attributable to common stockholders per
common share is calculated in accordance with the provisions of Statement of
Financial Accounting Standards No. 128, "Earnings per Share".

RECLASSIFICATION

Certain amounts in prior years have been reclassified to conform with the
current year presentation.

3.  INCOME TAXES

For the years ended December 31, 2001, 2000 and 1999, Franklin's tax (provision)
benefit was based on the following:

<TABLE>
<CAPTION>
                                                     2001           2000            1999
                                                 -----------    -----------    -----------
<S>                                              <C>            <C>            <C>
Net investment loss from operations              $(1,386,685)   $(2,257,782)   $(1,549,398)
Net realized gain on portfolio of investments        520,455      1,215,875        688,259
(Decrease) increase in unrealized appreciation    (1,553,756)    (3,716,513)     3,437,958
                                                 -----------    -----------    -----------
     Pre-tax book (loss) income                  $(2,419,986)   $(4,758,420)   $ 2,576,819
                                                 ===========    ===========    ===========
</TABLE>



<TABLE>
<CAPTION>
                                                                   2001            2000            1999
                                                                -----------    -----------    -----------
<S>                 <C>                                         <C>            <C>            <C>
Federal tax benefit (provision) at 34% on $(2,419,986),
  $(4,758,420), and $2,576,819, respectively ................   $   823,000    $ 1,618,000    $  (876,000)
State and local, net of Federal benefit .....................         1,000        (13,000)       (49,000)
Other .......................................................         5,000       (130,000)       (10,000)
Change in valuation allowance ...............................      (827,000)    (1,144,000)       584,000
                                                                -----------    -----------    -----------
                                                                $     2,000    $   331,000    $  (351,000)
                                                                ===========    ===========    ===========
</TABLE>

The components of the tax benefit (provision) are as follows:

<TABLE>
<CAPTION>
                                                   2001        2000         1999
                                                ---------   ----------   ----------
<S>                                             <C>         <C>          <C>
Current state and local tax benefit (expense)   $   2,000   $ (20,000)   $      --
Deferred tax benefit (expense) ..............          --     351,000     (351,000)
                                                ---------   ---------    ---------
Benefit (provision) for income taxes ........   $   2,000   $ 331,000    $(351,000)
                                                =========   =========    =========
</TABLE>

Deferred income tax benefit (provision) reflects the impact of
"temporary differences" between amounts of assets and liabilities for financial
reporting purposes and such amounts as measured by tax laws.

                                       33
<PAGE>
FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


At December 31, 2001 and December 31, 2000, significant deferred tax assets and
liabilities consist of:

<TABLE>
<CAPTION>
                                                                     Asset (Liability)
                                                               ---------------------------
                                                               December 31,   December 31,
                                                                   2001           2000
                                                               ------------   ------------
<S>                                                            <C>            <C>
Deferred Federal and state benefit from net operating
  loss carryforward ........................................   $ 1,905,000    $ 1,638,000
Deferred Federal and state benefit (provision) on unrealized
  depreciation (appreciation) of investments ...............        66,000       (494,000)
Valuation allowance ........................................    (1,971,000)    (1,144,000)
                                                               -----------    -----------
  Deferred taxes ...........................................   $        --    $        --
                                                               ===========    ===========
</TABLE>

At December 31, 2001, Franklin had net operating loss carryforwards for income
tax purposes of approximately $5,291,000 that will begin to expire in 2011. At a
36% effective tax rate the after-tax net benefit from this loss would be
approximately $1,905,000.

4.  STOCKHOLDERS' EQUITY

The accumulated deficit at December 31, 2001, consists of accumulated net
realized gains of $5,047,000 and accumulated investment losses of $11,218,000.

On February 22, 2000, the Corporation issued 16,450 shares of convertible
preferred stock with a par value of $100 for $1,645,000. The stock has a
cumulative 7% quarterly dividend and is convertible into the number of shares of
common stock by dividing the purchase price for the convertible preferred stock
by conversion price in effect (which is currently $13.33), resulting in 123,375
shares of common stock. The convertible preferred stock has antidilution
provisions, which can change the conversion price in certain circumstances if
the Corporation issues additional shares of common stock. The holder has the
right to convert the shares of convertible preferred stock at any time until
February 22, 2010 into common stock. Upon liquidation, dissolution or winding up
of the Corporation, the stockholders of the convertible preferred stock are
entitled to receive $100 per share plus any accrued and unpaid dividends before
distributions to any holder of the Corporation's common stock.

On April 26, 2000, the Corporation declared a three-for-two stock split of the
Corporation's Common Stock in the form of a stock dividend to shareholders of
record on May 15, 2000, and payable June 7, 2000. The stock split has been
reflected in the accompanying financial statements and all applicable references
as to the number of common shares and per share information have been restated.

The Board of Directors has authorized Franklin to repurchase up to an aggregate
of 525,000 shares of its common stock in open market purchases on the American
Stock Exchange when such purchases are deemed to be in the best interest of the
Corporation and its stockholders. As of December 31, 2000, the Corporation had
purchased 458,850 shares of its common stock of which 407,688 remained in
treasury. During the year ended December 31, 2001, the Corporation purchased
23,500 shares of its common stock at a total cost of $123,874. To date, Franklin
has repurchased 482,350 shares of its common stock of which 431,188 shares
remain in treasury at December 31, 2001.





                                       34
<PAGE>
FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5.  COMMITMENTS AND CONTINGENCIES

Franklin is obligated under an operating lease, which provides for annual
minimum rental payments as follows:

<TABLE>
<S>                                                        <C>
December 31,
2002.................................................      $  149,600
2003.................................................         149,600
                                                           ----------
                                                           $  299,200
                                                           ==========
</TABLE>

Rent expense for the years ended December 31, 2001, 2000 and 1999, was $126,134,
$104,332 and $83,905, respectively. For the years ended December 31, 2001, 2000
and 1999, the Corporation collected rents of $24,000, $40,000 and
$58,032,respectively, from subtenants under month-to-month leases, for a portion
of its existing office space that is reflected as a reduction in rent expense
for that period. Of the amount collected from subtenants during the years ended
December 31, 2000 and 1999, $30,000 and $25,000, respectively, was received from
a corporation included in Franklin's investment portfolio and $10,812 was
received during the year ended December 31, 1999, from a partnership in which
two officers of Franklin have a non-controlling interest.

On October 15, 2001, Jeffrey A. Leve and Jeffrey Leve Family Partnership, L.P.
filed a lawsuit against Franklin, Sunshine Wireless, LLC ("Sunshine") and four
other defendants affiliated with Winstar Communications, Inc. in the Superior
Court of the State of California for the County of Los Angeles. The lawsuit,
which has subsequently been removed to the United States District Court for the
Central District of California, alleges that the Winstar defendents conspired to
commit fraud and breached their fiduciary duty to the plaintiffs in connection
with the acquisition of the plaintiffs' radio production and distribution
business. The complaint further alleges that Franklin and Sunshine joined the
alleged conspiracy. The business was initially acquired by certain entities
affiliated with Winstar Communications and, subsequently, the assets of such
business were sold to Franklin and Sunshine (see Note 6). Concurrently with such
purchase, Franklin transferred such assets to Excelsior. The plaintiffs seek
recovery of damages in excess of $10,000,000, costs and attorneys' fees. On
January 7, 2002, Franklin filed a motion to dismiss the lawsuit or, in the
alternative, to transfer venue to the United States District Court of the
Southern District of New York. The plaintiffs filed a motion opposing Franklin's
request on January 28, 2002. Franklin's motion for dismissal was granted on
February 25, 2002, due to improper venue. The plaintiff may refile in New York.
Franklin believes that plaintiffs' claims are without merit and intends to
defend this lawsuit vigorously, though the outcome cannot be predicted at this
time. An unfavorable outcome in this lawsuit may have a material adverse effect
on Franklin's business, financial condition and results of operations

6. TRANSACTIONS WITH AFFILIATES

On February 1, 2001, Franklin sold to Avery Communications, Inc. ("Avery")
1,183,938 shares of common stock and 350,000 shares of preferred stock of Avery
representing Franklin's entire holding in Avery, for $1,557,617 plus accrued
dividends on the preferred stock for a realized gain net of expenses of
$137,759. As part of the sale Franklin retained the right to receive 1,533,938
shares of Primal Solutions, Inc. ("Primal") a wholly-owned subsidiary of Avery.
On February 13, 2001, Primal announced that Avery had completed a spin-off of
Primal and Franklin received 1,533,938 fully registered and marketable shares of
Primal. During the year ended December 31, 2001, Franklin sold 1,150,000 shares
of Primal for total proceeds of $53,861, realizing a loss of $130,139.



