`UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

            Quarterly Report Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934
                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006


                         COMMISSION FILE NUMBER: 1-10104
                         -------------------------------

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

                              UNITED CAPITAL CORP.
                              --------------------
             (Exact name of registrant 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, NY                       11021
      ----------------------------                       -----
(Address of principal executive offices)               (Zip Code)


                                  516-466-6464
                                  ------------
              (Registrant'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 registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the  Securities  and  Exchange Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.                             Yes /X/   No /_/

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer or a  non-accelerated  filer.  See definition of "accelerated
filer and large  accelerated  filer" in Rule 12b-2 of the  Exchange  Act.
Large accelerated filer /_/   Accelerated filer /_/   Non-accelerated filer /X/

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).                                Yes /_/   No /X/

The registrant had 8,276,543 shares of common stock, $.10 par value, outstanding
as of August 8, 2006.





                          UNITED CAPITAL CORP. AND SUBSIDIARIES

                                          INDEX


                                                                                     PAGE
                                                                                     ----

                              PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

            Condensed Consolidated Balance Sheets as of
            June 30, 2006 (Unaudited) and December 31, 2005............................3

            Condensed Consolidated Statements of Income for the
            Three and Six Months Ended June 30, 2006 and 2005 (Unaudited)..............4

            Condensed Consolidated Statements of Cash Flows for the
            Six Months Ended June 30, 2006 and 2005 (Unaudited)......................5-6

            Notes to Condensed Consolidated Financial Statements (Unaudited)........7-13

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS..........................14-19

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURE OF
            MARKET RISK...............................................................19

ITEM 4.     CONTROLS AND PROCEDURES...................................................19

                               PART II - OTHER INFORMATION

ITEM 1A.    RISK FACTORS..............................................................19

ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS...............20

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......................20

ITEM 6.     EXHIBITS..................................................................20


SIGNATURES  ..........................................................................21



                                            2






                                        UNITED CAPITAL CORP. AND SUBSIDIARIES
                                        CONDENSED CONSOLIDATED BALANCE SHEETS
                                        (In thousands, except per share data)

                                                                                  June 30,           December 31,
                                                                                    2006                 2005
                                                                              -----------------    -----------------
                                                                                (Unaudited)
ASSETS

Current assets:
   Cash and cash equivalents                                                    $  72,662              $  99,628
   Marketable securities                                                           56,127                 40,419
   Notes and accounts receivable, net                                               9,545                  8,954
   Inventories                                                                      4,840                  4,426
   Prepaid expenses and other current assets                                        1,767                  1,407
   Deferred income taxes                                                            2,092                  2,389
                                                                                ---------              ---------

     TOTAL CURRENT ASSETS                                                         147,033                157,223
                                                                                ---------              ---------

Property, plant and equipment, net                                                  6,091                  5,943
Real property held for rental, net                                                 48,995                 39,275
Investments in joint ventures                                                       6,957                  7,208
Non-current notes receivable                                                        2,497                  3,790
Other assets                                                                        2,412                  2,321
Non-current assets of discontinued operations                                          --                    925
                                                                                ---------              ---------

     TOTAL ASSETS                                                               $ 213,985              $ 216,685
                                                                                =========              =========


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Current maturities of long-term debt                                         $     456              $     652
   Accounts payable and accrued liabilities                                        12,781                  9,045
   Income taxes payable                                                             5,165                  5,142
   Current liabilities of discontinued operations                                      --                     14
                                                                                ---------              ---------

     TOTAL CURRENT LIABILITIES                                                     18,402                 14,853
                                                                                ---------              ---------

Long-term debt                                                                     11,908                 12,140
Other long-term liabilities                                                        30,519                 30,546
Deferred income taxes                                                               3,233                  3,496
                                                                                ---------              ---------

     TOTAL LIABILITIES                                                             64,062                 61,035
                                                                                ---------              ---------

Commitments and contingencies

Stockholders' equity:
   Common stock $.10 par value, authorized 17,500 shares;
     issued and outstanding 8,276 and 8,737 shares, respectively                      828                    874
   Retained earnings                                                              151,072                157,235
   Accumulated other comprehensive loss, net of tax                                (1,977)                (2,459)
                                                                                ---------              ---------
     TOTAL STOCKHOLDERS' EQUITY                                                   149,923                155,650
                                                                                ---------              ---------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                 $ 213,985              $ 216,685
                                                                                =========              =========








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


                                                          3




                                                UNITED CAPITAL CORP. AND SUBSIDIARIES
                                             CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                                             (Unaudited)
                                                (In thousands, except per share data)


                                                                                Three Months Ended             Six Months Ended
                                                                                     June 30,                      June 30,
                                                                           ------------------------        ------------------------
                                                                              2006            2005            2006            2005
                                                                           ----------    ----------        ----------    ----------
REVENUES:
   Net sales                                                               $  9,643        $ 10,010        $ 18,940        $ 20,103
   Rental revenues from real estate operations                                7,552           5,875          14,281          11,021
                                                                           --------        --------        --------        --------
       Total revenues                                                        17,195          15,885          33,221          31,124
                                                                           --------        --------        --------        --------
COSTS AND EXPENSES:
   Cost of sales                                                              7,250           7,329          14,243          14,783
   Real estate operations:
     Mortgage interest expense                                                  200              98             402             209
     Depreciation expense                                                       599             615           1,145           1,196
     Other operating expenses                                                 3,079           2,047           6,256           4,050
   General and administrative expenses                                        1,916           1,675           4,161           3,281
   Selling expenses                                                             883             977           1,948           1,949
                                                                           --------        --------        --------        --------
       Total costs and expenses                                              13,927          12,741          28,155          25,468
                                                                           --------        --------        --------        --------

       Operating income                                                       3,268           3,144           5,066           5,656
                                                                           --------        --------        --------        --------

OTHER INCOME (EXPENSE):
   Interest and dividend income                                               1,441           1,005           2,781           2,149
   Interest expense                                                              --            (110)             --            (243)
   Other income and expense, net                                               (487)            641            (323)          1,430
                                                                           --------        --------        --------        --------
       Total other income                                                       954           1,536           2,458           3,336
                                                                           --------        --------        --------        --------
Income from continuing operations before income taxes                         4,222           4,680           7,524           8,992

Provision for income taxes                                                    1,476           1,639           2,680           3,137
                                                                           --------        --------        --------        --------
INCOME FROM CONTINUING OPERATIONS                                             2,746           3,041           4,844           5,855
                                                                           --------        --------        --------        --------

