`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 SEPTEMBER 30, 2004

                         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. [X] Yes [ ] No

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No

The registrant had 9,130,142 shares of common stock, $.10 par value, outstanding
as of November 8, 2004.





                      UNITED CAPITAL CORP. AND SUBSIDIARIES

                                      INDEX


                                                                            PAGE
                                                                            ----

                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

         Consolidated Balance Sheets as
         of September 30, 2004 (Unaudited) and December 31, 2003...............3

         Consolidated Statements of Income for the
         Three and Nine Months Ended September 30, 2004 and 2003 (Unaudited)...4

         Consolidated Statements of Cash Flows for the
         Nine Months Ended September 30, 2004 and 2003 (Unaudited)...........5-6

         Notes to Consolidated Financial Statements (Unaudited).............7-15

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS.....................15-19

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

ITEM 4.  CONTROLS AND PROCEDURES..............................................20


                           PART II - OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.....................................20


SIGNATURES....................................................................20


                                       2




                      UNITED CAPITAL CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

                                                                   SEPTEMBER 30,  DECEMBER 31,
                                                                       2004          2003
                                                                   -------------  ------------
                                                                          (Unaudited)
ASSETS

Current assets:
   Cash and cash equivalents                                          $ 87,133     $ 59,210
   Marketable securities                                                59,472       49,612
   Notes and accounts receivable, net                                    7,152        6,434
   Inventories                                                           3,902        4,155
   Prepaid expenses and other current assets                               657          961
   Current assets of discontinued operations                                --           86
                                                                      --------     --------

      TOTAL CURRENT ASSETS                                             158,316      120,458
                                                                      --------     --------

Property, plant and equipment, net                                       2,553        3,098
Real property held for rental, net                                      32,204       33,120
Investments in joint ventures                                           19,341       19,819
Noncurrent notes receivable                                              4,538        2,862
Other assets                                                             1,946        3,194
Noncurrent assets of discontinued operations                               950        7,163
                                                                      --------     --------

      TOTAL ASSETS                                                    $219,848     $189,714
                                                                      ========     ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Current maturities of long-term debt                               $  2,616     $  2,938
   Accounts payable and accrued liabilities                             12,719        9,178
   Income taxes payable                                                  9,411        7,270
   Deferred income taxes                                                 6,272        3,947
   Current liabilities of discontinued operations                           11        1,074
                                                                      --------     --------

      TOTAL CURRENT LIABILITIES                                         31,029       24,407
                                                                      --------     --------
Long-term debt                                                           6,461        8,459
Other long-term liabilities                                             30,491       30,848
Deferred income taxes                                                    1,443        1,783
                                                                      --------     --------
      TOTAL LIABILITIES                                                 69,424       65,497
                                                                      --------     --------
Commitments and contingencies

Stockholders' equity:
   Common stock $.10 par value, authorized 17,500 shares;
      issued and outstanding 9,120 and 9,092 shares, respectively          912          909
   Retained earnings                                                   136,039      114,436
   Accumulated other comprehensive income, net of tax                   13,473        8,872
                                                                      --------     --------

      TOTAL STOCKHOLDERS' EQUITY                                       150,424      124,217
                                                                      --------     --------

      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                      $219,848     $189,714
                                                                      ========     ========


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

                                       3




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


                                                                  THREE MONTHS ENDED          NINE MONTHS ENDED
                                                                      SEPTEMBER 30,             SEPTEMBER 30,
                                                                ----------------------      ----------------------
                                                                   2004         2003          2004           2003
                                                                --------      --------      --------      --------
REVENUES:
    Net sales                                                   $  9,285      $  8,599      $ 28,753      $ 25,081
    Rental revenues from real estate operations                    5,673         5,401        16,348        16,726
                                                                --------      --------      --------      --------
          Total revenues                                          14,958        14,000        45,101        41,807
                                                                --------      --------      --------      --------
COSTS AND EXPENSES:
    Cost of sales                                                  6,393         5,849        20,177        17,729
    Real estate operations:
       Mortgage interest expense                                     155           228           518           721
       Depreciation expense                                          657           708         1,852         2,094
       Other operating expenses                                    2,021         1,989         5,550         5,832
    General and administrative expenses                            1,472         1,588         4,420         4,753
    Selling expenses                                               1,001           913         2,962         2,653
                                                                --------      --------      --------      --------
          Total costs and expenses                                11,699        11,275        35,479        33,782
                                                                --------      --------      --------      --------
          Operating income                                         3,259         2,725         9,622         8,025
                                                                --------      --------      --------      --------