                                       35
<PAGE>
FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


On August 28, 2001, Franklin along with Sunshine Wireless LLC ("Sunshine")
purchased the assets of Winstar Radio Networks, Global Media and Winstar Radio
Productions (collectively "WRN") for a total purchase price of $6.25 million.
Change Technology Partners, Inc. ("Change"), a public company, provided $2.25
million of senior financing for the deal. The acquisition was consummated
through eCom Capital Inc., subsequently renamed Excelsior Radio Networks, Inc.
("Excelsior"), a then wholly-owned subsidiary of Franklin. Franklin's total
investment was $2.5 million consisting of $1.5 million in cash and a $1 million
note payable to WRN. The note is due February 28, 2002 with interest at 3.54%
and has a right of set-off against certain representations and warranties made
by WRN. In October 2001, a legal proceeding was filed against WRN, which also
named Franklin as a defendant, in which the representations and warranties made
by WRN have been challenged. Until the time that this action is settled the due
date of the note is extended indefinitely (see Note 5). Additionally, Franklin
provided a $150,000 note receivable to Excelsior. The note bears interest at 10%
per annum and is issued for a ninety-day rolling period. In connection with this
note, Franklin was granted warrants to acquire 12,879 shares of Excelsior common
stock at an exercise price of $1.125 per share. As of December 31, 2001, $75,000
of this note has been repaid. In contemplation of the proposed merger agreement
between Franklin and Change (see Note 11), Franklin sold to Change 250,000
shares of common stock in Excelsior for $250,000. If the merger is not
consummated, Franklin is required to repurchase the 250,000 shares of
Excelsior's common stock for $250,000 plus interest at an annual rate of 10%
from December 4, 2001 to the date of repurchase. As a result of the transaction,
Franklin now owns 50.8% of Excelsior on a fully diluted basis and has 58.2% of
voting control. In addition, Franklin has the right to nominate four directors
to Excelsior's seven-person board of directors.

At the closing, Franklin entered into a services agreement with Excelsior
whereby Franklin will provide Excelsior with certain services. In consideration
for the services provided, for a period of six months Franklin will receive
$30,000 per month and be reimbursed for all direct expenses. Subsequently,
Franklin's monthly fee will be determined by a majority of the non-Franklin
directors; however, said management fee will be no less than $15,000 per month.
Franklin will continue to be reimbursed for all direct expenses. Finally,
Franklin's chief financial officer will serve in that capacity for Excelsior and
his salary and benefits will be allocated between Excelsior and Franklin on an
80/20 basis. During the year ended December 31, 2001, Franklin earned $120,000
in management fees and was reimbursed $40,156 for salary and benefits for
Franklin's chief financial officer, which was recorded as a reduction of
expenses on Franklin.

During the year ended December 31, 2000, the Corporation invested $140,000 in
Excom Ventures, LLC. ("Excom"). Excom was formed as a holding company for the
purpose of investing in Expert Commerce, Inc., a Business-to-Business purchase
evaluation engine that simulates the way people make decisions. At December 31,
2001, the Board of Franklin has determined that this investment has no value and
has marked these securities down to reflect that determination.

In January 1999, Franklin formed eCom Capital Corporation ("eCom"), a
wholly-owned subsidiary of Franklin, for the purposes of investing in Internet
related ventures. On January 25, 1999, eCom invested a total of $387,500 in
eMattress.com Inc. ("eMattress"), consisting of $175,000 worth of Franklin
common stock (30,069 shares from treasury stock valued at the Net Asset Value on
the date of the transaction) and $212,500 in cash. Franklin received preferred
stock convertible into a 50% equity interest in eMattress. Two officers of
Franklin were elected to serve on the five member eMattress Board of Directors.



                                       36
<PAGE>

FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

In August 1999, Franklin invested an additional $87,500 in eCom. Pursuant to
this transaction, eMattress was merged into eCom and 28,566 shares of Franklin
common stock were returned to Franklin's treasury. The surviving entity,
eMattress.com, was a Delaware corporation. In November 1999, Franklin invested
an additional $75,000 into eMattress and as a result of this transaction, on
December 31, 1999, Franklin owned 87.2% of eMattress. During 2000, eMattress
ceased operations and has legally dissolved. Franklin has written-off its entire
investment including a loan of $56,311 that was determined to be
non-collectible.

7.       STOCK OPTION PLANS

On September 9, 1997, Franklin's stockholders approved two Stock Option Plans: a
Stock Incentive Plan ("SIP") to be offered to the Corporation's consultants,
officers and employees (including any officer or employee who is also a director
of the Corporation) and a Non-Statutory Stock Option Plan ("SOP") to be offered
to the Corporation's "outside" directors, (i.e., those directors who are not
also officers or employees of Franklin). 112,500 shares of the Corporation's
Common Stock have been reserved for issuance under these plans, of which 67,500
shares have been reserved for the SIP and 45,000 shares have been reserved for
the SOP. Shares subject to options that terminate or expire prior to exercise
will be available for future grants under the Plans. Because the issuance of
options to "outside" directors is not permitted under the Act without an
exemptive order by the Securities and Exchange Commission, the issuance of
options under the SOP was conditioned upon the granting of such order. The order
was granted by the Commission on January 18, 2000.

On January 27, 1998, 67,500 options were granted to three eligible officers of
the Corporation under the SIP. The strike price of the options was $4.67 per
share, which represented the closing price of Franklin's Common Stock as
reported by the American Stock Exchange on that date. One-third of the options
granted vested immediately; another one-third vested one year from the date of
issuance; and the final one-third vested two years after the date of issuance.
The options expire after ten years. On December 31, 1998, one of the eligible
officers resigned from the Corporation and forfeited 15,000 options upon
resignation and an additional 7,500 options three months after resignation.
15,000 of these options were reissued on March 18, 1999 to three eligible
officers of the Corporation at a strike price of $3.83 per share, which
represented the closing price of Franklin's Common Stock as reported by the
American Stock Exchange on that date. These options will expire as originally
issued. One-half of the reissued options vested immediately, and one-half vested
on January 27, 2000. 5,625 of the remaining forfeited options were reissued on
December 9, 1999 to three eligible officers of the Corporation at a strike price
of $6.00 per share, which represented the closing price of Franklin's Common
Stock as reported by the American Stock Exchange on that date. These options
will expire as originally issued. One-half of the reissued options vested
immediately, and one-half vested on December 9, 2000. The remaining 1,875 of
forfeited options were reissued on March 1, 2000, to one eligible officer of the
Corporation at a strike price of $14.00 per share, which represented the closing
price of Franklin's Common Stock as reported by the American Stock Exchange on
that date. These options will expire as originally issued. One-half of the
reissued options vested immediately, and one-half will vest on March 1, 2001.

On February 14, 2000, 30,000 options were granted under the SOP to four eligible
"outside" directors. The strike price of the options was $11.50 per share, which
represented the closing price of Franklin's Common Stock as reported by the
American Stock Exchange on that date. One-third of the options granted vested
immediately; another one-third vest one year from the date of issuance; and the
final one-third vest two years after the date of issuance. The options expire
after ten years. On June 7, 2000, 7,500 options were granted




                                       37
<PAGE>
FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


under the SOP to four eligible "outside" directors. The strike price of the
options was $9.67 per share, which represented the closing price of Franklin's
Common Stock as reported by the American Stock Exchange on that date. One-third
of the options granted vested immediately; another one-third vest one year from
the date of issuance; and the final one-third vest two years after the date of
issuance. The options expire after ten years.

On May 9, 2000, one of Franklin's officers made a cashless exercise of 29,062
options resulting in a non-cash charge to compensation expense of $197,188. On
September 11, 2000, one of Franklin's officers made a cashless exercise of
29,062 options resulting in a non-cash charge to compensation expense of
$129,317. On December 21, 2000, three of Franklin's officers made cashless
exercises of 7,501 options resulting in a non-cash charge to compensation
expense of $23,139.