DISCONTINUED OPERATIONS:
   (Loss) income from discontinued operations, net of
     tax benefit (provision) of $7, ($13), $14 and ($27),
     respectively                                                               (10)             18             (20)             39
   Net gain on disposal of discontinued operations, net of
     tax provision of $311, $148, $311 and $168,
     respectively                                                               465             221             465             251
                                                                           --------        --------        --------        --------

INCOME FROM DISCONTINUED OPERATIONS                                             455             239             445             290
                                                                           --------        --------        --------        --------
NET INCOME                                                                 $  3,201        $  3,280        $  5,289        $  6,145
                                                                           ========        ========        ========        ========
BASIC EARNINGS PER SHARE:
   Income from continuing operations                                       $    .33        $    .34        $    .59        $    .65
   Income from discontinued operations                                          .06             .02             .05             .03
                                                                           --------        --------        --------        --------
   NET INCOME PER SHARE                                                    $    .39        $    .36        $    .64        $    .68
                                                                           ========        ========        ========        ========
DILUTED EARNINGS PER SHARE:
   Income from continuing operations                                       $    .27        $    .28        $    .48        $    .53
   Income from discontinued operations                                          .05             .02             .04             .03
                                                                           --------        --------        --------        --------
   NET INCOME PER SHARE ASSUMING DILUTION                                  $    .32        $    .30        $    .52        $    .56
                                                                           ========        ========        ========        ========





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


                                                                 4



                                              UNITED CAPITAL CORP. AND SUBSIDIARIES
                                         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                           (Unaudited)
                                                         (In thousands)


                                                                                                     Six Months Ended
                                                                                                         June 30,
                                                                                             ----------------------------------
                                                                                                 2006                2005
                                                                                             --------------     ---------------
                                                                                                                  (Revised -
                                                                                                                  See Note 15)
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                                                 $  5,289            $  6,145
   Adjustments  to  reconcile  net income to net cash  provided  by
     operating  activities:
       Depreciation and amortization                                                             1,368               1,412
       Non-cash stock-based compensation                                                           807                  --
       Net loss (gain) on sale of available-for-sale securities                                    782                (721)
       Income from equity investments                                                             (139)                (76)
       Net gain on disposal of discontinued operations, net of tax                                (465)               (251)
       Net realized and unrealized gain on derivative instruments                                  (62)               (664)
       Tax benefit from employee stock options                                                      --                  80
       Changes in assets and liabilities:
         Notes and accounts receivable, net                                                        180                (210)
         Inventories                                                                              (414)               (482)
         Prepaid expenses and other current assets                                                (360)               (298)
         Deferred income taxes                                                                    (227)                163
         Other assets                                                                             (105)                 58
         Accounts payable and accrued liabilities                                                  683                (333)
         Income taxes payable                                                                     (288)             (1,032)
         Other long-term liabilities                                                               (27)                (88)
                                                                                              --------            --------
            Net cash provided by operating activities of continuing
              operations                                                                         7,022               3,703
            Operating activities of discontinued operations                                        (14)                 (2)
                                                                                              --------            --------

            NET CASH PROVIDED BY OPERATING ACTIVITIES                                            7,008               3,701
                                                                                              --------            --------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of available-for-sale securities                                                   (22,251)             (4,755)
   Proceeds from sale of available-for-sale securities                                           9,004              12,430
   Proceeds from sale of real estate assets                                                      1,701                 457
   Proceeds from sale of derivative instruments                                                     67                  82
   Purchase/issuance of notes receivable                                                          (873)             (2,810)
   Principal payments on notes receivable                                                        1,395               2,885
   Acquisition of property, plant and equipment                                                   (670)             (1,208)
   Acquisition of/additions to real estate assets                                              (10,004)             (1,273)
   Distributions from joint ventures                                                               390                 389
                                                                                              --------            --------

            NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES                                (21,241)              6,197
                                                                                              --------            --------





                                                               5



                                          UNITED CAPITAL CORP. AND SUBSIDIARIES
                               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                                       (Unaudited)


                                                                                             Six Months Ended
                                                                                                 June 30,
                                                                                     ----------------------------------
                                                                                         2006                2005
                                                                                     --------------     ---------------
                                                                                                          (Revised -
                                                                                                          See Note 15)
CASH FLOWS FROM FINANCING ACTIVITIES:
   Principal payments on mortgage obligations                                             (428)             (1,305)
   Purchase and retirement of common stock                                             (13,626)             (9,951)
   Proceeds from exercise of stock options                                                 753                 206
   Tax benefit from exercise of employee stock options                                     568                  --
                                                                                      --------            --------
       Net cash used in financing activities of continuing operations                  (12,733)            (11,050)
       Financing activities of discontinued operations                                      --                 (13)
                                                                                      --------            --------
       NET CASH USED IN FINANCING ACTIVITIES                                           (12,733)            (11,063)
                                                                                      --------            --------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                              (26,966)             (1,165)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                          99,628              84,783
                                                                                      --------            --------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                              $ 72,662            $ 83,618
                                                                                      ========            ========




SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

   Cash paid during the period for:

       Interest                                                                       $    404            $    414
                                                                                      ========            ========
       Taxes                                                                          $  2,596            $  3,952
                                                                                      ========            ========
NON-CASH OPERATING AND INVESTING ACTIVITIES:
   Accounts payable and accrued liabilities incurred for unsettled
     available-for-sale securities and acquisition of/additions to real
     estate assets                                                                    $  3,048            $     --
                                                                                      ========            ========






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


                                                               6



                      UNITED CAPITAL CORP. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                      (In thousands, except per share data)
                                   (Unaudited)

1.    BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States of America ("GAAP") for interim financial information and with the
instructions  to Form 10-Q and Article 10 of Regulation  S-X, as  promulgated by
the Securities  and Exchange  Commission.  Accordingly,  they do not include all
information and footnotes required by GAAP for complete financial statements.

In the opinion of the  management,  all  adjustments,  consisting only of normal
recurring adjustments,  necessary for a fair presentation of the results for the
interim periods  presented have been recorded.  These financial  statements have
been  prepared in  conformity  with the  accounting  principles,  and methods of
applying  those  accounting  principles,  as reflected in the audited  financial
statements  and notes thereto  included in the  Company's  Annual Report on Form
10-K for the year ended  December  31,  2005 and  should be read in  conjunction
therewith.  The  results  of  operations  for  the  periods  presented  are  not
necessarily indicative of the results to be expected for the full year.

2.    STOCKHOLDERS' EQUITY

Previous  purchases of the  Company's  common  stock have reduced the  Company's
additional  paid-in-capital  to zero and have also reduced retained  earnings by
amounts in excess of par value. Any future purchases in excess of par value will
also reduce retained earnings.

