`SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

For the quarterly period ending              June 30, 2003
                               -------------------------------------------------

                                       or

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

     For the transition period from                       to
                                     ------------------------------------------

     Commission File Number:                           1-10104
                             ---------------------------------------------------

                              United Capital Corp.
--------------------------------------------------------------------------------
               (Exact name of Company as specified in its charter)

        Delaware                                              04-2294493
--------------------------------------------------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

          9 Park Place, Great Neck, New York                     11021
--------------------------------------------------------------------------------
    (Address of principal executive offices)                  (Zip Code)

                                  516-466-6464
--------------------------------------------------------------------------------
                (Company's telephone number, including area code)

                                      N/A
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Company (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  Company  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. [X] Yes [ ] No

Indicate by check mark whether the Company is an accelerated  filer. [ ] Yes [X] No

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

Common stock, $.10 par value 9,101,342 shares outstanding as of August 5, 2003.
       (4,550,671 shares before adjustment for a two-for-one stock split
                             effective August 2003.
                 See Notes to Consolidated Financial Statements)

                                  Page 1 of 27




                      UNITED CAPITAL CORP. AND SUBSIDIARIES

                                      INDEX


                          PART I FINANCIAL INFORMATION
                                                                            PAGE
                                                                            ----

ITEM 1.    FINANCIAL STATEMENTS

           Consolidated Balance Sheets as
           of June 30, 2003 (Unaudited) and December 31, 2002                3

           Consolidated Statements of Income for the
           Three Months Ended June 30, 2003 and 2002 (Unaudited)             4

           Consolidated Statements of Income for the
           Six Months Ended June 30, 2003 and 2002 (Unaudited)               5

           Consolidated Statements of Cash Flows for the
           Six Months Ended June 30, 2003 and 2002 (Unaudited)           6 - 7

           Notes to Consolidated Financial Statements                   8 - 20

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS               20 - 25

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURE OF
           MARKET RISK                                                      26

ITEM 4.    CONTROLS AND PROCEDURES                                          26


                            PART II OTHER INFORMATION

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECUIRTY HOLDERS              26

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K                                 27


SIGNATURES                                                                  27

                                  Page 2 of 27





                      UNITED CAPITAL CORP. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
              AS OF JUNE 30, 2003 (UNAUDITED) AND DECEMBER 31, 2002
                                 (In Thousands)

                                                                      2003        2002
                                                                    --------   ----------
Assets

Current assets:
   Cash and cash equivalents                                        $ 62,984   $ 48,893
   Marketable securities                                              31,299     25,893
   Notes and accounts receivable, net                                  7,541      5,715
   Inventories                                                         3,401      3,677
   Prepaid expenses and other current assets                             917      1,477
   Deferred income taxes                                                 628        207
   Current assets of discontinued operations                              26         73
                                                                    --------   --------

      Total current assets                                           106,796     85,935
                                                                    --------   --------

Property, plant and equipment, net                                     3,365      3,569
Real property held for rental, net                                    43,104     44,539
Investments in joint ventures                                         21,926     31,389
Noncurrent notes receivable                                            2,948      2,994
Other assets                                                           3,437      3,707
Noncurrent assets of discontinued operations                             536      4,414
                                                                    --------   --------

      Total assets                                                  $182,112   $176,547
                                                                    ========   ========

Liabilities and Stockholders' Equity

Current liabilities:
   Current maturities of long-term debt                             $  6,466   $  3,977
   Accounts payable and accrued liabilities                            8,902      9,262
   Dividends payable                                                   9,102          0
   Income taxes payable                                                7,769      5,260
   Current liabilities of discontinued operations                          0        446
                                                                    --------   --------

      Total current liabilities                                       32,239     18,945
                                                                    --------   --------

Long-term debt                                                         7,750     12,347
Other long-term liabilities                                           31,142     31,016
Deferred income taxes                                                  1,929      2,605
                                                                    --------   --------

      Total liabilities                                               73,060     64,913
                                                                    --------   --------

Commitments and contingencies

Stockholders' equity:
   Common stock $.10 par value, authorized 17,500 shares;
      issued and outstanding 9,101 and 9,038 shares, respectively        910        904
   Retained earnings                                                 107,560    109,644
   Accumulated other comprehensive income, net of tax                    582      1,086
                                                                    --------   --------

      Total stockholders' equity                                     109,052    111,634
                                                                    --------   --------

      Total liabilities and stockholders' equity                    $182,112   $176,547
                                                                    ========   ========

The accompanying Notes to Consolidated Financial Statements are an integral part
of  these  statements.   Share  amounts  and  common  stock  at  par  have  been
retroactively adjusted to reflect the two-for-one stock split in August 2003.

                                  Page 3 of 27





                      UNITED CAPITAL CORP. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                FOR THE THREE MONTHS ENDED JUNE 30, 2003 AND 2002
                                   (UNAUDITED)
                      (In Thousands, Except Per Share Data)

                                                                   2003         2002
                                                                 ---------    --------

Revenues:
   Net sales                                                     $  8,326    $  9,021
   Rental revenues from real estate operations                      6,405       6,082
                                                                 --------    --------

                     Total revenues                                14,731      15,103
                                                                 --------    --------

Costs and expenses:
   Cost of sales                                                    5,820       6,458
   Real estate operations:
      Mortgage interest expense                                       267         368
      Depreciation expense                                            774         816
      Other operating expenses                                      2,148       1,885
   General and administrative expenses                              1,728       1,427
   Selling expenses                                                   874         931
                                                                 --------    --------

                     Total costs and expenses                      11,611      11,885
                                                                 --------    --------

   Operating income                                                 3,120       3,218
                                                                 --------    --------

Other income (expense):
   Interest and dividend income                                       582         324
   Interest expense                                                  (111)        (76)
   Other income and expense, net                                      845       1,892
                                                                 --------    --------

                     Total other income                             1,316       2,140
                                                                 --------    --------

   Income from continuing operations before income taxes            4,436       5,358

   Provision for income taxes                                       1,476       2,137
                                                                 --------    --------

   Income from continuing operations                                2,960       3,221
                                                                 --------    --------

Discontinued operations:
   Income from discontinued operations, net of tax
      provision of $81 and $205, respectively                         122         308
   Net gain on disposal of discontinued operations, net of tax
      provision of $249                                               375           0
                                                                 --------    --------

   Income from discontinued operations                                497         308
                                                                 --------    --------

   Net income                                                    $  3,457    $  3,529
                                                                 ========    ========

Basic earnings per share:
   Income from continuing operations                             $    .33    $    .35
   Income from discontinued operations                                .05         .03
                                                                 --------    --------
   Net income per share                                          $    .38    $    .38
                                                                 ========    ========

Diluted earnings per share:
   Income from continuing operations                             $    .27    $    .33
   Income from discontinued operations                                .05         .03
                                                                 --------    --------
   Net income per share assuming dilution                        $    .32    $    .36
                                                                 ========    ========
Dividends declared per share                                     $   2.00    $      0
                                                                 ========    ========

The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.  Per share amounts,  except dividends  declared,  have been
retroactively adjusted to reflect the two-for-one stock split in August 2003.

                                  Page 4 of 27




                      UNITED CAPITAL CORP. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                 FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002
                                   (UNAUDITED)
                      (In Thousands, Except Per Share Data)

                                                                    2003        2002
                                                                 --------    ---------

Revenues:
   Net sales                                                     $ 16,482    $ 17,261
   Rental revenues from real estate operations                     12,482      11,879
                                                                 --------    --------

                     Total revenues                                28,964      29,140
                                                                 --------    --------

Costs and expenses:
   Cost of sales                                                   11,880      12,761
   Real estate operations:
      Mortgage interest expense                                       553         735
      Depreciation expense                                          1,554       1,645
      Other operating expenses                                      4,213       3,577
   General and administrative expenses                              3,165       2,801
   Selling expenses                                                 1,740       1,840
                                                                 --------    --------

                     Total costs and expenses                      23,105      23,359
                                                                 --------    --------

   Operating income                                                 5,859       5,781
                                                                 --------    --------

Other income (expense):
   Interest and dividend income                                       915         881
   Interest expense                                                  (219)       (242)
   Other income and expense, net                                    1,474       4,389
                                                                 --------    --------

                     Total other income                             2,170       5,028
                                                                 --------    --------

   Income before income taxes                                       8,029      10,809

   Provision for income taxes                                       2,847       4,139
                                                                 --------    --------

   Income from continuing operations                                5,182       6,670
                                                                 --------    --------

Discontinued operations:
   Income  from discontinued operations,
      net of tax provision of $175 and $412, respectively             262         617
   Net gain on disposal of discontinued operations, net of tax
      provision of $1,006                                           1,509           0
                                                                 --------    --------

   Income from discontinued operations                              1,771         617
                                                                 --------    --------

   Net income                                                    $  6,953    $  7,287
                                                                 ========    ========

Basic earnings per share:
   Income from continuing operations                             $    .57    $    .72
   Income from discontinued operations                                .20         .07
                                                                 --------    --------
   Net income per share                                          $    .77    $    .79
                                                                 ========    ========

Diluted earnings per share:
   Income from continuing operations                             $    .49    $    .67
   Income from discontinued operations                                .16         .06
                                                                 --------    --------
   Net income per share assuming dilution                        $    .65    $    .73
                                                                 ========    ========
Dividends declared per share                                     $   2.00    $      0
                                                                 ========    ========

The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.  Per share amounts,  except dividends  declared,  have been
retroactively adjusted to reflect the two-for-one stock split in August 2003.