Franklin accounts for the options issued to employees under APB Opinion No. 25,
under which no compensation cost has been recognized. Proforma information
determined consistent with the fair value method required by FASB Statement No.
123, is as follows for the years ended:

<TABLE>
<CAPTION>
                                           December 31, 2001   December 31, 2000  December 31, 1999
                                           -----------------   -----------------  -----------------
<S>                                        <C>                 <C>                <C>
Net (decrease) increase in net assets
  attributable to common stockholders:

As reported                                 $  (2,533,460)      $  (4,526,053)      $   2,225,819

Pro forma                                   $  (2,571,445)      $  (4,666,638)      $   2,196,909

Basic and diluted net (decrease) increase
   in net assets attributable to common
   stockholders:

As reported                                 $       (2.34)      $       (4.14)      $        1.98
Pro forma                                   $       (2.37)      $       (4.26)      $        1.95
</TABLE>

The fair value of the options granted was estimated on the date of the grant
using the Black-Scholes option pricing model with the following assumptions:

<TABLE>
<CAPTION>
                                 December 31, 2000   December 31, 1999
                                 -----------------   -----------------
<S>                                   <C>                   <C>
Stock volatility                      41.3%                 30.6%
Risk-free interest rate                5.5%                  5.5%
Option term in years                     4                     4
Stock dividend yield                     -                     -
</TABLE>

The following is a summary of the status of the Stock Option Plans during the
years ended:

<TABLE>
<CAPTION>
                                                 December 31, 2001       December 31, 2000       December 31, 1999
                                              -----------------------   -------------------      ------------------
                                                            Weighted               Weighted                Weighted
                                                            Average                Average                 Average
                                                            Exercise               Exercise                Exercise
                                               Shares        Price       Shares     Price        Shares      Price
                                              --------      ---------   -------    --------      ------    --------
<S>                                           <C>           <C>         <C>        <C>           <C>       <C>
Outstanding at beginning of year               39,375        $11.27     65,625     $  4.59       52,500     $4.67
Granted                                             -             -     39,375     $ 11.27       20,625     $4.42
</TABLE>




                                       38
<PAGE>
FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


<TABLE>
<S>                                            <C>           <C>        <C>        <C>           <C>        <C>
Exercised                                           -             -     65,625     $ 4.42            -         -
Forfeited                                           -             -          -          -        7,500     $4.67
Expired                                             -             -          -          -            -         -
                                               ------                   ------                  ------
Outstanding at end of year                     39,375        $11.27     39,375     $11.27       65,625     $4.59
                                               ======                   ======                  ======
Exercisable at end of year                     26,875        $11.33     13,438     $11.33       40,312     $4.42
                                               ======                   ======                  ======
Weighted average fair value of options
  granted                                           -                  $  2.40                 $  1.42
</TABLE>


The options issued under the SIP have a remaining contractual life of 6.1 years.
The options issued under the SOP have a remaining contractual life of 8.1 years.

8.  NET (DECREASE) INCREASE IN NET ASSETS PER COMMON SHARE

The following table sets forth the computation of basic and diluted change in
net assets per common share:

<TABLE>
<CAPTION>
                                                                       December 31,
                                                       -----------------------------------------
                                                          2001           2000            1999
                                                       -----------    -----------    -----------
<S>                                                    <C>            <C>            <C>
Numerator:
         Net (decrease) increase in net
            assets from operations                     $(2,418,310)   $(4,427,420)   $2,225,819
         Preferred stock dividends                        (115,150)       (98,633)            -
                                                       -----------    -----------    ----------
         Numerator for basic and diluted earnings
            per share - net (decrease) increase
            in net assets attributable
            to common stockholders                     $(2,533,460)   $(4,526,053)   $2,225,819
                                                       ===========    ===========    ==========

Denominator:
         Denominator for basic (decrease)
            increase in net assets from
            operations - weighted -
            average shares                               1,083,408      1,094,373      1,124,740

Effect of dilutive securities:
         Employee stock options -
            weighted - average shares                            -              -          1,763
                                                       -----------    -----------    ----------

         Denominator for diluted (decrease)
            increase in net assets from
            operations - adjusted weighted - average
            shares and assumed conversions               1,083,408      1,094,373      1,126,503
                                                        ==========    ===========    ===========

Basic and diluted net (decrease) increase in
         net assets from operations per share           $    (2.34)   $     (4.14)   $      1.98
                                                        ==========    ===========    ===========
</TABLE>

The following securities have been excluded from the dilutive per share
computation as they are antidilutive:



                                       39
<PAGE>
FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


<TABLE>
<CAPTION>
                                             Period ended December 31,
                                           ---------------------------
                                             2001     2000      1999
                                           -------   -------    ------
<S>                                        <C>       <C>        <C>
Preferred stock convertible into 123,375
         shares of common stock            123,375   123,375        --
Stock options                               39,375    39,375    25,625
</TABLE>


For additional information on the above securities, see Notes 4 and 7.

9. NET ASSET VALUE PER SHARE

The following table sets forth the computation of net asset value per common
share attributable to common stockholders:

<TABLE>
<CAPTION>
                                                                         December 31,   December 31,
                                                                         -----------    -----------
                                                                            2001           2000
                                                                         -----------    -----------
<S>                                                                      <C>            <C>
Numerator:

         Numerator for net asset value per
           common share, as if converted basis                           $ 2,921,745    $ 5,579,080

         Liquidation value of convertible preferred
           stock                                                          (1,645,000)    (1,645,000)
                                                                         -----------    -----------
         Numerator for net asset value per share
           attributable to common stockholders                           $ 1,276,745    $ 3,934,080
                                                                         ===========    ===========
Denominator:
         Number of common shares outstanding,
           denominator for net asset value per share
           attributable to common stockholders                             1,074,700      1,098,200
         Number of shares of common stock to be
           issued upon conversion of preferred stock                         123,375        123,375
                                                                         -----------    -----------
         Denominator for net asset value per common
           share as if converted basis                                     1,198,075      1,221,575
                                                                         ===========    ===========
         Net asset value per share attributable to common stockholders   $      1.19    $      3.58
                                                                         ===========    ===========
         Net asset value per common share, as if converted basis         $      2.44    $      4.57
                                                                         ===========    ===========
</TABLE>

10.  PURCHASES AND SALES OF INVESTMENT SECURITIES

The cost of purchases and proceeds from sales of investment securities,
including the issuance of treasury stock for December 31, 1999, and excluding
short-term investments, aggregated $3,241,241 and $3,477,991, respectively, for
the year ended December 31, 2001; $1,944,500 and $2,543,819, respectively, for
the year ended December 31, 2000; and $2,158,804 and $3,352,674, respectively,
for the year ended December 31, 1999.

                                       40
<PAGE>
FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

11. MERGER WITH CHANGE TECHNOLOGY PARTNERS, INC.

On December 4, 2001, Change and Franklin entered into a definitive agreement and
plan of merger pursuant to which Change will be merged with and into Franklin.
Under the terms of the merger agreement, Change's common stockholders will
receive one share of Franklin for each 40.985 shares of Change common stock that
they own. Change's Series A preferred stockholders will receive one share of
Franklin Series B preferred stock for each share of Change Series A preferred
stock they own. As a result of the merger, Franklin will issue approximately
4,442,000 shares of its common stock and 645 shares of its Series B preferred
stock to Change stockholders. Upon closing of the transaction, Change
shareholders will own approximately 80% of Franklin with the balance being held
by Franklin's current stockholders. The boards of both companies have approved
the transaction.

Concurrently with the execution of the merger agreement, the parties entered
into a stock purchase agreement pursuant to which Change agreed to purchase
250,000 shares of common stock of Excelsior from Franklin for an aggregate
purchase price of $250,000. In the event the merger between Franklin and Change
is terminated pursuant to the terms of the merger agreement, Franklin shall be
required to repurchase all of such common stock from Change at a repurchase
price equal to $250,000, plus interest thereon at an annual rate of 10% from
December 4, 2001 to the date of repurchase.