OTHER INCOME (EXPENSE):
    Interest and dividend income                                     492           445         1,276         1,360
    Interest expense                                                (111)         (110)         (340)         (329)
    Other income and expense, net                                     27           572         2,081         2,046
                                                                --------      --------      --------      --------
          Total other income                                         408           907         3,017         3,077
                                                                --------      --------      --------      --------

Income from continuing operations before income taxes              3,667         3,632        12,639        11,102

Provision for income taxes                                           501         1,140         2,498         3,764
                                                                --------      --------      --------      --------
INCOME FROM CONTINUING OPERATIONS                                  3,166         2,492        10,141         7,338
                                                                --------      --------      --------      --------

DISCONTINUED OPERATIONS:
    Income from discontinued operations, net of income
       taxes of $35, $88, $92 and $486, respectively                  51           132           137           730
    Net gain on disposal of discontinued operations, net of
       income taxes of $3,251, $225, $7,407 and $1,231,
       respectively                                                4,877           336        11,110         1,845
                                                                --------      --------      --------      --------
INCOME FROM DISCONTINUED OPERATIONS                                4,928           468        11,247         2,575
                                                                --------      --------      --------      --------

NET INCOME                                                      $  8,094      $  2,960      $ 21,388      $  9,913
                                                                ========      ========      ========      ========
BASIC EARNINGS PER SHARE:
    Income from continuing operations                           $    .35      $    .28      $   1.11      $    .81
    Income from discontinued operations                              .54           .05          1.24           .28
                                                                --------      --------      --------      --------
    NET INCOME PER SHARE                                        $    .89      $    .33      $   2.35      $   1.09
                                                                ========      ========      ========      ========
DILUTED EARNINGS PER SHARE:
    Income from continuing operations                           $    .30      $    .23      $    .94      $    .69
    Income from discontinued operations                              .46           .04          1.05           .24
                                                                --------      --------      --------      --------
    NET INCOME PER SHARE ASSUMING DILUTION                      $    .76      $    .27      $   1.99      $    .93
                                                                ========      ========      ========      ========

CASH DIVIDENDS PER SHARE                                        $     --      $     --      $     --      $   1.00
                                                                ========      ========      ========      ========


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

                                       4




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


                                                                            NINE MONTHS ENDED
                                                                             September 30,
                                                                         ----------------------
                                                                           2004           2003
                                                                         --------      --------

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                            $ 21,388      $  9,913
   Adjustments to reconcile net income
      to net cash provided by operating activities:
         Depreciation and amortization                                      2,563         2,723
         Net gain on sale of available-for-sale securities                   (850)          (36)
         Gain on sale of other assets                                        (363)           --
         Net gain on sale of real estate assets                                (2)         (152)
         Equity in earnings of joint ventures                                (105)       (1,088)
         Net gain on disposal of discontinued operations, net of tax      (11,110)       (1,845)
         Net realized and unrealized gain on derivative instruments          (146)       (1,096)
         Proceeds from sale of trading securities                              --           884
         Net realized gain on trading securities                               --           (57)
         Changes in assets and liabilities:
            Notes and accounts receivable, net                               (674)       (1,368)
            Inventories                                                       253          (237)
            Prepaid expenses and other current assets                         304           321
            Deferred income taxes                                            (493)         (809)
            Other assets                                                      228           354
            Accounts payable and accrued liabilities                        2,911           644
            Income taxes payable                                           (5,266)        1,074
            Other long-term liabilities                                      (357)          401
            Discontinued operations - noncash charges and
               working capital changes                                       (898)         (726)
                                                                         --------      --------

                     NET CASH PROVIDED BY OPERATING ACTIVITIES              7,383         8,900
                                                                         --------      --------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of available-for-sale securities                              (19,342)       (7,062)
   Proceeds from sale of available-for-sale securities                     17,411           179
   Proceeds from sale of other assets                                       1,363            --
   Proceeds from sale of real estate assets                                23,855         7,523
   Purchase of derivative instruments                                         (13)           --
   Proceeds from sale of derivative instruments                               789         1,584
   Purchase of notes receivable                                            (1,000)           --
   Acquisition of property, plant and equipment                              (146)         (229)
   Principal payments on notes receivable                                      78            70
   Acquisition of/additions to real estate assets                            (936)         (200)
   Investments in joint ventures, net                                          --          (256)
   Distributions from joint ventures                                          583        12,724
                                                                         --------      --------