                                  Page 5 of 27




                      UNITED CAPITAL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002
                                   (UNAUDITED)
                                 (In Thousands)


                                                                                2003        2002
                                                                              -------     --------

Cash flows from operating activities:
   Net income                                                                $  6,953    $  7,287
   Adjustments to reconcile net income
      to net cash provided by operating activities:
         Depreciation and amortization                                          1,945       2,282
         Net loss on sale of available-for-sale securities                          0       1,005
         Net loss (gain) on sale of real estate assets                            152      (5,674)
         Equity in earnings of joint ventures                                    (533)       (337)
         Net gain on disposal of discontinued operations                       (2,515)          0
         Net realized and unrealized (gain) loss on derivative instruments       (982)        255
         Proceeds from sale of trading securities                                 884           0
         Net realized and unrealized gain on trading securities                   (57)          0
         Changes in assets and liabilities  (A)                                  (213)      3,116
                                                                             --------    --------

                     Net cash provided by operating activities                  5,332       7,934
                                                                             --------    --------

Cash flows from investing activities:
   Purchase of available-for-sale securities                                   (6,490)     (2,099)
   Proceeds from sale of available-for-sale securities                              0         268
   Proceeds from sale of real estate assets                                     6,541       6,419
   Proceeds from sale of derivative instruments                                   954           0
   Purchase of derivative instruments                                               0      (1,930)
   Purchase of note receivable                                                      0      (2,955)
   Acquisition of property, plant and equipment                                  (132)       (112)
   Principal payments on notes receivable                                          59           3
   Acquisition of/additions to real estate assets                                (132)       (124)
   Distributions from joint ventures, net of capital contributions              9,996         389
                                                                             --------    --------

                     Net cash provided by (used in) investing activities       10,796        (141)
                                                                             --------    --------

Cash flows from financing activities:
   Principal payments on mortgage commitments, notes
      and loans                                                                (2,108)     (2,104)
   Net repayments under credit facilities                                           0        (350)
   Purchase and retirement of common shares                                      (771)     (1,720)
   Proceeds from exercise of stock options                                        842         337
                                                                             --------    --------

                     Net cash used in financing activities                     (2,037)     (3,837)
                                                                             --------    --------

Net increase in cash and cash equivalents                                      14,091       3,956

Cash and cash equivalents, beginning of period                                 48,893      68,170
                                                                             --------    --------

Cash and cash equivalents, end of period                                     $ 62,984    $ 72,126
                                                                             ========    ========

                                  Page 6 of 27





                      UNITED CAPITAL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
           FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002 (CONTINUED)
                                   (UNAUDITED)


                                                                             2003       2002
                                                                          ---------  ---------

Supplemental disclosures of cash flow information:
   Cash paid during the period for:

          Interest                                                           $658       $889
                                                                           ======     ======

          Taxes                                                            $3,542     $3,651
                                                                           ======     ======


         (A) Changes in assets and liabilities for the six months ended June 30,
         2003 and 2002 are as follows:


                                                                             2003       2002
                                                                          ---------  ---------


          Accounts receivable, net                                        ($1,839)   ($  356)
          Inventories                                                         276        913
          Prepaid expenses and other current assets                            40         21
          Deferred income taxes                                              (826)     2,135
          Other assets                                                        232       (460)
          Accounts payable and accrued liabilities                           (332)     2,347
          Income taxes payable                                              2,509     (2,460)
          Other long-term liabilities                                         126      1,015
          Discontinued operations - noncash charges and working capital
             changes                                                         (399)       (39)
                                                                          -------    -------

                   Total                                                  ($  213)   $ 3,116
                                                                          =======    =======

The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.

                                  Page 7 of 27




                      UNITED CAPITAL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      (In Thousands, Except Per Share Data)
                                   (UNAUDITED)

BASIS OF PRESENTATION

            The accompanying  unaudited  Consolidated  Financial Statements have
been  prepared  in  accordance  with  the  instructions  to Form  10-Q  used for
quarterly  reports under Section 13 or 15(d) of the  Securities  Exchange Act of
1934, as amended,  and therefore,  do not include all  information and footnotes
necessary for a fair presentation of financial  position,  results of operations
and cash flows in conformity with accounting  principles  generally  accepted in
the United States of America.

            The consolidated  financial  information included in this report has
been  prepared  in  conformity  with the  accounting  principles  and methods of
applying those accounting  principles,  reflected in the Consolidated  Financial
Statements  included in the Annual Report on Form 10-K filed with the Securities
and Exchange Commission for the year ended December 31, 2002.

            All  adjustments,  all of which  are  normal  and  recurring  in the
opinion of  management,  necessary  for a fair  statement of the results for the
interim periods presented have been recorded.

            The  results  of  operations  for  the  periods  presented  are  not
necessarily indicative of the results to be expected for the full year.

DIVIDENDS

            On June 10, 2003,  the Board of Directors of the Company  declared a
special  one-time cash dividend of $2.00 per common share to all stockholders of
record as of June 20,  2003.  The  declaration  of such  dividend  is within the
discretion  of the Board of  Directors.  While the  Company  does not  currently
expect to pay additional  dividends in the future,  the Board of Directors could
re-evaluate this position in the future.  This dividend,  totaling  $9,102,  was
paid on July 10, 2003.

STOCK SPLIT

            On June 10,  2003,  the  Company's  Board of  Directors  unanimously
adopted an amendment to the Company's  Articles of Incorporation to increase the
number of authorized  shares of the Company's  Common Stock from 7,500 to 17,500
shares,  subject to stockholder  approval.  The Company received the approval of
this amendment by a majority of it's stockholders on August 4, 2003 and, on that
date,  declared a two-for-one  stock split to  stockholders  of record as of the
close of business on August 15, 2003 payable on or about  August 29,  2003.  All
references  to the  number  of  shares of common  stock,  per share  prices  and
earnings per share amounts in the accompanying Consolidated Financial Statements
and notes  included  in the  Quarterly  Report on Form 10-Q for the  current and
prior periods have been adjusted to reflect the split on a retroactive basis.

RECENT ACCOUNTING PRONOUNCEMENTS

            In April 2002,  the Financial  Accounting  Standards  Board ("FASB")
issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment
of FASB  Statement No. 13, and  Technical  Corrections"  ("SFAS No. 145").  This
statement   eliminates   the   requirement  to  report  gains  and  losses  from
extinguishment  of debt as  extraordinary  unless they meet the  criteria of APB
Opinion 30. SFAS No. 145 also  requires  sale-leaseback  accounting  for certain
lease   modifications   that  have   economic   effects   that  are  similar  to
sale-leaseback  transactions.  The  changes  related  to  lease  accounting  are
effective for transactions  occurring after May 15, 2002 and the changes related

                                  Page 8 of 27





to debt  extinguishment  are effective for fiscal years  beginning after May 15,
2002.  The  adoption  of SFAS No.  145 did not  have a  material  impact  on the
Company's financial position or results of operations.

            In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs
Associated  with Exit or Disposal  Activities"  ("SFAS No.  146").  SFAS No. 146
nullifies  Emerging  Issues  Task  Force  Issue  No.  94-3 and  requires  that a
liability for a cost associated with an exit or disposal  activity be recognized
when the liability is incurred.  This statement also establishes that fair value
is the  objective  for initial  measurement  of the  liability.  SFAS No. 146 is
effective for exit or disposal  activities that are initiated after December 31,
2002.  The  adoption  of SFAS No.  146 did not  have a  material  impact  on the
Company's financial position or results of operations.

            In December  2002,  the FASB issued  SFAS No. 148,  "Accounting  for
Stock-Based  Compensation  -  Transition  and  Disclosure,  an amendment of FASB
Statement  No.  123"  ("SFAS  No.  148").  SFAS No.  148  amends  SFAS No.  123,
"Accounting for Stock-Based  Compensation,"  to provide  alternative  methods of
transition for an entity that voluntarily changes to the fair value based method
of  accounting  for  stock-based  employee  compensation.  It  also  amends  the
disclosure  provisions of that Statement to require  prominent  disclosure about
the effects on reported net income of an entity's  accounting  policy  decisions
with respect to  stock-based  employee  compensation.  The Company has chosen to
continue to account  for  stock-based  compensation  using the  intrinsic  value
method prescribed in APB Opinion No. 25 and related  interpretations as provided
for under SFAS No. 148.  Accordingly,  compensation  expense is only  recognized
when the market value of the  Company's  stock at the date of grant  exceeds the
amount an  employee  must pay to acquire  the stock.  The  Company  adopted  the
interim  disclosure  provisions of SFAS No. 148 in its financial reports for the
quarter  ended  March 31,  2003.  The  adoption  of SFAS No.  148 did not have a
material impact on the Company's financial position or results of operations.