12. SELECTED QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                        2001
                                              ---------------------------------------------------------
                                               Quarter 1      Quarter 2      Quarter 3       Quarter 4
                                              ------------   ------------   ------------   ------------
<S>                                           <C>            <C>            <C>            <C>
Total investment income                       $    42,557    $    14,802    $    41,735    $    93,603
Net investment loss from operations              (390,097)      (371,291)      (317,146)
                                                                                              (308,151)
Net decrease in net assets
  attributable to common stockholders          (1,181,953)      (443,100)      (395,004)
                                                                                              (398,253)

Basic and diluted earnings per common share         (1.08)         (0.41)         (0.37)         (0.48)
</TABLE>

<TABLE>
<CAPTION>
                                                                         2000
                                              --------------------------------------------------------
                                                Quarter 1     Quarter 2      Quarter 3      Quarter 4
                                              -------------  -----------    -----------    -----------
<S>                                           <C>            <C>            <C>            <C>
Total investment income                       $    22,344    $    50,152    $    21,138    $    21,381
Net investment loss from operations              (422,762)      (700,802)      (542,509)      (591,709)
Net increase (decrease) in net assets
attributable to common stockholders             1,086,449        135,484     (2,095,200)    (3,652,786)
Basic earnings per common share                      0.99           0.12          (1.92)         (3.33)
Diluted earnings per common share                    0.92           0.12          (1.92)         (3.33)
</TABLE>

13. SUBSEQUENT EVENT

         On April 3, 2002, Dial Communications Global Media, Inc. ("Newco"), a
newly formed wholly-owned subsidiary of Excelsior, a subsidiary of Franklin,
completed the acquisition of substantially all of the assets of Dial
Communications Group, Inc. ("DCGI"), and Dial Communications Group, LLC ("DCGL"
and together with DCGI, the "Dial Entities") used in connection with the Dial
Entities' business of selling





                                       41
<PAGE>
FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

advertising relating to radio programming (the "Dial Acquisition"). The Dial
Acquisition was completed pursuant to the Asset Purchase Agreement (the
"Purchase Agreement"), dated as of April 1, 2002, by and among the Dial
Entities, Franklin and Excelsior. Immediately prior to the closing of the
transactions contemplated by the Purchase Agreement, Excelsior assigned all of
its rights and obligations under the Purchase Agreement, as well as certain
other assets and liabilities relating to the portion of Excelsior's business
dedicated to the sale of advertising relating to radio programming, to Newco.

         The total purchase price for the Dial Acquisition will be an amount
between $8,880,000 and $13,557,500. The initial consideration for the Dial
Acquisition consisted of $6,500,000 in cash and a three year promissory note
bearing interest at 4.5% issued by Newco in favor of DCGL in the aggregate
principal amount of $460,000. In addition, the Purchase Agreement provides for
the minimum payment of $1,920,000 of additional consideration, which is subject
to increase to a maximum amount of $6,597,500 based upon the attainment of
certain revenue and earnings objectives in 2002 and 2003. The additional
consideration will be comprised of both cash and two additional promissory notes
issued by Newco in favor of DCGL, each with an initial aggregate principal
amount of $460,000 bearing interest at 4.5% that is subject to increase upon the
attainment of such revenue and earnings objectives. Each of the promissory notes
issued in consideration of the Dial Acquisition is convertible into shares of
Franklin's common stock at a premium of 115% to 120% of the average closing
prices of Franklin's common stock during a specified pre and post closing
measurement period. The promissory notes are not convertible for at least a
one-year period. Excelsior has paid to Franklin an amount equal to $300,000 in
consideration of Franklin's obligations in connection with any Franklin common
stock that may be issued pursuant to the terms of the Purchase Agreement or the
promissory notes issued in consideration of the Dial Acquisition.

         Change and Sunshine, both existing stockholders of Excelsior, loaned
Excelsior an aggregate amount of $7,000,000 to finance the initial consideration
of the Dial Acquisition. The obligations under the loans are secured by certain
of Excelsior's assets.



                                       42
<PAGE>

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

         Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND OFFICERS OF THE CORPORATION

         All of the Corporation's directors are independent with the exception
of Stephen L. Brown.

COMMON STOCK DIRECTORS

         STEPHEN L. BROWN, age 63, was elected to the Corporation's Board of
Directors and appointed Chairman of its Board of Directors in October 1986. He
has been Chairman and Chief Executive Officer since October 1986. Prior to
joining Franklin, Mr. Brown was Chairman of S.L. Brown & Company, Inc. ("SLB &
Co., Inc."), a private investment firm. Mr. Brown is a director of Copley
Financial Services Corporation, advisor to Copley Fund, Inc., a mutual fund. Mr.
Brown is an "interested person" of the Corporation as defined in the 1940 Act
because he serves as both an officer and director of the Corporation. He is the
father of Spencer L. Brown, Senior Vice President and Secretary of the
Corporation.

         DAVID T. LENDER, age 49, joined the Board as a director in 2000. Mr.
Lender is a Managing Director at Banc of America Securities, LLC where he
specializes in mergers and acquisitions. Prior to joining Banc of America
Securities, LLC, Mr. Lender was a Managing Director in the Mergers and
Acquisitions Group of Rothschild, Inc.

         JONATHAN A. MARSHALL, age 63, joined the Board as a director in 1987.
Until February 2002, Mr. Marshall was a Senior Partner in the law firm of Pennie
& Edmonds, and had been a member of that firm since 1974. He is a member of the
Bar of the State of New York and is admitted to practice before the United
States Supreme Court and the United States Patent and Trademark Office.

         MICHAEL P. ROLNICK, age 36, joined the Board as a director in 1998. Mr.
Rolnick is currently a General Partner at ComVentures, a venture capital firm
that invests in early stage Internet and communications companies. Mr. Rolnick
is responsible for private equity investments and managing portfolio companies.
Prior to joining ComVentures, Mr. Rolnick was Vice President for New Ventures at
E*Trade Group, Inc.

PREFERRED STOCK DIRECTORS

         PETER D. GOTTLIEB, age 34, joined the Board as a director in 2000. Mr.
Gottlieb is Vice-President of Investments at First Albany Corporation and is a
Portfolio Manager for First Albany Asset Management. Mr. Gottlieb serves as a
director of Midwest Bank & Trust and Gottlieb Health Services. Additionally, Mr.
Gottlieb serves as Treasurer of STEP, Inc.

         IRVING LEVINE, age 80, joined the Board as a director in 1990. He has
been Chairman of the Board and President of Copley Fund, Inc., a mutual fund,
since 1978, and Chairman and Treasurer of Stuffco International, Inc., a ladies
handbag processor and chain-store operator, since 1978. Mr. Levine is President
and a director of Copley Financial Services Corporation (advisor to Copley Fund,
Inc.) as well as a director of U.S. Energy Systems, Inc. an independent producer
of clean efficient energy for growing energy markets.



                                       43
<PAGE>

EXECUTIVE OFFICERS

         STEPHEN L. BROWN, Chairman and Chief Executive Officer. For additional
information about Mr. Brown, please see the Directors' biographical information
section above.

         SPENCER L. BROWN, age 36, has been Senior Vice President of the
Corporation since November 1995, Secretary of the Corporation since October 1994
and was Vice President from August 1994 to November 1995. Mr. Brown is the son
of Stephen L. Brown, the Chairman and Chief Executive of the Corporation.

         HIRAM M. LAZAR, age 37, joined the Corporation as Chief Financial
Officer in January 1999. From June 1992 to January 1999, Mr. Lazar was the
Vice-President of Finance and Corporate Controller for Lebenthal & Co., Inc., a
regional full-service broker/dealer.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Corporation's officers and directors, and persons who own more than 10
percent of the Corporation's common stock to file reports (including a year-end
report) of ownership and changes in ownership with the Securities and Exchange
Commission (the "SEC") and to furnish the Company with copies of all reports
filed.

     Based solely on a review of the forms furnished to the Corporation, or
written representations from certain reporting persons, the Corporation believes
that all persons who were subject to Section 16(a) in 2001 complied with the
filing requirements.

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

         The following table sets forth a summary for each of the last three
years of the cash and non-cash compensation awarded to, earned by, or paid to
the Chief Executive Officer of the Corporation and the other executive officers
of the Corporation, whose individual remuneration exceeded $100,000 for the year
ended December 31, 2001.

<TABLE>
<CAPTION>
                                                                                                 SECURITIES
                                                                                 OTHER           UNDERLYING
            NAME &                                                              ANNUAL             OPTIONS           OTHER
      PRINCIPAL POSITION        YEAR      SALARY ($)       BONUS ($)    COMPENSATION($) (1)      AWARDED (#)   COMPENSATION ($)
      ------------------        ----      -----------      ---------    --------------------     -----------   ----------------
  <S>                           <C>       <C>              <C>          <C>                      <C>           <C>
  Stephen L. Brown (2)          2001       $420,000               -               -                      -                -
  Chairman &                    2000        350,000        $125,000               -                      -                -
  President                     1999        350,000          70,000               -                  7,500                -

  Spencer L. Brown(3)           2001        225,000               -               -                      -                -
  Senior Vice President         2000        200,000          40,000               -                      -                -
       & Secretary              1999        151,250          30,000               -                  7,500                -

  Hiram M. Lazar                2001        130,000               -               -                      -                -
  Chief Financial               2000        120,000          15,000               -                  1,875                -
  Officer                       1999        112,917           5,000               -                  5,625                -
</TABLE>



                                       44
<PAGE>

-------------------------

(1) There were no perquisites paid by the Corporation in excess of the lesser of
$50,000 or 10% of the compensated person's total salary and bonus for the year.