                     NET CASH PROVIDED BY INVESTING ACTIVITIES             22,642        14,333
                                                                         --------      --------

                                       5




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


                                                                                        NINE MONTHS ENDED
                                                                                           SEPTEMBER 30,
                                                                                     ----------------------
                                                                                         2004         2003
                                                                                     ---------     --------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Principal payments on mortgage commitments, notes and loans                         (2,320)       (2,419)
   Purchase and retirement of common shares                                                --        (1,189)
   Proceeds from exercise of stock options                                                218           841
   Dividends paid                                                                          --        (9,102)
                                                                                     --------      --------

                     NET CASH USED IN FINANCING ACTIVITIES                             (2,102)      (11,869)
                                                                                     --------      --------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                              27,923        11,364

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                         59,210        48,893
                                                                                     --------      --------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                             $ 87,133      $ 60,257
                                                                                     ========      ========


SUPPLEMENTAL  DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the period for:

            Interest                                                                 $    777      $  1,008
                                                                                     ========      ========

            Taxes                                                                    $  8,377      $  3,372
                                                                                     ========      ========

NON-CASH INVESTING AND FINANCING ACTIVITIES:
   Issuance of note receivable in connection with sale of real property              $    800      $     --
                                                                                     ========      ========

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

                                       6




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

1.  BASIS OF PRESENTATION

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

The consolidated financial information included in this report has been prepared
in  conformity  with the  accounting  principles  and methods of applying  those
accounting  principles,  reflected  in  the  Consolidated  Financial  Statements
included  in the  Annual  Report  on Form 10-K  filed  with the  Securities  and
Exchange Commission for the year ended December 31, 2003.

In the opinion of management,  all  adjustments,  consisting  only of normal and
recurring adjustments,  necessary for a fair presentation of the results for the
interim periods presented have been recorded.  The results of operations for the
periods  presented are not necessarily  indicative of the results to be expected
for the full year.

2.  STOCKHOLDERS' EQUITY

Previous  purchases of the  Company's  common  stock have reduced the  Company's
additional  paid-in-capital  to zero and,  accordingly,  any future purchases in
excess of par value will also reduce retained earnings. 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 nine  months  ended  September  30,  2003,  the  Company
purchased  and retired 66 shares of the Company's  common stock for $1,189.  The
Company has not purchased any shares of the Company's  common stock during 2004.
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.  During the nine  months  ended
September 30, 2004 and 2003, the Company received proceeds of $218 and $841 from
the exercise of 28 and 107 stock options, respectively.

3.  DIVIDENDS

On June 10,  2003,  the Board of  Directors  of the  Company  declared a special
one-time cash dividend of $1.00 per common share to all  stockholders  of record
as of June 20, 2003. The  declaration of such dividend was within the discretion
of the Board of Directors.  While the Company does not  currently  expect to pay
additional dividends in the future, the Board of Directors could reevaluate this
position in the future.  This dividend,  totaling  $9,102,  was paid on July 10,
2003.

4.  EARNINGS PER SHARE

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

                                                        THREE MONTHS ENDED      NINE MONTHS ENDED
                                                            SEPTEMBER 30,         SEPTEMBER 30,
                                                       -------------------     -------------------
                                                         2004        2003        2004        2003
                                                       -------     -------     -------     -------
Numerator:
    Income from continuing operations                  $ 3,166     $ 2,492     $10,141     $ 7,338
                                                       =======     =======     =======     =======

Denominator:
    Basic - weighted-average shares outstanding          9,118       9,096       9,109       9,050
    Dilutive effect of employee stock options            1,558       1,685       1,654       1,649
                                                       -------     -------     -------     -------
    Diluted - weighted-average shares outstanding       10,676      10,781      10,763      10,699
                                                       =======     =======     =======     =======

Basic earnings per share - continuing operations       $   .35     $   .28     $  1.11     $   .81
                                                       =======     =======     =======     =======
Diluted earnings per share - continuing operations     $   .30     $   .23     $   .94     $   .69
                                                       =======     =======     =======     =======

                                       7




Employee stock options to purchase 756 shares of the Company's  common stock for
each of the three and nine months  ended  September  30, 2004 and 758 shares for
each of the three and nine months ended September 30, 2003, were not included in
the  computation  of  diluted  earnings  per  share  in the  respective  periods
presented because their effect would have been anti-dilutive.