In  November  2005,  the  Board  of  Directors   authorized  a  "Dutch  Auction"
self-tender offer for up to 1,000 shares of the Company's common stock resulting
in the January 2006  repurchase and retirement of 544 shares of common stock for
an aggregate price of $13,323 or $24.50 per share.  In addition,  during the six
months ended June 30, 2006 and 2005,  the Company  purchased  and retired 14 and
425  shares  of  common  stock  for an  aggregate  price  of  $303  and  $9,951,
respectively.

Repurchases  of the Company's  common stock may 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. Future proceeds from the issuance
of common  stock in excess of par value will be credited  to  retained  earnings
until such time that previously recorded reductions have been recovered.  During
the six months ended June 30, 2006 and 2005,  the Company  received  proceeds of
$753 and $206 from the exercise of 97 and 32 stock  options,  respectively.  The
Company  recorded a tax  benefit  of $568 to  retained  earnings  related to the
exercise of stock options during the six months ended June 30, 2006.

3.    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 Ended
                                                                    June 30,                       June 30,
                                                           --------------------------     --------------------------
                                                               2006          2005             2006          2005
                                                           -----------    -----------     ------------   -----------
Numerator:
   Income from continuing operations                         $  2,746      $  3,041         $  4,844      $  5,855
                                                             ========      ========         ========      ========

Denominator:
   Basic - weighted-average shares outstanding                  8,288         9,020            8,321         9,081
   Dilutive effect of employee stock options                    1,767         1,870            1,837         1,869
                                                             --------      --------         --------      --------
   Diluted - weighted-average shares outstanding               10,055        10,890           10,158        10,950
                                                             ========      ========         ========      ========
Basic earnings per share - continuing operations             $    .33      $    .34         $    .59      $    .65
                                                             ========      ========         ========      ========

Diluted earnings per share - continuing operations           $    .27      $    .28         $    .48      $    .53
                                                             ========      ========         ========      ========


                                       7



4.    STOCK-BASED COMPENSATION

The Company has two stock option plans,  the Incentive and  Non-Qualified  Stock
Option Plan and the 1988 Joint  Incentive and  Non-Qualified  Stock Option Plan,
under which qualified and non-qualified  options may be granted to key employees
to purchase the  Company's  common stock at the fair market value on the date of
grant. Under both plans, the options typically become exercisable in three equal
installments, beginning one year from the date of grant. Stock options generally
expire ten years from the date of grant.

On January 1, 2006,  the  Company  adopted  Statement  of  Financial  Accounting
Standards No. 123 (Revised  2004) -  "Share-Based  Payment"  ("SFAS No.  123R"),
which  required  the Company to measure all  employee  stock-based  compensation
awards using a fair value method and record the related expense in the financial
statements.  The  Company  elected to use the  modified  prospective  transition
method,  which  requires that  compensation  cost be recognized in the financial
statements  for all awards  granted  after the date of  adoption  as well as for
existing rewards for which the requisite service has not been rendered as of the
date of adoption and requires  that prior  periods not be restated.  All periods
presented  prior to  January  1,  2006 were  accounted  for in  accordance  with
Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to
Employees" ("APB No. 25"). Accordingly,  no compensation cost was recognized for
stock options granted prior to January 1, 2006 because the exercise price of the
stock options equaled the market value of the Company's common stock at the date
of grant,  which is the  measurement  date.  The Company uses the  Black-Scholes
model to estimate the value of stock options  granted  under SFAS No. 123R.  The
Company did not grant any options  during the six months  ended June 30, 2006 or
2005.

The  Black-Scholes  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 adoption of SFAS No. 123R reduced income from continuing  operations  before
income taxes and net income by $350 and $227, respectively, for the three months
ended June 30,  2006.  The impact on net income per basic and diluted  share for
this period was $.03 and $.02 per share, respectively.  For the six months ended
June 30,  2006,  the adoption of SFAS No. 123R  reduced  income from  continuing
operations  before  income taxes and net income by $807 and $518,  respectively.
The impact on net income per basic and  diluted  share for this  period was $.06
and $.05 per share,  respectively.  Prior to the adoption of SFAS No. 123R,  the
Company  presented  the tax benefit  from the  exercise  of stock  options as an
operating cash flow in the Condensed Consolidated Statements of Cash Flows. Upon
adoption of SFAS No. 123R, tax benefits  resulting from  deductions in excess of
the compensation cost recognized for those options are classified as a financing
cash flow.

As of June 30, 2006, there were no unrecognized  compensation  costs relating to
share-based payments.

The following table  illustrates the effect on net income and earnings per share
for the three and six months  ended June 30,  2005 had the  Company  applied the
fair value recognition  provisions of SFAS No. 123,  "Accounting for Stock-Based
Compensation," to stock-based employee compensation for those periods.

                                                                     Three Months Ended     Six Months Ended
                                                                        June 30, 2005         June 30, 2005
                                                                     ------------------     ----------------
Net income, as reported                                                    $ 3,280               $ 6,145
Deduct: Total stock-based employee compensation expense
   determined under fair value based method for all awards,
   net of related tax effects                                                 (449)                 (946)
                                                                           -------               -------
Pro forma net income                                                       $ 2,831               $ 5,199
                                                                           =======               =======

Earnings per share:
   Basic - as reported                                                     $   .36               $   .68
                                                                           =======               =======
   Basic - pro forma                                                       $   .31               $   .57
                                                                           =======               =======

   Diluted - as reported                                                   $   .30               $   .56
                                                                           =======               =======
   Diluted - pro forma                                                     $   .26               $   .48
                                                                           =======               =======


                                       8


A summary of the  activity  of the  Company's  stock  options for the six months
ended June 30, 2006 is as follows:

                                                                                   Weighted-
                                                                     Weighted-      Average
                                                                      Average      Remaining    Aggregate
                                                                     Exercise     Contractual   Intrinsic
                                                         Shares        Price          Term        Value
                                                       -----------  -----------  ------------  -----------
Outstanding at January 1, 2006                            5,398      $ 11.54
Exercised                                                   (97)     $  7.76
                                                          -----
Outstanding and exercisable at June 30, 2006              5,301      $ 11.61       4.2 Years     $78,924
                                                          =====                                  =======


The  aggregate  intrinsic  value in the table above  represents  the  difference
between the  Company's  closing  stock  price on June 30, 2006 and the  exercise
price of each  stock  option,  multiplied  by the number of  in-the-money  stock
options.  This amount  changes based upon the fair market value of the Company's
stock.  The total  intrinsic  value of options  exercised  during the six months
ended June 30, 2006 was $1,624.