(2) Mr. Brown is an "interested person" of the Corporation, as defined under the
1940 Act, because he serves as both a director and executive officer of the
Corporation.

(3) If elected to be a preferred stock director of Franklin Capital, Spencer L.
Brown will be an "interested person" of Franklin because he also serves as
Senior Vice President and Secretary of Franklin.

COMPENSATION OF DIRECTORS

         In the past, each director of the Corporation, other than Mr. Stephen
L. Brown, received a fee of $3,000 plus reimbursement of expenses incurred in
attending board meetings. In May 2001, the directors agreed to waive all
directors' fees until further notice. In connection with the merger, the
directors of Franklin are intended to receive options to purchase shares of
common stock of the combined company.

<TABLE>
<CAPTION>
                                                 PENSION OR
                                             RETIREMENT BENEFITS
                                             ACCRUED AS PART OF     ESTIMATED ANNUAL
                              AGGREGATE        CORPORATION'S          BENEFITS UPON         TOTAL COMPENSATION
NAME OF DIRECTOR            COMPENSATION         EXPENSES               RETIREMENT            PAID TO DIRECTORS
----------------            ------------     -------------------    ----------------        -------------------
<S>                         <C>              <C>                    <C>                     <C>
Stephen L. Brown              $ -                  -                        -                     -

David T. Lender               $3,000               -                        -                     $3,000

Jonathan A. Marshall          $3,000               -                        -                     $3,000

Michael P. Rolnick            $3,000               -                        -                     $3,000

Peter D. Gottlieb             $3,000               -                        -                     $3,000

Irving Levine                 $3,000               -                        -                     $3,000

</TABLE>

OPTION GRANTS

         No options were granted during the year ended December 31, 2001, to the
Chief Executive Officer of the Corporation or the other executive officers of
the Corporation.

OPTION EXERCISES

         No options were exercised during the year ended December 31, 2001, by
the Chief Executive Officer of the Corporation or the other executive officers
of the Corporation.

EMPLOYMENT AGREEMENTS

         On May 1, 2000, Stephen L. Brown signed an Employment Agreement with
the Corporation ("the Employee Agreement"), which superseded an agreement that
was to expire on December 31, 2000. The Employee Agreement expires on December
31, 2003, ("the Term"). The Term will automatically




                                       45
<PAGE>

renew from year to year thereafter, unless the Corporation notifies Mr. Brown
not less than 120 days prior to the end of any Term in writing that the
Corporation will not be renewing the Employee Agreement.

         During the period of employment, Mr. Stephen L. Brown shall serve as
the Chairman and Chief Executive Officer of the Corporation; be responsible for
the general management of the affairs of the Corporation, reporting directly to
the Board of Directors of the Corporation, serve as a member of the Board for
the period of which he is and shall from time to time be elected or reelected.

         Mr. Stephen L. Brown is to receive compensation under the Employment
Agreement in the form of base salary of $420,000 beginning January 1, 2001. In
addition, the Board of Directors may increase such salary at its discretion from
time to time. Mr. Brown is also entitled to be paid bonuses as the Board of
Directors determines in its sole discretion. Under the Employment Agreement, the
Corporation is to provide Mr. Brown with an automobile and reimburses him for
certain expenses related to such automobile. In addition, Mr. Brown is
reimbursed for expenses related to membership in a club to be used primarily for
business purposes. Mr. Brown is entitled under the Employment Agreement to
participate in any employee benefit plans or programs and to receive all
benefits, perquisites and emoluments for which salaried employees are eligible.

         Under the Employment Agreement, Mr. Stephen L. Brown is entitled to
severance pay in the event of termination without cause or by constructive
discharge equal to the remaining base salary payable under the Employment
Agreement and provides for death benefits payable to the surviving spouse equal
to Mr. Brown's base salary for a period of one year.

         In addition, Mr. Stephen L. Brown and the Corporation entered into a
Severance Agreement ("the Severance Agreement") on May 1, 2000. Under the
Severance Agreement Mr. Brown is entitled to receive severance if following a
change in control as defined in the Severance Agreement, such individual's
employment is terminated by the Corporation without cause or by the executive
within one year of such change in control, the individual shall be entitled to
receive compensation in a lump sum payment equal to 1.5 times the individual's
average compensation over the past five years.

         On May 1, 2000, Spencer L. Brown signed an Employment Agreement with
the Corporation ("the Employee Agreement"). The Employee Agreement expires on
December 31, 2003, ("the Term"). The Term will automatically renew from year to
year thereafter, unless the Corporation notifies Mr. Brown not less than 120
days prior to the end of any Term in writing that the Corporation will not be
renewing the Employee Agreement.

         During the period of employment, Mr. Spencer L. Brown shall serve as
the Senior Vice-President and Secretary of the Corporation; be responsible for
the general management of the affairs of the Corporation, reporting directly to
the Board of Directors of the Corporation, serve as a member of the Board for
the period of which he is and shall from time to time be elected or reelected.

         Mr. Spencer L. Brown is to receive compensation under his Employment
Agreement in the form of base salary of $225,000 beginning May 1, 2000. In
addition, the Board of Directors may increase such salary at its discretion from
time to time. Mr. Brown is also entitled to be paid bonuses as the Board of
Directors determines in its sole discretion. Under the Employment Agreement, the
Corporation is to reimburse Mr. Brown for expenses related to the use of an
automobile and for expenses related to membership in a club to be used primarily
for business purposes. Mr. Brown is entitled under the Employment Agreement to
participate in any employee benefit plans or programs and to receive all
benefits, perquisites and emoluments for which salaried employees are eligible.



                                       46
<PAGE>

         Under the Employment Agreement, Mr. Spencer L. Brown is entitled to
severance pay in the event of termination without cause or by constructive
discharge equal to the remaining base salary payable under the Employment
Agreement and provides for death benefits payable to the surviving spouse equal
to Mr. Brown's base salary for a period of one year.

         In addition, Mr. Spencer L. Brown and the Corporation entered into a
Severance Agreement ("the Severance Agreement") on May 1, 2000. Under the
Severance Agreement Mr. Brown is entitled to receive severance if following a
change in control as defined in the Severance Agreement, such individual's
employment is terminated by the Corporation without cause or by the executive
within one year of such change in control, the individual shall be entitled to
receive compensation in a lump sum payment equal to 1.5 times the individual's
average compensation over the past five years.

         If the merger with Change is consummated, these existing contracts with
Stephen L. Brown and Spencer L. Brown will be terminated and new employment
contracts will be entered into.

COMPENSATION PLANS

         On September 9, 1997, Franklin Capital's stockholders approved two
Stock Option Plans: a Stock Incentive Plan ("SIP") to be offered to Franklin
Capital's consultants, officers and employees (including any officer or employee
who is also a director of Franklin Capital) and a Non-Statutory Stock Option
Plan ("SOP") to be offered to Franklin Capital's "outside" directors, i.e.,
those directors who are not also officers or employees of Franklin. 112,500
shares of Franklin Capital's common stock have been reserved for issuance under
these plans, of which 67,500 shares have been reserved for the SIP and 45,000
shares have been reserved for the SOP.

         Shares subject to options that terminate or expire prior to exercise
will be available for future grants under the plans. Because the issuance of
options to "outside" directors is not permitted under the Investment Company Act
without an exemptive order by the Securities and Exchange Commission, the
issuance of options under the SOP was conditioned upon the granting of such
order. The order was granted by the Commission on January 18, 2000.

         On December 31, 2001, there were 39,375 options to purchase common
stock outstanding and 7,500 remain available for future issuance.

         The following is a description of each of the Stock Option Plans
followed by a description of the provisions applicable to both Stock Option
Plans.

STOCK INCENTIVE PLAN (SIP)

         Purpose

         The purpose of the SIP is to give the Corporation and its Affiliates a
competitive advantage in attracting, retaining and motivating officers,
employees and consultants of the Corporation and to provide the Corporation with
a stock plan that provides incentives linked to the financial results of the
Corporation and increase in stockholder value.