5.  STOCK-BASED COMPENSATION

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

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

                                                  THREE MONTHS ENDED                            NINE MONTHS ENDED
                                                     SEPTEMBER 30,                                 SEPTEMBER 30,
                                        ---------------------------------------     ---------------------------------------
                                              2004                   2003                 2004                      2003
                                        -----------------     -----------------     -----------------         -------------
Net income, as reported                 $           8,094     $           2,960     $          21,388         $       9,913
Deduct: Total stock-based employee
    compensation expense determined
    under fair value based method
    for all awards, net of related
    tax effects                                      (497)                 (726)               (1,899)               (1,860)
                                        -----------------     -----------------     -----------------             ---------
Pro forma net income                    $           7,597     $           2,234     $          19,489         $       8,053
                                        =================     =================     =================             =========

Earnings per share:

    Basic - as reported                 $             .89     $             .33     $            2.35             $    1.09
                                        =================     =================     =================             =========
    Basic - pro forma                   $             .83     $             .25     $            2.14             $     .89
                                        =================     =================     =================             =========

    Diluted - as reported               $             .76     $             .27     $            1.99             $     .93
                                        =================     =================     =================             =========
    Diluted - pro forma                 $             .73     $             .22     $            1.85             $     .78
                                        =================     =================     =================             =========


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

6.   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
                          --------     --------      --------      --------
SEPTEMBER 30, 2004:
-------------------
Available-for-sale:
    Equity securities     $ 38,738     $ 21,085      $   (356)     $ 59,467
    Bonds                        5           --            --             5
                          --------     --------      --------      --------
                          $ 38,743     $ 21,085      $   (356)     $ 59,472
                          ========     ========      ========      ========

DECEMBER 31, 2003:
------------------
Available-for-sale:
    Equity securities     $ 28,957     $ 13,763      $   (113)     $ 42,607
    Bonds                    7,005           --            --         7,005
                          --------     --------      --------      --------
                          $ 35,962     $ 13,763      $   (113)     $ 49,612
                          ========     ========      ========      ========

                                       8




Included in  marketable  securities  at September 30, 2004 and December 31, 2003
was $43,078  and  $36,105,  respectively,  of common  stock at fair value,  in a
publicly-traded  company for which the Board  Chairman was an executive  officer
and  director and another  Director of the Company was a director  (See Notes 11
and 16).

Proceeds  from the sale of  available-for-sale  and trading  securities  and the
resulting gross realized gains included in the  determination  of net income are
as follows:

                                                            NINE MONTHS ENDED
                                                               SEPTEMBER 30,
                                                        ------------------------
                                                          2004             2003
                                                        -------          -------

                   Available-for-sale securities:
                    Proceeds                             $17,411          $  179
                    Gross realized gains                     850              36
                   Trading securities:
                    Proceeds                             $    --          $  884
                    Gross realized gains                      --              57

7.  INVENTORIES

The components of inventories are as follows:

                                                     SEPTEMBER 30,     DECEMBER 31,
                                                         2004              2003
                                                     -------------     ------------

                Raw materials                            $2,218           $1,601
                Work in process                             419              411
                Finished goods                            1,265            2,143
                                                         ------           ------
                                                         $3,902           $4,155
                                                         ======           ======


8.  REAL ESTATE

PROPERTY SALES:

The  Company  adopted  the  provisions  of  Statement  of  Financial  Accounting
Standards  No. 144,  "Accounting  for the  Impairment  or Disposal of Long-Lived
Assets"  ("SFAS No.  144") in 2002.  SFAS No. 144  requires  that the  operating
results  through the date of sale,  as well as the gains on sales  generated  on
properties sold or held for sale, be reclassified as discontinued operations for
all periods presented.

During the nine months ended September 30, 2004, the Company  divested itself of
five  commercial  properties  which had a net book value of $5,274 from its real
estate  investment  and  management  segment.   The  cash  proceeds  from  these
transactions  were $8,712.  In addition,  the Company  received an $800 purchase
money  mortgage in  connection  with the sale of one of these  properties.  This
resulted  in a gain  of  $2,542  on a net of tax  basis.  Two of the  commercial
properties were contributed to charitable organizations in the first quarter for
a nominal amount.  In addition,  the Company sold three of its shopping  centers
and retail  outlets which had a net book value of $860.  The aggregate  proceeds
from these transactions were $15,139,  resulting in a gain of $8,568 on a net of
tax basis.