            In  November  2002,  the FASB  issued  FASB  Interpretation  No. 45,
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect  Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 requires that
upon  issuance of a guarantee,  a guarantor  must  recognize a liability for the
fair value of an  obligation  assumed  under a guarantee.  FIN 45 also  requires
additional  disclosures  by a  guarantor  in its  interim  and annual  financial
statements  about  the  obligations   associated  with  guarantees  issued.  The
recognition  provisions  of FIN 45 are effective  for any  guarantees  issued or
modified after December 31, 2002. The disclosure  requirements are effective for
financial  statements  of interim or annual  periods  ending after  December 15,
2002. As a result of adopting the  disclosure  provisions of FIN 45, the Company
has provided  additional  disclosures  herein as required (See  "Investments  in
Joint Ventures").

            In  January  2003,  the  FASB  issued  FASB  Interpretation  No.  46
"Consolidation of Variable Interest Entities" ("FIN 46"). In general, a variable
interest  entity  is a  corporation,  partnership,  trust,  or any  other  legal
structure  used for  business  purposes  that  either  (a) does not have  equity
investors  with voting  rights or (b) has equity  investors  that do not provide
sufficient  financial  resources  for the entity to support  its  activities.  A
variable  interest  entity  often holds  financial  assets,  including  loans or
receivables,  real estate or other property.  A variable  interest entity may be
essentially passive or it may engage in activities on behalf of another company.
Until now, a company  generally has included  another entity in its consolidated
financial  statements only if it controlled the entity through voting interests.
FIN 46 changes that by requiring a variable  interest  entity to be consolidated
by a company if that  company is subject to a majority  of the risk of loss from
the variable interest  entity's  activities or entitled to receive a majority of
the entity's residual returns or both. FIN 46's consolidation requirements apply
immediately to variable  interest entities created or acquired after January 31,
2003. The consolidation requirements apply to older entities in the first fiscal
year or interim period beginning after June 15, 2003.  Certain of the disclosure
requirements  apply in all financial  statements  issued after January 31, 2003,
regardless of when the variable  interest  entity was  established.  The Company

                                  Page 9 of 27





adopted FIN 46 effective  January 31,  2003.  The adoption of FIN 46 has not had
and is not  expected  to  have a  material  impact  on the  Company's  financial
position or results of operations.

            In  April  2003,  the FASB  released  SFAS No.  149,  "Amendment  of
Statement 133 on Derivative  Instruments and Hedging  Activities."  SFAS No. 149
clarifies  under what  circumstances  a contract with an initial net  investment
meets  the  characteristics  of  a  derivative,  amends  the  definition  of  an
underlying  contract,  and  clarifies  when a  derivative  contains a  financing
component in order to increase the  comparability of accounting  practices under
SFAS No. 133. The statement is effective for contracts  entered into or modified
after June 30, 2003,  and for hedging  relationships  designated  after June 30,
2003. The adoption of SFAS No. 149 is not expected to have a material  impact on
the Company's financial position or results of operations.

            In May 2003, the FASB issued SFAS No. 150,  "Accounting  for Certain
Financial  Instruments  with  Characteristics  of both  Liabilities  and Equity"
("SFAS  No.  150").  SFAS  No.  150  establishes  standards  for  how an  issuer
classifies and measures certain financial  instruments with  characteristics  of
both  liabilities  and equity.  It requires that an issuer  classify a financial
instrument  that is  within  its  scope  as a  liability  (or an  asset  in some
circumstances). SFAS No. 150 is effective for financial instruments entered into
or modified  after May 31, 2003,  and otherwise is effective at the beginning of
the first interim period  beginning after June 15, 2003,  except for mandatorily
redeemable financial instruments of nonpublic entities. The adoption of SFAS No.
150 is not  expected  to  have a  material  impact  on the  Company's  financial
position or results of operations.

MARKETABLE SECURITIES

            The cost, gross unrealized  gains,  gross unrealized losses and fair
market value of marketable  securities by type at June 30, 2003 and December 31,
2002 are as follows:

                                                    Gross            Gross            Fair
                                                  unrealized       unrealized        market
                    June 30, 2003:       Cost        gains           losses          value
                                       --------   ----------       ----------       ---------

         Available-for-sale:
               Equity securities       $30,399      $1,658          ($763)           $31,294
               Bonds                         5           0              0                  5
                                       -------      ------         -------           -------

                                       $30,404      $1,658          ($763)           $31,299
                                       =======      ======         =======           =======

                                                    Gross            Gross            Fair
                                                  unrealized       unrealized        market
                December 31, 2002:       Cost        gains           losses          value
                                       --------   ----------       ----------       ---------

         Available-for-sale:
               Equity securities       $23,389      $2,119          ($447)           $25,061
               Bonds                         5           0              0                  5
                                       -------      ------          ------           -------
                                        23,394       2,119           (447)            25,066

         Trading:
               Equity securities           792          35              0                827
                                       -------      ------         -------           -------
                                       $24,186      $2,154          ($447)           $25,893
                                       =======      ======         =======           =======

            Included in marketable  securities at June 30, 2003 and December 31,
2002 was $23,751 and $20,402,  respectively, of common stock at fair value, in a
publicly-traded company for which the Board Chairman and another Director of the
Company are directors.

                                 Page 10 of 27





            Proceeds from the sale of available-for-sale  and trading securities
and the resulting gross realized gains and losses included in the  determination
of net income for the six months ended June 30, 2003 and 2002 are as follows:

                                                   2003            2002
                                                   ----            ----
          Available-for-sale securities:
             Proceeds                             $     0        $   268
             Gross realized losses                      0         (1,005)
          Trading securities:
             Proceeds                             $   884        $     0
             Gross realized gains                      57              0

INVENTORIES

            The components of inventories are as follows:

                                    June 30, 2003      December 31, 2002
                                    -------------      -----------------

                  Raw materials        $1,657               $1,765
                  Work in process         457                  367
                  Finished goods        1,287                1,545
                                       ------               ------
                                       $3,401               $3,677
                                       ======               ======

REAL ESTATE

Property sales:
---------------

            The  Company  adopted  the  provisions  of  Statement  of  Financial
Accounting  Standards  No. 144,  "Accounting  for the  Impairment or Disposal of
Long-Lived  Assets"  ("SFAS No. 144") in 2002.  SFAS No. 144  requires  that the
operating  results  through  the  date of  sale,  as well as the  gains on sales
generated on properties sold or held for sale, that meet the criteria of being a
component of an entity, shall be reclassified as discontinued operations for all
periods  presented.  As the statement  requires  implementation on a prospective
basis, properties which were identified as held for sale prior to implementation
are presented in the Consolidated  Financial  Statements in a manner  consistent
with the prior periods' presentation.

            During the six months  ended June 30,  2003,  the  Company  sold six
commercial  properties  from its real estate  investment and management  segment
which had a total net book  value of  $3,676.  The  properties  were sold for an
aggregate  sales price of $3,369,  resulting in losses of ($185) on a net of tax
basis.  The Company also sold a shopping center from its real estate  investment
and  management  segment which had a total net book value of $136.  The property
was sold for an aggregate sales price of $3,020, resulting in gains of $1,730 on
a net of  tax  basis.  One  shopping  center  from  the  Company's  real  estate
investment and  management  segment was donated during the first quarter of 2003
which had a total net book value of $60. The Company  received no proceeds  from
the donation and recorded a loss of ($36) on a net of tax basis.

            The results of operations for these properties for the three and six
months  ended  June 30,  2003 and 2002 have been  reclassified  to  discontinued
operations, on a net of tax basis, in accordance with SFAS No. 144. In addition,
the  assets  and  liabilities   associated  with  these   properties  have  been
reclassified to  discontinued  operations in the  Consolidated  Balance Sheet at
December 31, 2002.  These amounts  primarily  consist of real  property,  net of
accumulated  depreciation,  rents  receivable,  prepaid or accrued charges,  and
mortgage obligations, if any.

                                 Page 11 of 27






            Summarized  financial  information for properties sold and accounted
for as discontinued  operations for the three and six months ended June 30, 2003
and 2002, respectively, is as follows:


                                              Three Months Ended      Six Months Ended
                                                   June 30,                June 30,
                                                   --------                --------

                                                2003       2002       2003        2002
                                                ----       ----       ----        ----


Rental revenues from real estate operations   $   214    $   529    $   468    $ 1,068
Mortgage interest expense                           0        (14)        (4)       (31)
Depreciation expense                                0         (5)         0        (11)
Other operating expenses                          (18)       (24)       (30)       (47)
                                              -------    -------    -------    -------

Income from operations                        $   196    $   486    $   434    $   979
                                              =======    =======    =======    =======

Properties held for sale:
------------------------

            As of June 30, 2003, in accordance  with the  provisions of SFAS No.
144, the Company  considered a total of six commercial  properties from its real
estate and  investment  management  segment to be held for sale and  reported as
discontinued operations.