                                       47
<PAGE>

         Type of Awards

         The SIP permits, at the discretion of the Committee, the granting to
SIP participants of options to purchase Common Stock (including incentive stock
options within the meaning of Section 422 of the Code ("ISOs") or "non-statutory
stock options" ("non-ISOs")), stock appreciation rights, restricted stock and
tax offset bonuses. A stock appreciation right entitles an optionee to an amount
equal to the excess of the fair market value of one share of common stock over
the per share exercise price multiplied by the number of shares in respect of
which the stock appreciation right is exercised. Stock appreciation rights may
only be granted in conjunction with all or part of an option grant.

         Restricted stock may be awarded to any participant, for no cash
consideration and may be subject to such conditions, including vesting,
forfeiture and restrictions on transfer, as the Committee shall determine. Such
terms and conditions will be specified in an agreement evidencing the award.

         Finally, the SIP permits the granting of a right to receive a cash
payment at such time or times as an award under the SIP results in compensation
income to the participant for the purpose of assisting the participant in paying
the resulting taxes.

         Upon exercise of an ISO or non-ISO, the Committee may elect to cash out
all or any portion of the shares of common stock for which an option is being
exercised by paying the optionee the excess of the fair market value of a share
of common stock over the per share exercise price for each such option share
being cashed out. All options granted under the SIP become automatically
exercisable upon a "change of control" and remain exercisable until expiration
of their respective terms. A "change in control" is defined in the Stock Option
Plans as the acquisition by any person or group (other than Stephen L. Brown and
his Affiliates) of more than 25% of the voting securities of the Corporation or
a sale or other disposition of all or substantially all of the assets of the
Corporation to any person.

         Administration

         The SIP will be administered by a committee of the Board of Directors
composed of not fewer than two outside directors each of whom will qualify as a
"non-employee director" within the meaning of Rule 16b-3 of the 1934 Act and an
"outside Director" within the meaning of Section 162(m) of the Code with all
grants under the SIP approved pursuant to Section 57(o) of the 1940 Act. Section
57(o) of the 1940 Act requires that grants be approved by a majority of the
directors with no financial interest in the grant and a majority of
non-interested directors. The Committee will have the authority, among other
rights, to select the participants to whom awards may be granted, determine
whether to grant ISOs, non-ISOs, stock appreciation rights or restricted stock,
or any combination thereof and determine the vesting terms and other conditions
of an award to an SIP participant.

         Participants

         SIP participants will be the officers, employees (including such
officers and employees who are also directors) or consultants of the Corporation
and its Affiliates who are responsible for or contribute to the management,
growth and profitability of the business of the Corporation and its Affiliates.
Each grant of an award under the SIP will be evidenced by an agreement between
the participant and the Corporation, which shall include such terms and
provisions as the Committee may determine from time to time.



                                       48
<PAGE>

         Transition of Awards

         Under the SIP, generally, upon an SIP participant's death or when an
SIP participant's employment is terminated for any reason, all unvested stock
options will be forfeited. Upon the termination of employment of an optionee
other than as a result of the optionee's death, unless otherwise provided in
such optionee's option agreement, an optionee's right to exercise a vested
option will expire three months after termination of employment. If an
optionee's employment is terminated by reason of death, the period of exercise
for options vested at the optionee's death is 12 months. Options are not
transferable except on the death of the optionee, by will or the laws of decent
and distribution. Stock appreciation rights may be exercised and transferred to
the same extent that the options to which they relate may be exercised or
transferred.

         The Board of Directors may terminate, suspend, amend or revise the SIP
at any time subject to limitations in the plan. The Board may not, without the
consent of the optionee, alter or impair rights under any award previously
granted except in order to comply with applicable law.

NON-STATUTORY STOCK OPTION PLAN (SOP)

         Purpose

         The purpose of the SOP is to further the interests of the Corporation,
its stockholders and its employees by providing the "outside" directors of the
Corporation (i.e., those who are not also officers and employees of the
Corporation) the opportunity to purchase the Common Stock of the Corporation as
an appropriate reward for the dedication and loyalty of the "outside" directors.

         Type of Awards

         The SIP only permits the granting of options to purchase common stock.
Only non-ISOs can be granted under the SOP.

         Administration

         The SOP will be administered by the Board of Directors of the
Corporation with all grants approved pursuant to Section 57(o) of the 1940 Act.
Options granted under the SOP are intended to comply with the exemption afforded
by Rule 16b-3 of the 1934 Act. The Board, in its discretion, can impose any
vesting or other restrictions on options granted under the SOP.

         Participants

         SOP participants will be outside directors of the Corporation.

         Termination of Awards

         Under the SOP, options expire 30 days after the date of a SOP
participant's appointment with the Corporation is terminated except if such
termination is by reason of death or disability. In the event of termination by
reason of disability, options expire 12 months after such termination. In the
event of the participant's death while serving as director or within the 30-day
period following termination of the participant's appointment, options expire 12
months following the date of death.



                                       49
<PAGE>

PROVISIONS APPLICABLE TO BOTH STOCK OPTION PLANS

         Available Shares

         The aggregate number of shares of common stock reserved for issuance
under the Stock Option Plans will be 112,500, of which 67,500 shares have been
reserved for issuance under the SIP and 45,000 have been reserved for issuance
under the SOP. Shares subject to options that terminate or expire prior to
exercise will be available for future grants under the Stock Option Plan.

         The number of shares of common stock reserved for issuance under the
Stock Option Plans, the number of shares issuable upon the exercise of options
or subject to stock appreciation rights, the exercise price of such awards and
the number of restricted stock awards granted under the Stock Option Plans may
be subject to "anti-dilution" adjustments, in the sole discretion of the
Committee, in the event of any merger, reorganization, consolidation,
separation, liquidation, stock dividend, stock split, share combination,
recapitalization or other change in corporate structure affecting the
outstanding common stock of the Corporation.

         Grant and Exercise of Awards

         The exercise price for options under the Stock Option Plans will be
determined, in the case of the SIP, by the Committee, and in the case of the
SOP, by the Board of Directors, but will not be less than the "Fair Market
Value" of the Corporation's common stock at the date of grant (as defined in the
Stock Option Plans as the closing market price of the common stock on the
American Stock Exchange on the date of such grant).

         Options granted under the Stock Option Plans are exercisable for a
period of 10 years from the date of grant (five years with respect to ISOs
granted to optionees who own more than 10% of the voting power of the
Corporation or any subsidiary) or such shorter period as the administrator of
such plan (either the Committee or the Board, as the case may be) may establish
as to any or all shares of common stock subject to any option. Options will
become exercisable in accordance with the vesting schedule prescribed in such
optionee's option agreement, and may be subject to satisfaction of such other
conditions as the administrator may determine. Stock appreciation rights granted
under the SIP are exercisable to the same extent as the options to which they
relate and upon exercise terminate the related option.

         An employee, officer or director exercising a non-ISO pursuant to the
SIP may elect to have the Corporation withhold shares of the Corporation's
common stock to satisfy tax liabilities arising from the exercise of such
options. Initially, there will be three employees of the Corporation, two of
whom are also directors, who will be eligible to participate in the SIP. There
are five outside directors eligible to participate in the SOP.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS

         The following discussion of certain relevant federal income tax effects
applicable to stock options granted under the Stock Option Plans is a brief
summary only, and reference is made to the Code and the regulations and
interpretations issued thereunder for a complete statement of all relevant
federal tax consequences.



                                       50
<PAGE>

         Incentive Stock Options

         No taxable income will be realized by an optionee upon the grant or
timely exercise of an ISO. If shares are issued to an optionee pursuant to the
timely exercise of an ISO and a disqualifying disposition of such shares is not
made by the optionee (i.e., no disposition is made within two years after the
date of grant or within one year after the receipt of shares by such optionee,
whichever is later), then (i) upon sale of the shares, any amount realized in
excess of the exercise price of the ISO will be taxed to the optionee as a
long-term capital gain and any loss sustained will be long-term capital loss,
and (ii) no deduction will be allowed to the Corporation. However, if shares
acquired upon the timely exercise of an ISO are disposed of prior to satisfying
the holding period described above, generally (a) the optionee will realize
ordinary income in the year of disposition in an amount equal to the excess (if
any) of the fair market value of the shares at the time of exercise (or, if
less, the amount realized on the disposition of the shares) over the exercise
price thereof, and (b) the Corporation will be entitled to deduct an amount
equal to such income. Any additional gain recognized by the optionee upon a
disposition of shares prior to satisfying the holding period described above
will be taxed as a short-term or long-term capital gain, as the case may be, and
will not result in any deduction for the Corporation.