The results of  operations  for these  properties  for the three and nine months
ended  September  30,  2004 and 2003  have  been  reclassified  to  discontinued
operations, on a net of tax basis, in accordance with SFAS No. 144. In addition,
the  assets  and  liabilities   associated  with  these   properties  have  been
reclassified to  discontinued  operations in the  Consolidated  Balance Sheet at
December 31, 2003.  These amounts  primarily  consist of real  property,  net of
accumulated  depreciation,  rents  receivable,  prepaid or accrued charges,  and
mortgage obligations, if any.


                                       9




Summarized  financial  information  for  properties  sold and  accounted  for as
discontinued operations is as follows:


                                                   THREE MONTHS ENDED        NINE MONTHS ENDED
                                                      SEPTEMBER 30,            SEPTEMBER 30,
                                                --------------------      --------------------
                                                  2004         2003         2004          2003
                                                -------      -------      -------      -------

Rental revenues from real estate operations     $   148      $   492      $   747      $ 2,055
Mortgage interest expense                            --          (23)         (19)         (84)
Depreciation expense                                 --          (73)         (46)        (225)
Other operating expenses                            (55)        (205)        (507)        (621)
                                                -------      -------      -------      -------

Income from operations                          $    93      $   191      $   175      $ 1,125
                                                =======      =======      =======      =======

PROPERTIES HELD FOR SALE:

As of September 30, 2004, in accordance with the provisions of SFAS No. 144, the
Company  considered a total of three commercial  properties from its real estate
and  investment  management  segment  to  be  held  for  sale  and  reported  as
discontinued operations.

In accordance with SFAS No. 144, the results of operations of these  properties,
plus those properties  disposed of during 2004 and 2003, have been  reclassified
to  discontinued  operations,  on a  net  of  tax  basis,  in  the  Consolidated
Statements of Income for the three and nine months ended  September 30, 2004 and
2003. In addition,  the assets and liabilities associated with these properties,
primarily consisting of real property,  net of accumulated  depreciation,  rents
receivable,  prepaid or accrued charges and mortgage  obligations,  if any, have
been reclassified to discontinued  operations in the Consolidated Balance Sheets
at September 30, 2004 and December 31, 2003.

During  the  quarter  ended  June  30,  2004,  two of the  Company's  properties
previously   classified  as  held  for  sale  were  reclassified  to  continuing
operations  after  the  Company  was  able to  negotiate  favorable  leases.  In
accordance  with SFAS 144,  prior  periods have been  restated to include  these
properties in continuing operations.

Summarized financial  information for properties held for sale and accounted for
as discontinued operations, is as follows:

                                          THREE MONTHS ENDED   NINE MONTHS ENDED
                                             SEPTEMBER 30,       SEPTEMBER 30,
                                          ------------------   -----------------
                                           2004      2003      2004         2003
                                           ----      ----      ----         ----

Rental revenues from real estate         $  18      $  44      $ 105      $ 126
   operations
Mortgage interest                           --         --         --         --
Depreciation expense                       (10)       (10)       (30)       (30)
Other operating expenses                   (15)        (4)       (21)        (5)
                                         -----      -----      -----      -----

(Loss) income from operations            $  (7)     $  30      $  54      $  91
                                         =====      =====      =====      =====

9.  INVESTMENTS IN JOINT VENTURES

Investments in joint ventures consist of:

                                                 SEPTEMBER 30,      DECEMBER 31,
                                                    2004               2003
                                                ------------      --------------
          Investment in hotel ventures (a)      $     11,627      $       11,843
          Lease financing (b)                          7,714               7,976
                                                ------------      --------------
                                                $     19,341      $       19,819
                                                ============      ==============

                                       10


(a) In December  2002,  the Company  purchased a 50% interest in a joint venture
(the  "Hotel  Venture")  for  $23,128  together  with  Prime  Hospitality  Corp.
("Prime"), a publicly-traded  company for which the Company's Board Chairman was
an  executive  officer and  director  and another  Director of the Company was a
director  (See Note 16).  The Hotel  Venture  owns and  operates  a hotel in New
Jersey.  In March 2003,  the  Company and Prime each sold a 10%  interest in the
Hotel Venture to an unrelated third party, at cost.