            In accordance with SFAS No. 144, the results of operations for these
properties  for the three and six months  ended June 30, 2003 and 2002 have been
reclassified  to  discontinued  operations,  on a  net  of  tax  basis,  in  the
Consolidated  Statements  of Income.  In  addition,  the assets and  liabilities
associated with these properties,  which primarily consist of real property, net
of accumulated depreciation,  rents receivable,  prepaid or accrued charges, and
mortgage obligations,  if any, have been reclassified to discontinued operations
in the Consolidated Balance Sheets at June 30, 2003 and December 31, 2002.

            Summarized  financial  information  for properties held for sale and
accounted for as discontinued operations for the three and six months ended June
30, 2003 and 2002, respectively, is as follows:

                                                   Three Months Ended Six Months Ended
                                                         June 30,       June 30,
                                                         --------       --------
                                                      2003    2002    2003    2002
                                                      ----    ----    ----    ----

       Rental revenues from real estate operations   $ 13    $ 38    $ 19    $ 75
       Depreciation expense                            (3)     (7)     (5)    (15)
       Other operating expenses                        (3)     (4)    (11)    (10)
                                                     ----    ----    ----    ----

       Income from operations                        $  7    $ 27    $  3    $ 50
                                                     ====    ====    ====    ====

                                 Page 12 of 27





INVESTMENTS IN JOINT VENTURES

            Investments in joint  ventures  consist of the following at June 30,
2003 and December 31, 2002:

                                                      2003         2002
                                                      ----         ----

            Investment in hotel ventures (a)        $13,808      $23,128
            Lease financing (b)                       8,118        8,261
                                                    -------      -------
                                                    $21,926      $31,389
                                                    =======      =======

        (a) In December  2002,  the Company  purchased a 50% interest in a joint
            venture  (the  "Hotel  Venture")  for  $23,128  together  with Prime
            Hospitality,  Corp. ("Prime"),  a publicly-traded  company for which
            the Company's Board Chairman and another Director of the Company are
            directors.  The  Hotel  Venture  owns  and  operates  a hotel in New
            Jersey.  In March  2003,  the  Company  and  Prime  each  sold a 10%
            interest in the Hotel Venture to an unrelated third party, at cost.

            In April 2003,  the Hotel  Venture  entered into a $25,000  mortgage
            loan (the "Mortgage") with a bank,  secured by the underlying hotel.
            The  proceeds of the loan were  distributed  to the  partners of the
            Hotel Venture based on their ownership  interest,  thereby  reducing
            their respective  investment.  In connection with the Mortgage,  the
            Company and Prime entered into a direct guaranty  agreement with the
            bank  whereby  the  Company  and  Prime,   jointly  and   severally,
            guaranteed  not more than $4,000 of the Mortgage.  Amounts due under
            the guaranty are reduced by the scheduled  principal  payments under
            the Mortgage.  The guaranty is  enforceable  upon the  occurrence of
            certain  events,  including a default as defined in the Mortgage and
            expires upon satisfaction of the loan in April 2006. Pursuant to the
            operating  agreement,  any payments  made under the  guaranty  would
            increase the guarantors'  ownership  interest.  The Company believes
            that the collateral of the  underlying  hotel is sufficient to repay
            the  Mortgage  without   requiring   enforcement  of  the  guaranty.
            Accordingly,  the fair value of this  guarantee was determined to be
            insignificant and, therefore, no liability has been recorded.

            In January  2003,  the Company  purchased a 50%  interest in a joint
            venture (the "Quebec  Venture") for $6,114 together with Prime.  The
            Quebec Venture owns and operates a hotel in Quebec, Canada. In March
            2003,  the Company and Prime each sold a 10%  interest in the Quebec
            Venture to an unrelated  third  party,  at cost.  In July 2003,  the
            Quebec Venture entered into an $8.2 (Canadian)  mortgage loan with a
            Canadian Bank,  secured by the underlying hotel. The proceeds of the
            loan were distributed to the partners of the Quebec Venture based on
            their  ownership   interest,   thereby   reducing  their  respective
            investment.

            The equity method of accounting  is used for  investments  in 20% to
            50% owned  joint  ventures  in which the  Company has the ability to
            exercise significant influence, but not control. Under the operating
            agreements of the Hotel Venture and Quebec Venture,  all significant
            operating  and capital  decisions  are made  jointly  and  operating
            profits  are   allocated   based  on  ownership   interests.   These
            investments  were  initially  recorded at cost and are  subsequently
            adjusted for equity in earnings (losses) and cash  contributions and
            distributions.  The  Company's  equity in  earnings  of these  hotel
            ventures  was $113 and $288 for the three and six months  ended June
            30, 2003, respectively.

                                 Page 13 of 27





            Summarized  financial  information  of  the  hotel  ventures  is  as
follows:

                                                           June 30, 2003   December 31, 2002
                                                           -------------   -----------------

             Balance Sheet:
                Property, plant and equipment, net            $60,205           $46,397
                                                              =======           =======
                Current assets                                 $3,637              $347
                                                              =======           =======
                Current liabilities                            $3,083              $500
                                                              =======           =======
                Long-term liabilities                         $24,410              $0
                                                              =======           =======


                                              Three Months Ended       Six Months Ended
                                                 June 30, 2003          June 30, 2003
                                                 -------------          -------------

             Statement of Operations:
                Revenues                            $6,010                 $8,869
                Expenses                            (5,615)                (8,248)
                                                    ------                 -------
                Operating income                      $395                   $621
                                                    ======                 ======

            The accounts of the Quebec Venture are recorded in Canadian  dollars
            and are translated into U.S. dollars,  the reporting currency of the
            Quebec  Venture.  Translation  adjustments  relating  to  results of
            operations are generally included in the equity in earnings reported
            by the Company while the  translation  of balance sheet  accounts do
            not generally affect the Company's investment in joint venture.

       (b)  Lease   financing   consists  of  a  50.0%  interest  in  a  limited
            partnership  whose  principal  assets are two  distribution  centers
            leased to Kmart  Corporation  ("Kmart"),  which are accounted for as
            leveraged  leases.  The Company's  share of income arising from this
            investment  was $245 and $337 for the six months ended June 30, 2003
            and 2002,  respectively,  and is  included  in rental  income in the
            Consolidated Statements of Income.


DERIVATIVE FINANCIAL INSTRUMENTS

            The Company recognizes all derivative financial instruments, such as
its short stock sales and put and/or call options, in the Consolidated Financial
Statements  at fair value  regardless  of the  purpose or intent for holding the
instrument.  Changes in the fair value of derivative  financial  instruments are
either  recognized  periodically  in  income  or in  stockholders'  equity  as a
component of accumulated  other  comprehensive  income  depending on whether the
derivative  financial  instrument  qualifies  for hedge  accounting,  and if so,
whether it qualifies as a fair value or cash flow hedge.  Generally,  changes in
the fair value of derivatives accounted for as fair value hedges are recorded in
income  along with the  portions of the changes in the fair values of the hedged
items that relate to the hedged risks.  Changes in the fair value of derivatives
accounted  for as cash flow hedges,  to the extent they are effective as hedges,
are recorded in accumulated  other  comprehensive  income net of deferred taxes.
Changes in the fair value of  derivatives  not qualifying as hedges are reported
in income.

            In strategies  designed to hedge overall market risks and manage its
interest rate exposure,  the Company may sell common stock short and participate
in put and/or call options.

            Management maintains a diversified portfolio of cash equivalents and
investments  in a variety of  securities,  primarily  U.S.  investments  in both
common and  preferred  equity  issues  and  participates  on a limited  basis in
transactions involving derivative financial  instruments,  including short stock
sales and put and/or call options.  At June 30, 2003 and December 31, 2002,  the

                                 Page 14 of 27





fair value of such  derivatives  was ($94) and  ($122),  respectively,  which is
recorded as a  component  of accounts  payable  and accrued  liabilities  in the
Consolidated  Balance  Sheets.  These  instruments  do  not  qualify  for  hedge
accounting and therefore changes in the derivatives fair value are recognized in
earnings.  The Company recognized $982 and ($255) in net realized and unrealized
gains  (losses) from  derivative  instruments  for the six months ended June 30,
2003 and 2002, respectively, which are included in other income and expense, net
in the Consolidated Statements of Income.

RELATED PARTY TRANSACTIONS

            The  Company  has a  50.0%  interest  in an  unconsolidated  limited
liability  corporation,  whose  principal  assets are two  distribution  centers
leased to Kmart. A group that includes the wife of the Company's Board Chairman,
two  Directors of the Company and the wife of one of the  Directors  has an 8.0%
interest in this entity (see "Investments in Joint Ventures").