         If an ISO is not exercised on a timely basis, the option will be
treated as a nonqualified stock option. Subject to certain expectations, an ISO
generally will not be exercised on a timely basis if it is exercised more than
three months following termination of employment.

         The amount that the fair market value of shares of common stock on the
exercise date of an ISO exceeds the exercise price generally will constitute an
item that increases the optionee's alternative minimum taxable income.

         In general, the Corporation will not be required to withhold income or
payroll taxes on the timely exercise of an ISO.

         Non-ISOs

         In general, an optionee will not be subject to tax at the time a
non-ISO is granted. Upon exercise of a non-ISO where the exercise price is paid
in cash, the optionee generally must include in ordinary income at the time of
exercise an amount equal to the excess, if any, of the fair market value of the
shares of common stock at the time of exercise over the exercise price. The
optionee's tax basis in the shares acquired upon exercise will equal the
exercise price plus the amount taxable as ordinary income to the optionee. The
federal income tax consequences of an exercise of a non-ISO where the exercise
price is paid in previously owned shares of common stock are generally similar
to those where the exercise price is paid in cash. However, the optionee will
not be subject to tax on the surrender of such shares, and the tax basis of the
shares acquired on exercise that are equal in number to the shares surrendered
will be the same as the optionee's tax basis in such surrendered shares. Special
timing rules may apply to an optionee who is subject to reporting under Section
16(a) of the 1934 Act (generally an executive officer of the Corporation) and
would be subject to liability under Section 16(b) of the 1934 Act.

         The Corporation generally will be entitled to a deduction in the amount
of an optionee's ordinary income at the time such income is recognized by the
optionee upon the exercise of a non-ISO. Income and payroll taxes are required
to be withheld for employees on the amount of ordinary income resulting from the
exercise of a non-ISO.

         On February 14, 2000, 30,000 options were granted under the SOP to four
eligible "outside" directors. The strike price of the options was $11.50 per
share, which represented the closing price of Franklin's common stock as
reported by the American Stock Exchange on that date. One-third of the




                                       51
<PAGE>

options granted vested immediately; another one-third vested one year from the
date of issuance; and the final one-third vest two years after the date of
issuance. The options expire after ten years. On June 7, 2000, 7,500 options
were granted under the SOP to four eligible "outside" directors. The strike
price of the options was $9.67 per share, which represented the closing price of
Franklin's common stock as reported by the American Stock Exchange on that date.
One-third of the options granted vested immediately; another one-third vest one
year from the date of issuance; and the final one-third vest two years after the
date of issuance. The options expire after ten years.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following tables set forth certain information with respect to
beneficial ownership (as that term is defined in the rules and regulations of
the Commission) of the Corporation's common stock as of April 1, 2002, by 1)
each person who is known by the Corporation to be the beneficial owner of more
than five percent of the outstanding common stock, 2) each director of the
Corporation, 3) each current executive officer listed in the Summary
Compensation Table and 4) all directors and executive officers of the
Corporation as a group. Except as otherwise indicated, to the Corporation's
knowledge, all shares are beneficially owned and investment and voting power is
held as stated by the persons named as owners. The address for all beneficial
owners, unless stated otherwise below, is c/o Franklin Capital Corporation 450
Park Avenue, Suite 1000, New York, NY 10022.

COMMON STOCK

<TABLE>
<CAPTION>
                  NAME AND ADDRESS OF                  AMOUNT AND NATURE OF                            PERCENT
                    BENEFICIAL OWNER                   BENEFICIAL OWNERSHIP                           OF CLASS
                    ----------------                   --------------------                           --------
       <S>                                             <C>                             <C>            <C>
       The Prudential Insurance                               211,557                                    19.7%
          Company of America
          751 Broad Street
          Newark, NJ 07102
       Stephen L. Brown                                       143,291                  (1)               13.3%
       Peter D. Gottlieb                                       77,400                  (2)                7.0%
       Irving Levine                                           46,375                  (3)                4.2%
       Spencer L. Brown                                        33,244                  (4)                3.1%
       Jonathan A. Marshall                                    20,200                  (5)                1.9%
       Hiram M. Lazar                                           8,148                  (6)                   *
       Michael P. Rolnick                                       7,250                  (7)                   *
       David T. Lender                                            300                                        *
       All officers and directors
            as a group (8 persons)                            336,945                                    28.8%
</TABLE>

-----------------------

*        Less than 1.0%

(1)      Does not include 7,535 shares owned by Mr. Brown's children and does
         not include 33,244 shares owned by Spencer L. Brown, who is also his
         son. See (4) below. Mr. Brown disclaims beneficial ownership of such
         shares.



                                       52
<PAGE>
(2)      Includes preferred stock held which is convertible into 3,750 shares of
         common stock. Also includes 38,900 shares of common stock and preferred
         stock which is convertible into 30,000 shares of common stock owned by
         Kuby Gottlieb Special Value Fund ("KGSV") and 3,750 shares of common
         stock owned by Kuby Gottlieb Investments ("KGI"). Mr. Gottlieb may be
         deemed to be a controlling person of KGSV and KGI due to his position
         as portfolio manager. Therefore, Mr. Gottlieb may be deemed to be a
         beneficial owner of all shares owned by KGSV and KGI.

(3)      Includes options for 2,500 shares exercisable on February 14, 2000,
         options for 625 shares exercisable on June 7, 2000, options for 2,500
         shares exercisable on February 14, 2001 and options for 625 shares
         exercisable on June 7, 2001. Also includes preferred stock which is
         convertible into 35,625 shares of common stock owned by Copley Fund,
         Inc. ("Copley"). Mr. Levine may be deemed to be a controlling person of
         Copley due to his position as Chairman and Chief Executive Officer.
         Therefore, Mr. Levine may be deemed to be a beneficial owner of all
         shares owned by Copley.

(4)      Includes preferred stock held which is convertible into 1,875 shares of
         common stock.

(5)      Includes options for 2,500 shares exercisable on February 14, 2000,
         options for 625 shares exercisable on June 7, 2000, options for 2,500
         shares exercisable on February 14, 2001 and options for 625 shares
         exercisable on June 7, 2001. Also includes preferred stock held which
         is convertible into 3,750 shares of common stock.

(6)      Includes options for 937 shares exercisable on March 1, 2000, and
         options for 938 shares exercisable on March 1, 2001. Also includes
         preferred stock held which is convertible into 750 shares of common
         stock.

(7)      Includes options for 2,500 shares exercisable on February 14, 2000,
         options for 625 shares exercisable on June 7, 2000, options for 2,500
         shares exercisable on February 14, 2001 and options for 625 shares
         exercisable on June 7, 2001.

PREFERRED STOCK

<TABLE>
<CAPTION>
                  NAME AND ADDRESS OF                  AMOUNT AND NATURE OF                                 PERCENT
                    BENEFICIAL OWNER                   BENEFICIAL OWNERSHIP                                OF CLASS
                    ----------------                   --------------------                                --------
       <S>                                             <C>                             <C>                 <C>
       Irving Levine                                           4,750                   (1)                    28.9%
       Peter D. Gottlieb                                       4,500                   (2)                    27.4%
       Mark Rattner                                            2,000                                          12.2%
         c/o Professional Indemnity
         37 Radio Circle Drive
         Mount Kisco, NY 10549

       Gerry M. Ritterman                                      1,500                                           9.1%
         47 Lawrence Farms Crossways
         Chappaqua, NY 10514
       Jonathan A. Marshall                                      500                                           3.0%
       Spencer L. Brown                                          250                                           1.5%
       Hiram M. Lazar                                            100                                              *
       Stephen L. Brown                                            -                                              *
       David T. Lender                                             -                                              *
       Michael P. Rolnick                                          -                                              *
       All officers and directors
            as a group (8 persons)                            10,100                                          61.4%
</TABLE>

-----------------------
* Less than 1.0%




                                       53
<PAGE>

(1)      Preferred stock owned by Copley Fund, Inc. ("Copley"). Mr. Levine may
         be deemed to be a controlling person of Copley due to his position as
         Chairman and Chief Executive Officer. Therefore, Mr. Levine may be
         deemed to be a beneficial owner of all shares owned by Copley.

(2)      Includes 4,000 shares of preferred stock owned by Kuby Gottlieb Special
         Value Fund ("KGSV"). Mr. Gottlieb may be deemed to be a controlling
         person of KGSV due to his position as portfolio manager. Therefore, Mr.
         Gottlieb may be deemed to be a beneficial owner of all shares owned by
         KGSV.