5.    MARKETABLE SECURITIES

The cost, gross unrealized gains,  gross unrealized losses and fair market value
of marketable securities by type are as follows:
                                                                       Gross            Gross            Fair
                                                                     Unrealized       Unrealized        Market
                                                       Cost            Gains            Losses          Value
                                                  ---------------  ---------------  --------------- ---------------
JUNE 30, 2006:
Available-for-sale:
   Equity securities                                 $   57,132       $    2,841       $   (5,902)     $   54,071
   Bonds                                                  2,036               21               (1)          2,056
                                                     ----------       ----------       -----------     ----------
                                                     $   59,168       $    2,862       $   (5,903)     $   56,127
                                                     ==========       ==========       ===========     ==========
DECEMBER 31, 2005:
Available-for-sale:
   Equity securities                                 $   44,074       $    2,931       $   (6,712)     $   40,293
   Bonds                                                    129               --               (3)            126
                                                     ----------       ----------       -----------     ----------
                                                     $   44,203       $    2,931       $   (6,715)     $   40,419
                                                     ==========       ==========       ===========     ==========

Proceeds from the sale of available-for-sale  securities and the resulting gross
realized  gains  (losses)  included  in the  determination  of net income are as
follows:
                                                                   Six Months Ended
                                                                       June 30,
                                                        ---------------------------------------
                                                              2006                  2005
                                                        ------------------    -----------------
Available-for-sale securities:
  Proceeds                                                 $    9,004            $   12,430
  Gross realized gains                                            701                   721
  Gross realized losses                                        (1,483)                   --

6.    INVENTORIES

The components of inventories are as follows:
                                                            June 30,             December 31,
                                                              2006                  2005
                                                        ------------------    -----------------
Raw materials                                              $    2,392            $    2,142
Work in process                                                   392                   462
Finished goods                                                  2,056                 1,822
                                                           ----------            ----------
                                                           $    4,840            $    4,426
                                                           ==========            ==========


                                       9




7.    REAL ESTATE

      PROPERTY ACQUISITIONS

During May 2006, the Company purchased,  for cash, a commercial property located
in Long Island City, New York for approximately $8,531.

      PROPERTY SALES

During the six months  ended June 30,  2006,  the Company  divested  itself of a
commercial  property  which had a net book  value of $925  from its real  estate
investment  and  management  segment.  The proceeds from this  transaction  were
$1,701 resulting in a gain of $465, on a net of tax basis.

During the six months ended June 30, 2005,  the Company  divested  itself of two
commercial  properties  which had a net book  value of $38 from its real  estate
investment  and   management   segment.   The  aggregate   proceeds  from  these
transactions were $457 resulting in a gain of $251, on a net of tax basis.

The results of operations for  properties  sold prior to June 30, 2006 have been
reclassified to discontinued  operations,  on a net of tax basis,  for the three
and six  months  ended  June 30,  2005.  Summarized  financial  information  for
properties sold and accounted for as discontinued operations is as follows:


                                                            Three Months Ended                 Six Months Ended
                                                                 June 30,                          June 30,
                                                       ------------------------------    ------------------------------
                                                            2006             2005             2006             2005
                                                       ------------      ------------    ------------      ------------
Rental revenues from real estate operations                $  --            $  88            $  --            $ 183
Mortgage interest expense                                     --              (22)              --              (45)
Depreciation expense                                          --               (5)              --              (11)
Other operating expenses                                     (17)             (30)             (34)             (61)
                                                           ------           ------           ------           ------
(Loss) income from operations                              $ (17)           $  31            $ (34)           $  66
                                                           ======           ======           ======           ======


      PROPERTIES HELD FOR SALE

As of June 30, 2006,  there were no  properties  considered by the Company to be
held for sale.

8.    DERIVATIVE FINANCIAL INSTRUMENTS

The Company recognizes all derivative financial instruments,  such as put and/or
call options, in the Condensed  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 value 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,  participate  in put
and/or call options or enter into interest rate swap agreements.

Management maintains a diversified portfolio of cash equivalents and investments
in a variety of securities,  primarily U.S.  investments in common and preferred
equity issues,  as well as corporate  bonds, 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, 2006 and December 31, 2005,
the fair value of such  derivatives was ($6) and ($1),  respectively,  which are
recorded as a  component  of accounts  payable  and accrued  liabilities  in the
Condensed  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 $62 and $664 in net realized and


                                       10


unrealized  gains from derivative  instruments for the six months ended June 30,
2006 and 2005, respectively, which are included in other income and expense, net
in the Condensed Consolidated Statements of Income.

9.    COMMITMENTS AND CONTINGENCIES

The Company has  undertaken  the  completion  of  environmental  studies  and/or
remedial action at Metex' (as hereafter  defined) two New Jersey  facilities and
has  recorded a  liability  for the  estimated  investigation,  remediation  and
administrative costs associated therewith.

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  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 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  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. Although such events are not expected to change these estimates, 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 had approximately  $9,750 and
$9,900 recorded in accounts payable and accrued  liabilities and other long-term
liabilities at June 30, 2006 and December 31, 2005, respectively,  to cover such
matters.

The Company has an employment  agreement with its Chairman,  President and Chief
Executive  Officer (the "Officer")  which provides for a base salary of $800 per
annum plus a discretionary bonus as determined by the Compensation  Committee of
the Board of Directors.  In the event of termination or a change in control,  as
defined in the employment agreement,  the Company is required to pay the Officer
a  lump  sum  severance  payment  equal  to  three  years  salary  and  purchase
outstanding  options.  The employment agreement provides for successive one year
terms unless either the Company or the Officer  gives the other  written  notice
that the employment agreement is terminated.

The Company is subject to various other  litigation,  legal,  regulatory and tax
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 Condensed Consolidated Financial Statements, depending on the
anticipated  payment date.  At June 30, 2006 and December 31, 2005,  the Company
had approximately  $20,000 recorded in other long-term  liabilities  relating to
such matters. None of these matters are expected to result in a material adverse
effect  on  the  Company's   consolidated   financial  position  or  results  of
operations.



                                       11



10.   COMPREHENSIVE INCOME

The components of comprehensive income are as follows:
                                                               Three Months Ended              Six Months Ended
                                                                    June 30,                       June 30,
                                                           --------------------------     --------------------------
                                                               2006          2005             2006          2005
                                                           -----------    -----------     -----------    -----------
Net income                                                   $  3,201      $  3,280         $  5,289     $   6,145
Other comprehensive income, net of tax:
   Change in net unrealized (loss) gain on available for
     sale securities, net of tax effect of $621, ($548),
     $14 and $289, respectively                                (1,153)        1,019              (26)         (536)

   Reclassification adjustment for net losses (gains)
     realized in net income, net of tax effect of
     ($330), $97, ($275) and $119, respectively                   613          (180)             508          (222)
                                                             ---------     ---------        ---------    ----------

Comprehensive income                                         $  2,661      $  4,119         $  5,771     $   5,387
                                                             =========     =========        =========    ==========


Accumulated  other  comprehensive  loss included as a component of stockholders'
equity at June 30, 2006 and December 31, 2005 consists of net unrealized  losses
on  available-for-sale  securities of $1,977 and $2,459,  which is net of $1,064
and $1,325 of taxes, respectively.