            The Company's two hotel  properties,  as well as the hotels owned by
the Hotel Venture and Quebec  Venture,  are managed by Prime, a  publicly-traded
company for which the Board  Chairman  and  another  Director of the Company are
directors.  Fees paid for the  management of the Company's two hotel  properties
are based upon a percentage  of revenue and were  approximately  $32 and $48 for
the six months ended June 30, 2003 and 2002,  respectively.  See "Investments in
Joint Ventures." Included in marketable securities at June 30, 2003 and December
31, 2002 was $23,751 and $20,402,  respectively,  of common stock in Prime which
represents   approximately  7.9%  and  5.6%  of  Prime's   outstanding   shares,
respectively.  During the first six months of 2003,  the  Company  purchased  an
additional 1,036 shares of the common stock of Prime for $5,941.

            Two  son-in-laws  of the Board Chairman are employed by the Company.
Each serves as a Vice  President in the Company's  real estate  operations  with
responsibilities  for  management of the Company's real estate  portfolio.  Each
received a total salary and bonus of $210 for 2002.

COMMITMENTS AND CONTINGENCIES

            The  Company  is a  lessor  of  eight  department  stores  that  are
currently  leased to Kmart,  which filed for protection  under Chapter 11 of the
U.S.  Bankruptcy Code on January 22, 2002. In addition,  the Company holds a 50%
interest in a joint  venture  that owns two  distribution  centers that are also
leased to Kmart. As part of its  reorganization,  Kmart announced the closure of
approximately  600  of  its  stores  during  the  past  year.  Kmart's  plan  of
reorganization was approved and became effective in May 2003 with no significant
adverse effects to the Company.

            The Company has undertaken the completion of  environmental  studies
and/or  remedial  action  at  Metex'  (as  hereafter  defined)  two  New  Jersey
facilities.  The Company has  recorded a  liability,  which is included in other
long-term  liabilities,   in  the  Consolidated  Financial  Statements  for  the
estimated potential remediation costs at these facilities.

            The process of remediation  has begun at one facility  pursuant to a
plan filed with the New Jersey Department of Environmental Protection ("NJDEP").
Environmental  experts  engaged  by the  Company  estimate  that  under the most
probable  remediation  scenario the  remediation  of this site is anticipated to
require initial  expenditures of $860,  including the cost of capital equipment,
and $86 in annual operating and maintenance costs over a 15 year period.

            Environmental   studies  at  the  second   facility   indicate  that
remediation  may  be  necessary.  Based  upon  the  facts  presently  available,
environmental  experts  have  advised the Company  that under the most  probable
remediation  scenario,  the estimated cost to remediate this site is anticipated
to require $2,300 in initial costs,  including capital  equipment  expenditures,
and $258 in annual operating and maintenance costs over a 10 year period.  These

                                 Page 15 of 27





estimated costs of future expenses for environmental remediation obligations are
not discounted to their present value.  The Company may revise such estimates in
the future due to the uncertainty regarding the nature, timing and extent of any
remediation  efforts  that may be required at this site,  should an  appropriate
regulatory agency deem such efforts to be necessary.

            The foregoing estimates may also be revised by the Company as new or
additional  information in these matters become available or should the NJDEP or
other regulatory agencies require additional or alternative  remediation efforts
in the future.  It is not currently  possible to estimate the range or amount of
any such liability.

            Although the Company  believed  that it was entitled to full defense
and indemnification with respect to environmental  investigation and remediation
costs under its insurance policies, the Company's insurers denied such coverage.
Accordingly,  the Company filed an action  against  certain  insurance  carriers
seeking defense and  indemnification  with respect to all prior and future costs
incurred in the investigation  and remediation of these sites.  Settlements have
been reached with all carriers in this matter.

            In the opinion of management,  amounts  recovered from its insurance
carriers  under the terms of its settlement  agreements  should be sufficient to
address  these  matters  and  amounts  needed in  excess,  if any,  will be paid
gradually over a period of years.  Accordingly,  they should not have a material
adverse  effect  upon the  business,  liquidity  or  financial  position  of the
Company. However, adverse decisions or events,  particularly as to the merits of
the  Company's  factual  and legal  basis  could cause the Company to change its
estimate of liability with respect to such matters in the future.

            The  Company  is  subject to  various  other  litigation,  legal and
regulatory  matters  that arise in the ordinary  course of business  activities.
When  management  believes it is probable that a liability has been incurred and
such  amounts are  reasonably  estimable  the Company  provides for amounts that
include  judgments and penalties  that may be assessed.  These  liabilities  are
usually included in accounts payable and accrued  liabilities or other long-term
liabilities  in  the  Consolidated   Financial  Statements,   depending  on  the
anticipated  payment  date.  None of these  matters are  expected to result in a
material  adverse  effect on the Company's  consolidated  financial  position or
results of operations.

STOCKHOLDERS' EQUITY

            The Board of Directors  declared a special one-time cash dividend of
$2.00 per  common  share to all  stockholders  of  record  as of June 20,  2003,
payable on July 10, 2003.  The Company has not paid cash  dividends in the past.
The  declaration  of such  dividends  is within the  discretion  of the Board of
Directors.  While  the  Company  does not  currently  expect  to pay  additional
dividends in the future,  the Board of Directors could re-evaluate this position
in the future.

            On June 10,  2003,  the  Company's  Board of  Directors  unanimously
adopted an amendment to the Company's  Articles of Incorporation to increase the
number of authorized  shares of the Company's  Common Stock from 7,500 to 17,500
shares,  subject to stockholder  approval.  The Company received the approval of
this amendment by a majority of it's stockholders on August 4, 2003 and, on that
date,  declared a two-for-one  stock split to  stockholders  of record as of the
close of business on August 15, 2003 payable on or about  August 29,  2003.  All
references  to the  number  of  shares of common  stock,  per share  prices  and
earnings per share amounts in the accompanying Consolidated Financial Statements
and notes  included  in the  Quarterly  Report on Form 10-Q for the  current and
prior periods have been adjusted to reflect the split on a retroactive basis.

            Previous  purchases of the  Company's  common stock have reduced the
Company's  additional  paid-in-capital  to zero  and  accordingly  current  year
purchases in excess of par value have reduced retained earnings.  During the six
months ended June 30, 2003 and 2002,  the Company  purchased  and retired 44 and

                                 Page 16 of 27





142 shares of the  Company's  common  stock for $771 and  $1,720,  respectively.
Future  repurchases  of the  Company's  common  stock will also reduce  retained
earnings  by amounts in excess of the par value.  Repurchases  of the  Company's
common  stock  will be made from time to time in the open  market at  prevailing
market prices and may be made in privately negotiated  transactions,  subject to
available resources.

EARNINGS PER SHARE

            The following  table sets forth the computation of basic and diluted
earnings per share from continuing operations:

                                                    Three Months Ended     Six Months
                                                          June 30,        Ended June 30,
                                                          --------        --------------

                                                       2003    2002      2003      2002
                                                       ----    ----      ----      ----

Numerator:
   Income from continuing operations                  $2,960   $3,221   $5,182   $6,670
                                                      ======   ======   ======   ======
Denominator:
   Denominator for basic earnings per
           share - weighted-average shares             9,023    9,174    9,026    9,209
Effect of dilutive securities:
   Employee stock options                              1,768      746    1,632      706
                                                      ------   ------   ------   ------
   Denominator for diluted earnings per
           share - adjusted weighted-average shares
           and assumed conversions                    10,791    9,920   10,658    9,915
                                                      ======   ======   ======   ======

Basic earnings per share - continuing operations      $  .33   $  .35   $  .57   $  .72
                                                      ======   ======   ======   ======

Diluted earnings per share - continuing operations    $  .27   $  .33   $  .49   $  .67
                                                      ======   ======   ======   ======

            Earnings per share and weighted average shares outstanding have been
adjusted to reflect the two-for-one stock split effective in August 2003.

            Employee  stock  options  to  purchase  758  and  58  shares  of the
Company's  common  stock  that  were  outstanding  at June 30,  2003  and  2002,
respectively, were not included in the computation of diluted earnings per share
in all periods presented because their effect would have been anti-dilutive.

STOCK-BASED COMPENSATION

            The  Company  accounts  for  stock-based   compensation   using  the
intrinsic value method in accordance with  Accounting  Principles  Board Opinion
No. 25, "Accounting for Stock Issued to Employees," and related  Interpretations
("APB No.  25") and has  adopted  the  disclosure  provisions  of  Statement  of
Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation
- Transition and Disclosure,  an amendment of FASB Statement No. 123" ("SFAS No.
148"). Under APB No. 25, compensation expense is only recognized when the market
value  of the  underlying  stock  at the date of grant  exceeds  the  amount  an
employee must pay to acquire the stock. Accordingly, no compensation expense has
been  recognized in the  Consolidated  Financial  Statements in connection  with
employee stock option grants.