Set forth below is the dollar range of equity securities beneficially owned by
each nominee and continuing director as of April 1, 2002:

<TABLE>
<CAPTION>
                                                                    DOLLAR RANGE OF EQUITY
                       NAME OF                                      SECURITIES BENEFICIALLY
                       DIRECTOR                                     OWNED(1)(2)(5)
                       --------                                     -----------------------
                       <S>                                          <C>
                       Stephen L. Brown(3)                          over $100,000
                       David T. Lender                              $1-$10,000
                       Jonathan A. Marshall                         $50,001-$100,000
                       Michael P. Rolnick                           $1-$10,000
                       Spencer L. Brown(4)                          over $100,000
                       Peter D. Gottlieb                            over $100,000
                       Irving Levine                                over $100,000
</TABLE>
---------------

(1) Beneficial ownership has been determined in accordance with Rule 16a-1(a)(2)
of the Securities Exchange Act of 1934.

(2) The dollar ranges are: None, $1-$10,000, $10,001-$50,000, $50,001-100,000,
or over $100,000.

(3) Denotes an individual who is an "interested person" as defined in the
Investment Company Act of 1940.

(4) Spencer L. Brown has been nominated to serve as a preferred stock director
of Franklin Capital. If elected, he will be an "interested person" because he
also serves as a Senior Vice President and Secretary of the Corporation.

(5) Franklin Capital has not provided information with respect to the "Aggregate
Dollar Range of Equity Securities in All Funds Overseen or to be Overseen by
Director or Nominee in Family of Investment Companies" because it is not part of
a family of investment companies.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         See Items 10 through 12 and Footnote 6 to the Financial Statements.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

The following financial statements are set forth under Item 8.

(a)      (1) Financial Statements
               Report of Ernst & Young, LLP
               Balance Sheets as of December 31, 2001 and 2000
               Statements of Operations for the years ended December 31, 2001,
               2000 and 1999


                                       54
<PAGE>

               Statements of Cash Flows for the years ended December 31, 2001,
                 2000 and 1999
               Statements of Changes in Net Assets for the years ended
                 December 31, 2001, 2000 and 1999
               Financial Highlights for the years ended December 31, 2001, 2000,
                 1999, 1998 and 1997
               Portfolio of Investments as of December 31, 2001
               Notes to Financial Statements

The following exhibits are filed herewith or incorporated as set forth below:

         (2) Exhibits

               (2)(i)     Agreement and Plan of Merger between Franklin Capital
                             Corporation and Change Technology Partners, Inc.
                             dated as of December 4, 2001(1)

               (3)(i)      Articles of Incorporation(2)
               (3)(ii)     By-Laws(2)
               (3)(iii)    Amendment to Articles of Incorporation(3)
               (4)(i)      Certificate of Designation(4)
               (4)(ii)     Registration Rights Agreement(5)
               (4)(iii)    Preferred Stock Purchase Agreement(6)
               (10)(i)     Employment Agreement - Stephen L. Brown(7)
               (10)(ii)    Employment Agreement - Spencer L. Brown(8)
               (10)(iii)   Severance Agreement - Stephen L. Brown(9)
               (10)(iv)    Severance Agreement - Spencer L. Brown(10)
               (10)(v)     Stock Incentive Plan.(11)
               (10)(vi)    Stock Option Plan(12)
               (10)(vii)   Management Agreement with Excelsior Radio Networks**
               (10)(viii)  Asset Purchase Agreement dated August 28, 2001(13)
               (10)(ix)    Asset Purchase Agreement, dated as of April 1, 2002,
                             by and among the Dial Entities, Franklin and
                             Excelsior(15)
               (10)(x)     Agreement and Plan of Merger, dated as of December 4,
                           2001 by and between Change and Franklin(14).
               (10)(xi)    Convertible Promissory Note, dated April 3, 2002,
                             issued by Newco in favor of DCGL (15)
               (10)(xii)   Convertible Promissory Note, dated April 3, 2002,
                             issued by Newco in favor of DCGL (15)
               (10)(xiii)  Convertible Promissory Note, dated April 3, 2002,
                             issued by Newco in favor of DCGL (15)
               (10)(xiv)   Promissory Note, dated April 3, 2002, issued by
                             Excelsior in favor of Change (15)
               (10)(xv)    Promissory Note, dated April 3, 2002, issued by
                             Excelsior in favor of Sunshine (15)
               (10)(xvi)   Security Agreement, dates as of April 3, 2002, by
                             and among Excelsior, Sunshine and Change (15)
               (10)(xvii)  Amendment No. 1 to Agreement and Plan of Merger,
                             dated as of April 3, 2002, by and between Change
                             and Franklin (15)
               (21)        List of Subsidiaries**
               (23)        Consent of Ernst & Young LLP**

--------------------------------------------------------------------------------
(1)      Incorporated by reference to the Current Report on Form 8-K filed
         December 5, 2001.

(2)      Incorporated by reference to the Corporation's Form N-2, as amended,
         filed July 31, 1992.

(3)      Incorporated by reference to Exhibit 3(iii) filed on the Company's
         Annual Report filed on Form 10-K for the year ended December 31, 2000



                                       55
<PAGE>

(4)      Incorporated by reference to Exhibit 4(i) filed on the Company's Annual
         Report filed on Form 10-K for the year ended December 31, 2000

(5)      Incorporated by reference to Exhibit 4(ii) filed on the Company's
         Annual Report filed on Form 10-K for the year ended December 31, 2000

(6)      Incorporated by reference to Exhibit 4(iii) filed on the Company's
         Annual Report filed on Form 10-K for the year ended December 31, 2000

(7)      Incorporated by reference to Exhibit 10(i) filed on the Company's
         Annual Report filed on Form 10-K for the year ended December 31, 2000

(8)      Incorporated by reference to Exhibit 10(ii) filed on the Company's
         Annual Report filed on Form 10-K for the year ended December 31, 2000

(9)      Incorporated by reference to Exhibit 10(iii) filed on the Company's
         Annual Report filed on Form 10-K for the year ended December 31, 2000

(10)     Incorporated by reference to Exhibit 10(iv) filed on the Company's
         Annual Report filed on Form 10-K for the year ended December 31, 2000

(11)     Incorporated by reference to Exhibit 4.1 to the Company's Form S-8
         filed July 17, 2000.

(12)     Incorporated by reference to Exhibit 4.2 to the Company's Form S-8
         filed July 17, 2000.

(13)     Incorporated by reference to Exhibit 99.1 to the Current Report on Form
         8-K filed September 14, 2001.

(14)     Incorporated by reference to Exhibit 2.1 to the Current Report on
         Form 8-K filed December 5, 2001.

(15)     Incorporated by reference to Current Report on form 8-K filed on April
         12, 2002

**       Filed herewith

         (b)      Reports on Form 8-K. The Corporation filed a report on Form
                  8-K on November 15, 2001 announcing an agreement in principle
                  to merge with Change. A report on form 8-K was filed on
                  December 5, 2001 announcing the signing of a definitive merger
                  agreement with Change. A report of Form 8-K was filed on April
                  12, 2002 announcing the acquisition of the Dial Entities.

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Corporation has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                       FRANKLIN CAPITAL CORPORATION

Date: April 12, 2002                   By:  /s/ STEPHEN L. BROWN
                                            ------------------------------------
                                            Stephen L. Brown
                                            Chairman & Chief Executive Officer


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
Corporation in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
     SIGNATURES                                  TITLE
     ----------                                  -----
<S>                                              <C>
/s/ STEPHEN L. BROWN
---------------------
Stephen L. Brown                                 Chairman & Chief Executive
                                                 Officer
/s/ SPENCER L. BROWN
---------------------
Spencer L. Brown                                 Senior Vice President &
                                                 Secretary
/s/ HIRAM  M. LAZAR
---------------------
Hiram M. Lazar                                   Chief Financial Officer
</TABLE>



                                       56
<PAGE>

<TABLE>
<S>                                             <C>

/s/ PETER D. GOTTLIEB
---------------------
Peter D. Gottlieb                               Director

/s/ DAVID T. LENDER
---------------------
David T. Lender                                 Director

/s/ IRVING LEVINE
----------------------
Irving Levine                                   Director

/s/ JONATHAN A. MARSHALL
------------------------
Jonathan A. Marshall                            Director

/s/ MICHAEL P. ROLNICK
----------------------
Michael P. Rolnick                             Director
</TABLE>




                                       57