11.   BUSINESS SEGMENTS

During the first  quarter  of 2006,  the  Company  re-evaluated  its  reportable
operating segments and has restated prior results to reflect three segments plus
corporate,  instead of only two, as previously reported. These segments are real
estate investment and management,  hotel operations and engineered products. The
real estate  investment  and  management  segment is engaged in the  business of
investing in and managing real estate properties  located  throughout the United
States.  The hotel operations  segment owns and operates three hotels located in
the United States.  Engineered  products are manufactured  through  wholly-owned
subsidiaries  of the Company and primarily  consist of knitted wire products and
components and transformer products sold worldwide.

The  accounting  policies  of the  Company's  segments  are the  same  as  those
described  in the summary of  significant  accounting  policies  included in the
Notes to  Consolidated  Financial  Statements in the Company's  Annual Report on
Form 10-K for the year ended December 31, 2005.

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

                                                           Three Months Ended                 Six Months Ended
                                                                June 30,                          June 30,
                                                     -------------------------------    ------------------------------
                                                         2006              2005             2006             2005
                                                     -------------     -------------    -------------    -------------

Net revenues and sales:
   Real estate investment and management                $ 5,313           $  4,914         $ 10,061         $  9,239
   Hotel operations                                       2,239                961            4,220            1,782
   Engineered products                                    9,643             10,010           18,940           20,103
                                                        -------           --------         --------         --------
                                                        $17,195           $ 15,885         $ 33,221         $ 31,124
                                                        =======           ========         ========         ========
Operating income (loss):
   Real estate investment and management                $ 3,501           $  3,088         $  6,421         $  5,712
   Hotel operations                                         173                 27               57             (146)
   Engineered products                                      758                872            1,175            1,773
   General corporate expenses                            (1,164)              (843)          (2,587)          (1,683)
                                                        -------           --------         --------         --------
                                                          3,268              3,144            5,066            5,656

Other income, net                                           954              1,536            2,458            3,336
                                                        -------           --------         --------         --------

Income from continuing operations before income
   taxes                                                $ 4,222           $  4,680         $  7,524         $  8,992
                                                        =======           ========         ========         ========






                                       12



12.   PENSION PLAN

The Company  accounts for its defined  benefit  pension plan in accordance  with
Statement of Financial Accounting  Standards No. 87, "Employers'  Accounting for
Pensions"  ("SFAS No.  87"),  which  requires  that  amounts  recognized  in the
financial  statements be determined on an actuarial basis. SFAS No. 87 generally
reduces  the  volatility  of future  income  (expense)  from  changes in pension
liability  discount rates and the performance of the pension plan's assets.  The
Company uses December 31 as the measurement date for its pension plan.

Net periodic pension expense consists of the following:

                                                                 Three Months Ended              Six Months Ended
                                                                      June 30,                       June 30,
                                                             ------------------------       -----------------------
                                                                 2006          2005             2006          2005
                                                             ----------    ----------       ----------    ----------
Service cost                                                 $    (76)     $    (74)        $   (146)     $   (148)
Interest cost                                                    (164)         (165)            (329)         (330)
Actual return on plan assets                                     (318)          121                6           (83)
Net amortization and deferral                                     487            45              335           439
                                                             ---------     ---------        ---------     ---------
Net periodic pension expense                                 $    (71)     $    (73)        $   (134)     $   (122)
                                                             =========     =========        =========     =========


The Company did not  contribute  to the pension plan during the six months ended
June 30, 2006 as the plan has been overfunded.

13.   RECENT ACCOUNTING PRONOUNCEMENTS

In June 2006, the Financial  Accounting  Standards  Board  ("FASB")  issued FASB
Interpretation  No.  48,  "Accounting  for  Uncertainty  in  Income  Taxes -- an
interpretation  of FASB  Statement  No. 109" ("FIN 48").  FIN 48  clarifies  the
accounting for uncertainty in income taxes  recognized in a company's  financial
statements in accordance  with SFAS No. 109,  "Accounting for Income Taxes." FIN
48  prescribes  a  recognition  threshold  and  measurement  attribute  for  the
financial  statement  recognition  and  measurement  of a tax position  taken or
expected  to be taken in a tax  return.  FIN 48 is  effective  for fiscal  years
beginning  after  December 15, 2006.  The Company is  currently  evaluating  the
effects, if any, that FIN 48 will have on its consolidated financial position or
results of operations.

14.   USE OF ESTIMATES

The  preparation of  consolidated  financial  statements in conformity with GAAP
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.

15.  RECLASSIFICATIONS

Certain  prior year  amounts have been  reclassified  to present them on a basis
consistent with the current year.  During the first quarter of 2006, the Company
restated its prior period  segment  disclosures  to be  consistent  with the new
segment classifications (see Note 11). The Company separately disclosed, for all
periods,  the  operating and financing  portions of cash flows  attributable  to
discontinued  operations,  which in prior  periods  were  reported on a combined
basis as a single amount.




                                       13



ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS
              (In thousands, except per share data or as otherwise noted)

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

RESULTS OF OPERATIONS:  THREE AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005

Total revenues  increased  $1,310 or 8.2% for the quarter ended June 30, 2006 to
$17,195,  compared to $15,885 for the quarter  ended June 30, 2005.  Income from
continuing  operations  before income taxes during the current period was $4,222
versus  $4,680  during the three months ended June 30, 2005.  Net income for the
second quarter of 2006 was $3,201 or $.39 per basic share compared to net income
of $3,280 or $.36 per basic share for the second quarter of 2005.

For the six months ended June 30, 2006, total revenues were $33,221, an increase
of  $2,097  or  6.7%,  compared  to the  comparable  2005  period.  Income  from
continuing  operations  for the first  half of 2006 was $4,844 or $.59 per basic
share versus $5,855 or $.65 per basic share during the same period of 2005.  Net
income for the six months ended June 30, 2006 was $5,289 or $.64 per basic share
compared  to net  income of $6,145  or $.68 per basic  share for the six  months
ended June 30, 2005.