                                 Page 17 of 27





            The  following  table  illustrates  the  effect  on net  income  and
earnings per share had the Company applied the fair value recognition provisions
of  Statement  of  Financial  Accounting  Standards  No.  123,  "Accounting  for
Stock-Based Compensation," to stock-based employee compensation.

                                                Three Months          Six Months
                                               Ended June 30,        Ended June 30,

                                                2003     2002     2003          2002
                                                ----     ----     ----          ----

Net income, as reported                        $3,457   $3,529   $6,953   $   7,287
Deduct: Total stock-based employee
       compensation expense determined
       under fair value based method for all
       awards, net of related tax effects        (586)    (500)  (1,134)       (952)
                                               ------   ------   ------   ---------
Pro forma net income                           $2,871   $3,029   $5,819   $   6,335
                                               ======   ======   ======   =========
Earnings per share:
          Basic - as reported                    $.38     $.38     $.77        $.79
                                               ======   ======   ======   =========
          Basic - pro forma                      $.32     $.33     $.64        $.69
                                               ======   ======   ======   =========

          Diluted - as reported                  $.32     $.36     $.65        $.73
                                               ======   ======   ======   =========
          Diluted - pro forma                    $.27     $.32     $.56        $.66
                                               ======   ======   ======   =========

            Earnings  per  share  and  weighted  shares  outstanding  have  been
adjusted to reflect the two-for-one stock split effective in August 2003.

            Pro forma  compensation  expense may not be  indicative of pro forma
expense in future  periods.  For purposes of  estimating  the fair value of each
option on the date of grant,  the  Company  utilized  the  Black-Scholes  option
pricing model.

            The  Black-Scholes  option  valuation model was developed for use in
estimating the fair value of traded options,  which have no vesting restrictions
and are fully  transferable.  In addition,  option  valuation models require the
input of highly  subjective  assumptions  including  the  expected  stock  price
volatility.  Because the Company's  employee stock options have  characteristics
significantly  different from those of traded options and because changes in the
subjective input assumptions can materially  affect the fair value estimate,  in
management's  opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

            The weighted-average  option fair values and the assumptions used to
estimate these values for grants issued during 2003 and 2002 are as follows:

                                                          2003              2002
                                                          ----              ----

          Expected life (years)                               5                 5
          Risk free interest rate                          2.2%              4.4%
          Expected volatility                             33.7%             34.2%
          Dividend yield                                   0.0%              0.0%
          Weighted-average option fair value              $7.26             $4.59

                                 Page 18 of 27





COMPREHENSIVE INCOME (LOSS)

            The components of comprehensive income (loss) are as follows:

                                                                     Three Months         Six Months
                                                                    Ended June 30,       Ended June 30,
                                                                    --------------       --------------
                                                                    2003      2002       2003     2002
                                                                    ----      ----       ----     ----

Net income                                                        $ 3,457   $ 3,529    $ 6,953    $ 7,287

Other comprehensive income (loss), net of tax:
   Change in net unrealized gain (loss) on available-for
   sale securities, net of tax (provision) benefit of ($2,188),
   $127, $272 and ($1,787), respectively                            4,064      (237)      (504)     3,319

   Change in fair value of cash flow hedge, net of tax
   provision of $0, ($1), $0 and ($4), respectively                     0         2          0          5
                                                                  -------   -------    -------    -------

Comprehensive income                                              $ 7,521   $ 3,294    $ 6,449    $10,611
                                                                  =======   =======    =======    =======

            Accumulated  other  comprehensive  income  as of June  30,  2003 and
December  31,  2002  consists  of a net  unrealized  gain on  available-for-sale
securities  of  $582  and  $1,086,  net of  tax  provision  of  $313  and  $586,
respectively.

BUSINESS SEGMENTS

            The Company  operates  through two  business  segments:  real estate
investment and management and engineered  products.  The real estate  investment
and  management  segment is engaged in the business of investing in and managing
real estate properties and the making of high-yield, short-term loans secured by
desirable properties.  Engineered products are manufactured through wholly-owned
subsidiaries  of the Company and primarily  consist of knitted wire products and
components and transformer products.

            Operating results of the Company's business segments are as follows:

                                               Three Months             Six Months
                                              Ended June 30,           Ended June 30,
                                              --------------           --------------
                                              2003       2002        2003         2002
                                              ----       ----        ----         ----

Net revenues and sales:
   Real estate investment and management   $  6,405    $  6,082    $ 12,482    $ 11,879
   Engineered products                        8,326       9,021      16,482      17,261
                                           --------    --------    --------    --------

                                           $ 14,731    $ 15,103    $ 28,964    $ 29,141
                                           ========    ========    ========    ========

Operating income:
   Real estate investment and management   $  3,216    $  3,013    $  6,162    $  5,922
   Engineered products                          834         851       1,312       1,074
   General corporate expenses                  (930)       (646)     (1,615)     (1,215)
                                           --------    --------    --------    --------

                                              3,120       3,218       5,859       5,781

Other income, net                             1,316       2,140       2,170       5,028
                                           --------    --------    --------    --------

Income from continuing operations before
   income taxes                            $  4,436    $  5,358    $  8,029    $ 10,809
                                           ========    ========    ========    ========

                                 Page 19 of 27





USE OF ESTIMATES

            The preparation of Consolidated  Financial  Statements in conformity
with accounting  principles  generally  accepted in the United States of America
requires  management to use judgment in making  estimates and  assumptions  that
affect the reported  amounts of assets,  liabilities,  revenues and expenses and
related  disclosure  of  contingent  assets  and  liabilities.  Certain  of  the
estimates  and  assumptions  required  to be made  relate  to  matters  that are
inherently uncertain as they pertain to future events. While management believes
that the  estimates  and  assumptions  used  were the most  appropriate,  actual
results  could  differ   significantly  from  those  estimates  under  different
assumptions and conditions.

RECLASSIFICATIONS

            Certain   amounts   have  been   reclassified   in  the  prior  year
Consolidated Financial Statements to present them on a basis consistent with the
current year.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS
         (In Thousands, Except Per Share Data)

The following  discussion  should be read in conjunction  with the  Consolidated
Financial  Statements of United Capital Corp.  (the "Company") and related notes
thereto.

RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002

            Total  revenues  for the quarter  ended June 30,  2003 were  $14,731
resulting in  operating  income of $3,120  versus total  revenues of $15,103 and
operating income of $3,218 during the comparable 2002 period. Net income for the
three month period ended June 30, 2003 was $3,457 or $.38 per basic share versus
$3,529 or $.38 per basic share for the same period in 2002.

            Revenues  for the six  months  ended  June  30,  2003  were  $28,964
compared to comparable  2002 revenues of $29,140.  Operating  income for the six
months  ended June 30, 2003 was $5,859  versus  $5,781 for the  comparable  2002
period. Net income for the six months ended June 30, 2003 was $6,953 or $.77 per
basic  share  compared  to net income of $7,287 or $.79 per basic  share for the
same period in 2002.


REAL ESTATE INVESTMENT AND MANAGEMENT

            Rental  revenues  from real estate  operations  remained  relatively
consistent with the prior year, totaling $6,405 for the three month period ended
June 30,  2003  versus  $6,082 in the same 2002  period and  $12,482 for the six
months ended June 30, 2003,  compared to $11,879 in 2002.  Rental  revenues from
2003  property  sales  and  properties  held for sale have  been  classified  as
discontinued  operations  in  accordance  with  SFAS No.  144.  The  results  of
operations of properties  that have been sold and properties held for sale prior
to the  implementation  of SFAS No. 144 have not been similarly  reclassified to
discontinued operations.

            Mortgage  interest  expense  continues  to  decrease  as a result of
continuing  mortgage  amortization.  Such expense  totaled $267 during the three
month  period  ended June 30, 2003 a decline of 27.4% from $368  incurred in the

                                 Page 20 of 27





second  quarter  of 2002.  For the six  months  ended  June 30,  2003,  mortgage
interest expense was $553 compared to $735 for the corresponding  2002 period, a
decline of 24.8% or $182.

            Depreciation expense associated with real properties held for rental
decreased $42 or 5.1% and $91 or 5.5%, respectively, for the three and six month
periods ended June 30, 2003  compared to the same periods in 2002.  Such decline
was  primarily  due  to  reduced  depreciation  expense  associated  with  fully
depreciated  properties  and  properties  sold in 2002 and not  accounted for as
discontinued operations. Depreciation expense from property sales and properties
held for  sale in 2003  has been  reclassified  as  discontinued  operations  in
accordance with SFAS No. 144. Such expense on property sales and properties held
for sale prior to the  implementation  of SFAS No.  144 have not been  similarly
reclassified to discontinued operations.

            Other  operating  expenses  associated  with the  management of real
properties  increased  $263 or 14.0% for the three month  period  ended June 30,
2003 and $636 or 17.8% for the six month period ended June 30, 2003, compared to
the  comparable  periods in 2002.  These  increases  are primarily the result of
increased   hotel  operating   expenses  and  increased   payroll  and  property
maintenance expenses, including insurance and real estate taxes.