      REAL ESTATE OPERATIONS

The Company's real estate  operations  consist of the real estate investment and
management  and hotel  operations  segments.  The  operating  results  for these
segments are as follows:

                                   Three Months Ended June 30, 2006              Six Months Ended June 30, 2006
                               ---------------------------------------      ---------------------------------------
                                                Hotel                                        Hotel
                               Real Estate    Operations      Total         Real Estate    Operations      Total
                               -----------    ----------    ----------      -----------    ----------    ----------
Rental revenues                  $ 5,313       $ 2,239       $ 7,552          $10,061       $ 4,220       $14,281
Mortgage interest expense            (67)         (133)         (200)            (136)         (266)         (402)
Depreciation expense                (403)         (196)         (599)            (753)         (392)       (1,145)
Other operating expenses          (1,342)       (1,737)       (3,079)          (2,751)       (3,505)       (6,256)
                                 -------       -------       -------          -------       -------       -------
Income from operations           $ 3,501       $   173       $ 3,674          $ 6,421       $    57       $ 6,478
                                 =======       =======       =======          =======       =======       =======


                                   Three Months Ended June 30, 2005              Six Months Ended June 30, 2005
                               ---------------------------------------      ---------------------------------------
                                                Hotel                                        Hotel
                               Real Estate    Operations      Total         Real Estate    Operations      Total
                               -----------    ----------    ----------      -----------    ----------    ----------
Rental revenues                  $ 4,914       $   961       $ 5,875          $ 9,239       $ 1,782       $11,021
Mortgage interest expense            (98)           --           (98)            (209)           --          (209)
Depreciation expense                (501)         (114)         (615)            (967)         (229)       (1,196)
Other operating expenses          (1,227)         (820)       (2,047)          (2,351)       (1,699)       (4,050)
                                 -------       -------       -------          -------       -------       -------
Income (loss) from operations    $ 3,088       $    27       $ 3,115          $ 5,712       $  (146)      $ 5,566
                                 =======       =======       =======          =======       =======       =======

REAL ESTATE INVESTMENT AND MANAGEMENT

Rental revenues from the real estate investment and management segment increased
$399 or 8.1% to $5,313 for the  quarter  ended June 30, 2006 and $822 or 8.9% to
$10,061  for the first half of 2006,  compared to the  corresponding  periods in
2005. These increases are primarily the result of lease renewals at higher rents
($812 and $1,091 for the three and six months ended June 30, 2006, respectively)
offset by recurring  tenant turnover ($435 and $792 for the three and six months
ended June 30, 2006,  respectively).  In addition,  during the first  quarter of
2006, the Company recognized additional revenue from a non-recurring transaction
($500). In general, rental revenues from the Company's real estate properties do
not fluctuate significantly due to the long-term nature of the Company's leases.
However,   future  rental   revenues  could  be  affected  by  lease   renewals,
terminations, step-ups and escalations and by the purchase or sale of additional
properties.

                                       14


Mortgage  interest  expense  continued  to  decrease  as a result of  continuing
mortgage amortization. Such expense decreased $31 or 31.6% for the quarter ended
June 30, 2006 and $73 or 34.9% for the six months ended June 30, 2006,  compared
to the  corresponding  periods in 2005.  Mortgage  interest  expense on existing
obligations of the Company's real estate investment and management  segment will
continue to decline with scheduled principle reductions.

Depreciation  expense  associated with real properties held for rental decreased
$98 or 19.6% for the  quarter  ended June 30, 2006 and $214 or 22.1% for the six
months ended June 20, 2006, compared to the corresponding periods in 2005. These
decreases were primarily attributable to reduced depreciation expense associated
with certain  properties  or  improvements  becoming  fully  depreciated  in the
current  and prior year  ($160 and $299 for the three and six months  ended June
30, 2006, respectively). These decreases were partially offset by an increase in
depreciation  expense  related to additions over the past twelve months ($70 and
$94  for  the  three  and  six  months  ended  June  30,  2006,   respectively).
Depreciation  expense  on the  Company's  properties  for the full  year of 2006
should continue to decline as additional  properties  become fully  depreciated.
Due to the May 2006 purchase of a commercial property and other expenditures for
capital improvements  incurred during the current year,  depreciation expense on
the Company's properties should increase in future years.

Other  operating  expenses  associated  with the  management of real  properties
increased $115 or 9.4% for the quarter ended June 30, 2006 and $400 or 17.0% for
the six months  ended June 30, 2006,  compared to the same periods in 2005.  The
Company  incurred an increase in other  operating  expenses during the three and
six months ended June 30, 2006 amounting to $210 and $387, respectively, related
to a  property  converted  from a triple  net lease in 2005.  In  addition,  the
increase for the quarter  ended June 30, 2006 is partially  offset by a decrease
in property  maintenance  ($132). The increase for the six months ended June 30,
2006 also includes the receipt of non-recurring tenant  reimbursements ($107) in
2005 partially offset by a decrease in property maintenance ($136) in 2006.

HOTEL OPERATIONS

The hotel  operations  segment  owns and  operates  three  hotels.  The  Company
acquired a hotel in November 2005,  located in Windsor Locks,  Connecticut.  The
increases  in  hotel   operating   revenues  and  related   mortgage   interest,
depreciation  and other  operating  expenses  for the three and six months ended
June 30, 2006,  compared to the same period in 2005 are  primarily the result of
the acquisition of this hotel. Future hotel operating revenues and expenses will
vary based on demand and desirability of these properties  compared to others in
their  immediate  proximity and may be  influenced  by local and other  economic
conditions, including the room rate of the hotels.

      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 Ended                 Six Months Ended
                                                                June 30,                          June 30,
                                                     -------------------------------    ------------------------------
                                                         2006             2005              2006             2005
                                                     -------------    --------------    -------------    -------------
Net sales                                              $   9,643        $  10,010         $  18,940        $  20,103
Cost of sales                                             (7,250)          (7,329)          (14,243)         (14,783)
Selling, general and administrative expenses              (1,635)          (1,809)           (3,522)          (3,547)
                                                       ----------       ----------        ----------       ----------
Operating income                                       $     758        $     872         $   1,175        $   1,773
                                                       ==========       ==========        ==========       ==========

Net sales of the  engineered  products  segment  decreased  $367 or 3.7% for the
quarter ended June 30, 2006 and $1,163 or 5.8% for the six months ended June 30,
2006,  compared  with the  results  of the  corresponding  2005  periods.  These
decreases were primarily due to a decreased  demand in the Company's  automotive
product line which is a result of continued softening of sales in the automotive
industry.  Although  management  believes that sales of its engineered  products
segment  are  directly  influenced  by general  economic  conditions,  worldwide
automotive demand and industrial capital spending,  future sales of this segment
could  also  be  affected  by  changes  in  technology,  competitive  forces  or
challenges to its intellectual property.

Cost of sales as a percentage of sales increased 2.0% and 1.7% for the three and
six months ended June 30, 2006,  compared to the corresponding  periods in 2005.
These  increases were primarily  related to an increase in fixed operating costs
as well as being  absorbed over lower net sales.  In addition,  the Company also


                                       15


incurred an increase in the cost of raw materials,  primarily steel  components;
where  possible,  these costs have been  passed  along to  customers.  Continued
increases  in the price of raw  materials  could  effect  the gross  margin  and
operating profit of the engineered products segment.

Selling,  general and administrative expenses of the engineered products segment
decreased  $174 or 9.6% for the  quarter  ended June 30,  2006,  compared to the
corresponding  period of 2005,  primarily  due to  decreases  in European  sales
office expenses ($131) and professional  fees ($75),  partially offset by higher
payroll and payroll related costs ($97) in the second quarter. On a year-to-date
basis, selling,  general and administrative expenses from this segment decreased
less than 1%.  However,  fluctuations  during this period  include  decreases in
European  sales  office  expenses  ($136),  travel and  entertainment  ($81) and
professional  fees ($48),  offset by an increase in payroll and payroll  related
expenses ($317).

      GENERAL AND ADMINISTRATIVE EXPENSES

General  and  administrative  expenses  not  associated  with the  manufacturing
operations  increased $321 or 38.1% for the quarter ended June 30, 2006 and $904
or 53.7% for the six  months  ended June 30,  2006,  compared  to such  expenses
incurred for the comparable 2005 periods.  These increases  primarily  relate to
compensation  expense  associated with unvested stock options resulting from the
adoption of SFAS No. 123R effective January 1, 2006 ($350 and $807 for the three
and six  months  ended  June 30,  2006,  respectively)  (see  Note 4 of Notes to
Condensed Consolidated  Financial  Statements).  At June 30, 2006, there were no
unrecognized compensation costs relating to share-based payments.

      OTHER INCOME AND EXPENSE, NET

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

                                                               Three Months Ended              Six Months Ended
                                                                    June 30,                       June 30,
                                                           --------------------------     --------------------------
                                                               2006          2005             2006          2005
                                                           -----------   ------------     -----------   ------------
Net (loss) gain on sale of available-for-sale securities     $   (943)     $    276         $   (782)     $    721
Net realized and unrealized gain on derivative
   instruments                                                     30            59               62           664
Litigation settlement                                             422            --              422            --
Equity in earnings (losses) of hotel ventures                      --           252              (35)         (103)
Other, net                                                          4            54               10           148
                                                             --------      --------         --------      --------
                                                             $   (487)     $    641         $   (323)     $  1,430
                                                             ========      ========         ========      ========


      DISCONTINUED OPERATIONS

Loss from  operations  on  properties  sold and  accounted  for as  discontinued
operations was $10 and $20, on a net of tax basis,  for the three and six months
ended June 30, 2006, respectively. Income from operations on properties sold and
accounted for as discontinued operations was $18 and $39, on a net of tax basis,
for the three and six  months  ended  June 30,  2005,  respectively.  Prior year
amounts  have  been  reclassified  to  reflect  results  of  operations  of real
properties sold during 2006 and 2005, as discontinued operations. As of June 30,
2006, no properties  were  classified as held for sale. Net gain on the disposal
of real estate assets accounted for as discontinued operations was $465 for both
the three and six months  ended June 30,  2006,  and $221 and $251 for the three
and six months  ended June 30,  2005,  respectively,  on a net of tax basis (see
Note 7 of Notes to Condensed Consolidated Financial Statements).

LIQUIDITY AND CAPITAL RESOURCES

The Company  experienced a net cash inflow from operations of $7,008 for the six
months  ended June 30,  2006  versus  $3,701 for the same  period of 2005.  This
$3,307 increase in operating cash flow results  principally  from an increase in
operating   income  before  non-cash   charges,   including   depreciation   and
compensation  costs  resulting from the adoption of SFAS No. 123(R),  as well as
working  capital  changes,  particularly  an increase  in  accounts  payable and
accrued liabilities.

                                       16


Net cash used in investing  activities was $21,241 for the six months ended June
30, 2006 versus net cash provided by investing  activities of $6,197 for the six
months ended June 30, 2005. This change primarily results from the timing of the
purchase or sale of available for sale  securities  which utilized  $20,922 more
cash in 2006 and the  acquisition  of/additions to real estate assets which also
utilized additional cash in the current year ($8,731).

Net cash used in  financing  activities  was $12,733 and $11,063  during the six
months ended June 30, 2006 and 2005, respectively. The increase in cash used for
financing  activities  primarily  results  from the  increase  in  purchase  and
retirement  of shares of common  stock  during the first half of 2006  ($13,626)
over that purchased during the same period of 2005 ($9,951). This additional use
of cash is offset by a reduction in principal  payments on mortgage  obligations
($877),  the tax benefit  related to the  exercise of stock  options  ($568) and
additional proceeds from such exercises ($547).

Previous  purchases of the  Company's  common  stock have reduced the  Company's
additional  paid-in capital to zero and have also reduced  retained  earnings by
amounts in excess of par value. Any future purchases in excess of par value will
also reduce retained earnings.  Repurchases of the Company's common stock may 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.
Future proceeds from the issuance of common stock in excess of par value will be
credited  to  retained  earnings  until  such  time  that  previously   recorded
reductions have been recovered.

At June 30, 2006, the Company's cash and  marketable  securities  totaled $128.8
million and working  capital was $128.6 million  compared to cash and marketable
securities of $140.0  million and working  capital of $142.4 million at December
31, 2005.  This  reduction in cash and  marketable  securities  is primarily the
result of a property purchase, for cash, in May 2006 ($8.5 million).  Management
continues to believe that the real estate market is overvalued  and  accordingly
acquisitions  have  been  limited  to  those  select  properties  that  meet the
Company's  stringent  financial  requirements.   Management  believes  that  the
available  working  capital  puts the Company in an  opportune  position to fund
acquisitions  and  grow  its  portfolio,   if  and  when  attractive   long-term
opportunities become available.

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. These investments are recorded initially at cost and
subsequently  adjusted  for  equity  in  earnings  and  cash  contributions  and
distributions. The debt of the joint ventures in which the Company currently has
an ownership interest are non-recourse obligations and are collateralized by the
entity's real  property.  The Company  believes that the value of the underlying
property and its operating cash flows are sufficient to satisfy its obligations.
The  Company is not  obligated  for the debts of the joint  ventures,  but could
decide to satisfy them in order to protect its  investment.  In such event,  the
Company's  capital  resources and financial  condition  would be reduced and, in
certain  instances,  the  carrying  value of the  Company's  investment  and its
results of operations would be negatively impacted.