ENGINEERED PRODUCTS

            The  Company's  engineered  products  segment  includes  Metex  Mfg.
Corporation  ("Metex")  and AFP  Transformers,  LLC  ("AFP  Transformers").  The
operating results of the engineered products segment are as follows:

                                               Three Months        Six Months
                                               Ended June 30,     Ended June 30,
                                               --------------     --------------

                                                2003     2002     2003     2002
                                                ----     ----     ----     ----

Net sales                                      $8,326   $9,021   $16,482   $17,261
                                               ======   ======   =======   =======

Cost of sales                                  $5,820   $6,458   $11,880   $12,761
                                               ======   ======   =======   =======

Selling, general and administrative expenses   $1,672   $1,712   $ 3,290   $ 3,426
                                               ======   ======   =======   =======

Operating income                               $  834   $  851   $ 1,312   $ 1,074
                                               ======   ======   =======   =======

            Net sales of the engineered  products  segment for the three and six
months  ended  June  30,  2003   decreased  7.7%  or  $695  and  4.5%  or  $779,
respectively,  compared with the results of the corresponding 2002 period. These
declines  primarily  result from weakened  demand for the  Company's  engineered
component  and  transformer  product  lines  which  continue  to suffer from the
effects of the struggling economy.

            Cost of sales as a  percentage  of sales  decreased  1.7% and  1.8%,
respectively,  for the three and six months ended June 30, 2003, compared to the
corresponding  period in 2002,  principally  due to the  implementation  of cost
containment measures and the mix of products sold.

            Selling,  general  and  administrative  expenses  of the  engineered
products  segment for the three and six months ended June 30, 2003 decreased $40
or 2.3% and $136 or 4.0%,  respectively,  versus the  comparable  2002  periods.
These decreases are primarily the result of lower selling expenses which are the
result of lower net sales, as noted above.

                                 Page 21 of 27





GENERAL AND ADMINISTRATIVE EXPENSES

            General  and   administrative   expenses  not  associated  with  the
manufacturing  operations  for the  three and six  months  ended  June 30,  2003
increased  $284 or  43.9%  and $400 or  32.9%,  respectively,  compared  to such
expenses incurred for the comparable 2002 period. These increases are mainly due
to higher pension related expenses and salary and salary related expenses.


OTHER INCOME AND EXPENSE, NET

            The components of other income and expense,  net in the Consolidated
Statements of Income are as follows:

                                                          Three Months          Six Months
                                                          Ended June 30,      Ended June 30,
                                                          --------------      --------------

                                                           2003    2002        2003     2002
                                                           ----    ----        ----     ----

Net gain on sale of real estate assets                  $    11   $   296    $   152   $ 5,674

Net loss on sale of available-for-sale securities             0         0          0    (1,005)

Net realized and unrealized gain on trading
      securities                                              0         0         57         0

Net realized and unrealized gain (loss) on derivative
      instruments                                           667     1,607        982      (255)

Other, net                                                  167       (11)       283       (25)
                                                        -------   -------    -------   -------

                                                        $   845   $ 1,892    $ 1,474   $ 4,389
                                                        =======   =======    =======   =======


DISCONTINUED OPERATIONS

            Operating income from properties sold or held for sale and accounted
for as  discontinued  operations was $122 and $262 on a net of tax basis for the
three and six months  ended June 30, 2003,  versus $308 and $617,  respectively,
for the comparable  2002 periods.  Prior year amounts have been  reclassified to
reflect  results of  operations of real  properties  sold or held for sale as of
June 30, 2003 as discontinued  operations.  Net gains on the sale of real estate
assets   accounted  for  as  discontinued   operations  were  $375  and  $1,509,
respectively  on a net of tax basis for the three and six months  ended June 30,
2003.  Prior to the  adoption of SFAS No. 144,  gains or losses on sales of real
estate assets were not accounted for as a component of discontinued operations.


LIQUIDITY AND CAPITAL RESOURCES

            The Company  experienced a net cash inflow from operations of $5,332
for the six months  ended June 30, 2003 versus  $7,934 for the six months  ended
June 30, 2002. The $2,602 decrease in operating cash flow primarily results from
lower net gains on the sale of real  estate  assets  and is offset by changes in
working capital.  The components of the working capital changes are set forth in
detail in the Consolidated Statements of Cash Flows.

                                 Page 22 of 27





            For the six months  ended June 30,  2003,  $10,796  was  provided by
investing  activities  which  consisted  primarily  of  net  distributions  from
investments in joint  ventures of $9,996,  proceeds from the sale of real estate
assets of $6,541, as well as proceeds from the sale of derivative instruments of
$954. This was offset by purchases of available for-sale securities of $6,490.

            For the six months ended June 30,  2002,  $141 was used in investing
activities   which   consisted   primarily   of  $1,831  in  net   purchases  of
available-for-sale securities, $1,930 of purchases of derivative instruments and
$2,995 to purchase a note receivable.  This was offset by proceeds from the sale
of real estate assets of $6,419.

            Net cash used in financing  activities  was $2,037 and $3,837 during
the six months ended June 30, 2003 and 2002, respectively. This use of cash flow
was primarily  attributable to debt reduction and the purchase and retirement of
the Company's common stock,  partially offset by cash proceeds from the exercise
of stock options.

            At June 30, 2003, the Company's cash and marketable  securities were
$94.3  million  and  working  capital  was $74.6  million  compared  to cash and
marketable  securities of $74.8 million and working  capital of $67.0 million at
December 31, 2002.  Management  continues to believe that the real estate market
is overvalued and  accordingly  recent  acquisitions  have been limited to those
select  properties  that meet the Company's  stringent  financial  requirements.
Management  believes  that the  available  working  capital along with the $80.0
million of availability on the revolving credit facility,  discussed below, puts
the Company in an opportune position to fund acquisitions and grow its portfolio
of real estate properties if and when attractive long-term  opportunities become
available.

            On June 10, 2003,  the Board of Directors of the Company  declared a
special  one-time cash dividend of $2.00 per common share to all stockholders of
record as of June 20,  2003.  The  declaration  of such  dividend  is within the
discretion  of the Board of  Directors.  While the  Company  does not  currently
expect to pay additional  dividends in the future,  the Board of Directors could
re-evaluate this position in the future.  This dividend,  totaling  $9,102,  was
paid on July 10, 2003.

            On June 10,  2003,  the  Company's  Board of  Directors  unanimously
adopted an amendment to the Company's  Articles of Incorporation to increase the
number of authorized  shares of the Company's  Common Stock from 7,500 to 17,500
shares,  subject to stockholder  approval.  The Company received the approval of
this amendment by a majority of it's stockholders on August 4, 2003 and, on that
date,  declared a two-for-one  stock split to  stockholders  of record as of the
close of business on August 15, 2003 payable on or about  August 29,  2003.  All
references  to the  number  of  shares of common  stock,  per share  prices  and
earnings per share amounts in the accompanying Consolidated Financial Statements
and notes  included  in the  Quarterly  Report on Form 10-Q for the  current and
prior periods have been adjusted to reflect the split on a retroactive basis.

            The  cash  needs of the  Company  have  been  satisfied  from  funds
generated by current  operations.  It is expected that future  operational  cash
needs and the cash required to repurchase  the Company's  common stock will also
be  satisfied  from  existing  cash  balances,  marketable  securities,  ongoing
operations  and  borrowings  under the Revolver (as  hereinafter  defined).  The
primary source of capital to fund  additional  real estate  acquisitions  and to
make  additional  high-yield  mortgage  loans  will  come from  existing  funds,
borrowings  under the  Revolver,  the sale,  financing  and  refinancing  of the
Company's  properties  and from third party  mortgages and purchase  money notes
obtained in connection with specific acquisitions.

            In addition  to the  acquisition  of  properties  for  consideration
consisting of cash and mortgage financing proceeds, the Company may acquire real
properties in exchange for the issuance of the Company's equity securities.  The
Company may also  finance  acquisitions  of other  companies  in the future with
borrowings from institutional  lenders and/or the public or private offerings of

                                 Page 23 of 27





debt or equity securities. The Company currently has no agreements,  commitments
or  understandings  with respect to the  acquisition of real properties or other
companies in exchange for equity securities.

            Funds of the Company in excess of that  needed for working  capital,
purchasing real estate and arranging  financing for real estate acquisitions are
invested  by the  Company  in  corporate  equity  securities,  corporate  notes,
certificates of deposit, government securities and other financial instruments.

            The  Company  is a  lessor  of  eight  department  stores  that  are
currently  leased to Kmart  Corporation  ("Kmart"),  which filed for  protection
under Chapter 11 of the U.S.  Bankruptcy  Code on January 22, 2002. In addition,
the Company holds a 50% interest in a joint  venture that owns two  distribution
centers  that are also  leased  to Kmart.  Kmart's  plan of  reorganization  was
approved and became effective in May 2003 with no significant adverse effects to
the Company.