The cash  needs of the  Company  have been  satisfied  from funds  generated  by
current operations.  It is expected that future operational cash needs will also
be  satisfied  from  existing  cash  balances,  marketable  securities,  ongoing
operations or borrowings.  The primary source of capital to fund additional real
estate  acquisitions and to make additional  high-yield  mortgage loans may come
from  existing  funds,  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 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 its equity or debt 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.  Changes in U.S.
interest  rates  affect  the  interest  earned  on the  Company's  cash and cash
equivalent balances and other interest bearing  investments.  Given the level of
cash and other interest bearing investments held by the Company and the increase
in U.S. interest rates, the Company's earnings have been favorably impacted.

                                       17


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  Condensed  Consolidated
Balance Sheets.

The Company  manufactures its products in the United States and Mexico and sells
its products in those markets as well as in Europe, South America and Asia. As a
result,  the  Company's  operating  results could be affected by factors such as
changes in foreign  currency  exchange rates or weak economic  conditions in the
foreign  markets in which the  Company  distributes  its  products.  Most of the
Company's  sales are  denominated  in U.S.  dollars.  Net sales of the Company's
engineered  products  segment  denominated  in Euros  were 5.3% and 5.9% for the
three and six months ended June 30, 2006 and 7.6% and 8.4% for the three and six
months ended June 30, 2005,  respectively.  As such, a portion of the  Company's
receivables  are exposed to  fluctuations  with the U.S.  dollar.  However,  the
Company  does not believe  this risk to be  material  to its  overall  financial
position.  Since the Euro has been  relatively  stable in  relation  to the U.S.
dollar,  the Company's results have not been  significantly  impacted by foreign
exchange gains or losses in the past.  Accordingly,  the Company has not entered
into  forward  exchange  contracts  to hedge  this  exposure.  If such  exposure
increased in the future, the Company may reexamine this practice to minimize the
associated risks.

The Company has  undertaken  the  completion  of  environmental  studies  and/or
remedial action at Metex' two New Jersey facilities and has recorded a liability
for the estimated investigation, remediation and administrative costs associated
therewith.  See Note 9 of Notes to Condensed  Consolidated  Financial Statements
for further discussion of this matter.

The Company is subject to various other  litigation,  legal,  regulatory and tax
matters  that  arise  in  the  ordinary  course  of  business  activities.  When
management  believes it is probable that liabilities have 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 Condensed Consolidated Financial Statements, depending on the
anticipated  payment date.  At June 30, 2006 and December 31, 2005,  the Company
had approximately  $20,000 recorded in other long-term  liabilities  relating to
such matters. None of these matters are expected to result in a material adverse
effect  on  the  Company's   consolidated   financial  position  or  results  of
operations.

RELATED PARTY TRANSACTIONS

The  Company  has  a  50%  interest  in  an  unconsolidated   limited  liability
corporation, whose principal assets are two distribution centers leased to Kmart
Corporation. 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% interest
in this entity.

CRITICAL ACCOUNTING POLICIES AND MANAGEMENT ESTIMATES

The  preparation  of  consolidated   financial  statements  in  accordance  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.

Refer to the  Company's  2005 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. Also see Note 4 of
Notes to  Condensed  Consolidated  Financial  Statements  included  herein for a
discussion  on the adoption of SFAS No. 123R  effective  January 1, 2006.  There
were no other material  changes to the Company's  critical  accounting  policies
during the six months ended June 30, 2006.



                                       18



RECENT ACCOUNTING PRONOUNCEMENTS

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


ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

See  Note 8 of  Notes  to  Condensed  Consolidated  Financial  Statements  for a
discussion of derivative  financial activity since December 31, 2005. There have
been no other material changes in quantitative and qualitative market risks from
those  disclosed in Item 7A of the Company's  Annual Report on Form 10-K for the
year ended December 31, 2005, which is incorporated herein by reference.

ITEM 4.       CONTROLS AND PROCEDURES

As of the end of the period covered by 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-15(e) and
15d-15(e).  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 over financial  reporting or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation.


                           PART II - OTHER INFORMATION

ITEM 1A.      RISK FACTORS

There have been no material changes with regard to the risk factors disclosed in
Item 1A of the Company's  Annual Report on Form 10-K for the year ended December
31, 2005, which are incorporated herein by reference.

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  2005 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.



                                       19




ITEM 2.       UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table details the Company's repurchases of common stock during the
three months ended June 30, 2006:

                      ISSUER PURCHASES OF EQUITY SECURITIES
                      (In thousands, except per share data)

                                                                                 Total Number
                                                                                   of Shares       Approximate
                                                                                 Purchased as      Dollar Value
                                                                                    Part of        That May Yet
                                                 Total                             Publicly        be Purchased
                                               Number of                           Announced        Under the
                                                 Shares       Average Price        Plans or          Plans or
Period                                         Purchased      Paid Per Share       Programs          Programs
-------------------------------------------   -----------    ----------------   ---------------   ---------------
June 1, 2006 -- June 30, 2006                        14            $ 21.95               14           $ 6,473
                                                  =====            =======            =====


As  previously  announced,  the Board of Directors  have  approved and announced
repurchase plans for the Company's common stock,  which may be made from time to
time in the open market at prevailing  market prices or in privately  negotiated
transactions. At June 30, 2006, $6,473 remains to be purchased under such plans.
These authorizations are ongoing and do not have an expiration date.


ITEM 4.       SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

On June 13, 2006, the Company held its Annual Meeting of  Stockholders,  whereby
the stockholders voted to elect Directors as follows:
                                                            FOR         WITHHELD
A.F. Petrocelli.....................................     7,624,370      349,265
Michael T. Lamoretti................................     7,623,150      350,485
Howard M. Lorber....................................     7,693,378      280,257
Robert M. Mann......................................     7,524,568      449,067
Anthony J. Miceli...................................     7,595,439      378,196
Arnold S. Penner....................................     7,791,164      182,471
Michael J. Weinbaum.................................     7,623,150      350,485


ITEM 6.       EXHIBITS

  14.    Code of Business Conduct and Ethics.
  31.1   Certification of the Chief Executive Officer pursuant to Rule 13a-15(e)
         and 15d-15(e).
  31.2   Certification of the Chief Financial Officer pursuant to rule 13a-15(e)
         and 15d-15(e).
  32.1   Certification  of the Chief  Executive  Officer  pursuant  to 18 U.S.C.
         Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley  Act
         of 2002.
  32.2   Certification  of the Chief  Financial  Officer  pursuant  to 18 U.S.C.
         Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley  Act
         of 2002.





                                       20



                                   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.

Date:  August 8, 2006

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


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