            Effective  December  10,  2002,  the Company  entered  into a credit
agreement with five banks which provides for an $80.0 million  revolving  credit
facility ("Revolver"). The Revolver may be increased under certain circumstances
and expires on December 31, 2005.

            Under the Revolver,  the Company will be provided  with  eligibility
based  upon the sum of (i)  60.0% of the  aggregate  annualized  and  normalized
year-to-date  net  operating  income of  unencumbered  eligible  properties,  as
defined,  capitalized  at 10.0%,  (ii)  60.0% of the  aggregate  annualized  and
normalized  year-to-date  net operating  income of  unencumbered  eligible hotel
properties, as defined,  capitalized at 10.5%, not to exceed the lesser of $10.0
million or 10% of total eligibility,  (iii) the lesser of $20.0 million or 50.0%
of the aggregate annualized and normalized  year-to-date net operating income of
encumbered eligible properties,  as defined,  capitalized at 12.0%, (iv) the sum
of 75.0% of eligible accounts receivable,  50.0% of eligible inventory,  and 50%
of  eligible  loans,  as  defined,  (v) cash and cash  equivalents  in excess of
working capital, as defined, and (vi) 50% of marketable securities,  as defined.
At June 30, 2003,  eligibility under the Revolver was $80.0 million,  based upon
the above terms and there were no amounts  outstanding  under the Revolver.  The
credit agreement contains certain financial and restrictive covenants, including
minimum  consolidated  equity,  interest  coverage,  debt  service  coverage and
capital   expenditures  (other  than  for  real  estate),   and  limitations  on
indebtedness. The Company was in compliance with all covenants at June 30, 2003.
The credit agreement also contains provisions which allow the banks to perfect a
security  interest in certain operating and real estate assets in the event of a
default, as defined in the credit agreement.  Borrowings under the Revolver,  at
the Company's  option,  bear interest at the bank's prime lending rate or at the
London  Interbank  Offered Rate ("LIBOR") (1.12% at June 30, 2003) plus 2.0% for
non cash collateralized borrowings and 1.0% for cash collateralized borrowings.

            In strategies designed to hedge overall market risk, the Company may
sell  common  stock short and  participate  in put and/or  call  options.  These
instruments do not qualify for hedge  accounting  and therefore  changes in such
derivatives  fair  value are  recognized  in  earnings.  These  derivatives  are
recorded as a  component  of accounts  payable  and accrued  liabilities  in the
Consolidated Balance Sheets.

            The Company has undertaken the completion of  environmental  studies
and/or remedial  action at Metex' two New Jersey  facilities and filed an action
against certain insurance  carriers seeking recovery of costs incurred and to be
incurred in these  matters.  Settlements  have been reached with all carriers in
this  matter.  See  Notes  to  Consolidated  Financial  Statements  for  further
discussion of this matter.

            The Company is subject to various  litigation,  legal and regulatory
matters  that  arise  in  the  ordinary  course  of  business  activities.  When
management  believes it is probable  that a liability has been incurred and such

                                 Page 24 of 27





amounts are reasonably  estimable the Company  provides for amounts that include
judgments  and penalties  that may be assessed.  These  liabilities  are usually
included  in  accounts  payable  and  accrued  liabilities  or  other  long-term
liabilities  in  the  Consolidated   Financial  Statements,   depending  on  the
anticipated  payment  date.  None of these  matters are  expected to result in a
material  adverse  effect on the Company's  consolidated  financial  position or
results of operations.

            The current  liabilities  of the  Company  have at times in the past
exceeded its current assets principally due to the financing of long-term assets
utilizing short-term  borrowings and from the classification of current mortgage
obligations without the corresponding current asset for such properties.  Future
financial  statements  may  reflect  current  liabilities  in excess of  current
assets.   Management  is  confident   that  through  cash  flow  generated  from
operations,  together with borrowings  available under the Revolver and the sale
of select assets, all obligations will be satisfied as they come due.

Related Party Transactions
--------------------------

            Refer to Notes to Consolidated Financial Statements for a discussion
of related party transactions.

CRITICAL ACCOUNTING POLICIES AND MANAGEMENT ESTIMATES

            Refer  to the  Company's  2002  Annual  Report  on Form  10-K  for a
discussion of the Company's critical accounting policies,  which include revenue
recognition and accounts receivable,  marketable securities,  inventories,  real
estate, discontinued operations, long-lived assets and pension plans. During the
first half of 2003, there were no material changes to these policies.

RECENT ACCOUNTING PRONOUNCEMENTS

            Refer to Notes to Consolidated Financial Statements for a discussion
of recent accounting pronouncements.

FORWARD-LOOKING STATEMENTS

            Certain  statements in this Report on Form 10-Q and other statements
made by the  Company or its  representatives  that are not  strictly  historical
facts  are  "forward-looking"  statements  within  the  meaning  of the  Private
Securities Litigation Reform Act of 1995 that should be considered as subject to
the many risks and  uncertainties  that exist in the  Company's  operations  and
business  environment.  The  forward-looking  statements  are  based on  current
expectations  and involve a number of known and unknown risks and  uncertainties
that could cause the actual  results,  performance  and/or  achievements  of the
Company  to  differ   materially  from  any  future   results,   performance  or
achievements,  expressed or implied, by the forward-looking statements.  Readers
are cautioned not to place undue reliance on these  forward-looking  statements,
and that in light of the significant  uncertainties  inherent in forward-looking
statements,  the  inclusion  of such  statements  should  not be  regarded  as a
representation  by the Company or any other person that the  objectives or plans
of the Company will be  achieved.  The Company  also  assumes no  obligation  to
publicly update or revise its forward-looking statements or to advise of changes
in the assumptions  and factors on which they are based.  See the Company's 2002
Annual  Report on Form 10-K for a  discussion  of risk factors that could impact
our  future  financial   performance  and/or  cause  actual  results  to  differ
significantly from those expressed or implied by such statements.


                                 Page 25 of 27





ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

            The  information  called  for by this  item is  provided  under  the
caption "Derivative Financial  Instruments" under Item 1 - Notes to Consolidated
Financial Statements.

ITEM 4.   CONTROLS AND PROCEDURES

            Within the 90 days  prior to the date of this  report,  the  Company
carried out an evaluation,  under the supervision and with the  participation of
the Company's  management,  including the Company's Chief Executive  Officer and
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's  disclosure  controls  and  procedures  pursuant to Exchange  Act Rule
13a-14.  Based  upon that  evaluation,  the Chief  Executive  Officer  and Chief
Financial  Officer  concluded  that  the  Company's   disclosure   controls  and
procedures  are  effective  in  timely  alerting  them to  material  information
relating to the Company (including its consolidated subsidiaries) required to be
included  in the  Company's  periodic  reports.  There have been no  significant
changes  in the  Company's  internal  controls  or in other  factors  that could
significantly affect these controls subsequent to the date of their evaluation.


PART II OTHER INFORMATION

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

            On  June  10,  2003,   the  Company  held  its  Annual   Meeting  of
Stockholders,   whereby  the   stockholders   elected   Directors  and  approved
performance criteria for the payment of bonuses to the Company's Chief Executive
Officer. The vote on such matters was as follows:


1.   ELECTION OF DIRECTORS:

                                              For                    Withheld
                                              ---                    --------
        A.F. Petrocelli                     4,104,708                128,497
        Howard M. Lorber                    4,104,708                128,497
        Robert M. Mann                      4,104,708                128,497
        Anthony J. Miceli                   4,104,708                128,497
        Arnold S. Penner                    4,104,708                128,497


2.   APPROVAL  OF  PERFORMANCE  CRITERIA  FOR  THE  PAYMENT  OF  BONUSES  TO THE
     COMPANY'S CHIEF EXECUTIVE OFFICER:

          FOR                                 AGAINST                 ABSTAIN
          ---                                 -------                 -------
         4,177,991                            42,896                   9,018

                                 Page 26 of 27





ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Reports on Form 8-K.
          On June 10, 2003, the Company filed a current report on Form 8-K, with
          the Securities and Exchange Commission under Item 5.

     (b)  Exhibits
          31.1   Certification  of the Chief Executive  Officer Pursuant to Rule
                 13a-14
          31.2   Certification  of the Chief Financial  Officer Pursuant to Rule
                 13a-14
          32.1   Certification  of  the  Chief  Executive  Officer  Pursuant  to
                 Section 906 of Sarbanes-Oxley Act of 2002
          32.2   Certification  of  the  Chief  Financial  Officer  Pursuant  to
                 Section 906 of Sarbanes-Oxley Act of 2002






                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly  caused  this  report to be signed  on its  behalf by the  undersigned,
thereunto duly authorized.

                                    UNITED CAPITAL CORP.

Dated:  August 5, 2003              By: /s/Anthony J. Miceli
                                        ----------------------------------------
                                         Anthony J. Miceli
                                         Vice President, Chief Financial Officer
                                         and Secretary of the Company`