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

In January  2003,  the Company  purchased a 50% interest in a joint venture (the
"Quebec  Venture") for $6,114  together with Prime.  The Quebec Venture owns and
operates a hotel in Quebec,  Canada.  In March 2003,  the Company and Prime each
sold a 10% interest in the Quebec Venture to an unrelated  third party, at cost.
In July 2003, the Quebec Venture entered into an $8,200 (Canadian) mortgage loan
with a Canadian bank,  secured by the underlying hotel. The proceeds of the loan
were  distributed to the partners of the Quebec Venture based on their ownership
interest, thereby reducing their respective investment.

The equity  method of  accounting  is used for  investments  in 20% to 50% owned
joint  ventures in which the  Company  has the  ability to exercise  significant
influence,  but not control. Under the operating agreements of the Hotel Venture
and Quebec  Venture,  all significant  operating and capital  decisions are made
jointly and operating profits are allocated based on ownership interests.  These
investments were initially  recorded at cost and are  subsequently  adjusted for
equity in earnings  and cash  contributions  and  distributions.  The  Company's
equity in (losses)  earnings of these hotel  ventures  was ($226) and ($216) for
the three and nine  months  ended  September  30, 2004 and $433 and $720 for the
three and nine months ended September 30, 2003, respectively.

Summarized financial  information of the Hotel Venture and Quebec Venture are as
follows:

                                                       SEPTEMBER 30,   DECEMBER 31,
BALANCE SHEETS:                                           2004             2003
---------------                                        ------------    -----------

  Current assets                                         $ 3,337         $ 3,728
                                                         =======         =======
  Property, plant and equipment, net                     $59,681         $61,008
                                                         =======         =======
  Other non-current assets                               $   206         $   304
                                                         =======         =======
  Current liabilities                                    $ 2,768         $ 3,267
                                                         =======         =======
  Long-term liabilities                                  $29,334         $29,971
                                                         =======         =======
  Equity                                                 $31,122         $31,802
                                                         =======         =======


                                THREE MONTHS ENDED         NINE MONTHS ENDED
                                   SEPTEMBER 30,             SEPTEMBER 30,
                             ----------------------      ----------------------
OPERATING RESULTS:              2004          2003         2004           2003
------------------           --------      --------      --------      --------


  Revenues                   $  6,264      $  7,062      $ 18,182      $ 15,931
  Expenses                     (6,827)       (5,979)      (18,721)      (14,227)
                             --------      --------      --------      --------
  Operating (loss) income    $   (563)     $  1,083      $   (539)     $  1,704
                             ========      ========      ========      ========

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

                                       11


(b) Lease financing  consists of a 50% interest in a limited  partnership  whose
principal  assets  are two  distribution  centers  leased  to Kmart  Corporation
("Kmart"),  which are accounted for as leveraged leases.  The Company's share of
income  arising  from this  investment  was $107 and $321 for the three and nine
months ended  September 30, 2004 and $123 and $368 for the three and nine months
ended September 30, 2003, respectively,  and is included in rental income in the
Consolidated Statements of Income.

10.  DERIVATIVE FINANCIAL INSTRUMENTS

The Company recognizes all derivative financial instruments,  such as put and/or
call options, in the Consolidated  Financial Statements at fair value regardless
of the purpose or intent for holding the  instrument.  Changes in the fair value
of derivative financial instruments are either recognized periodically in income
or in  stockholders'  equity as a component of accumulated  other  comprehensive
income depending on whether the derivative  financial  instrument  qualifies for
hedge  accounting,  and if so, whether it qualifies as a fair value or cash flow
hedge. Generally, changes in the fair value of derivatives accounted for as fair
value  hedges are  recorded in income  along with the portions of the changes in
the fair 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 and 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 both  common and
preferred  equity issues,  and  participates  on a limited basis in transactions
involving derivative financial instruments,  including short stock sales and put
and/or call options. At September 30, 2004 and December 31, 2003, the fair value
of such derivatives was ($651) and ($10),  respectively,  which is recorded as a
component  of  accounts  payable  and accrued  liabilities  in the  Consolidated
Balance  Sheets.  These  instruments  do not  qualify for hedge  accounting  and
therefore  changes in the derivatives  fair value are recognized in income.  The
Company  recognized  $146 and $1,096 in net realized and  unrealized  gains from
derivative  instruments  for the nine months ended  September 30, 2004 and 2003,
respectively,  which  are  included  in other  income  and  expense,  net in the
Consolidated Statements of Income.

11.  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.  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 (See Note 9).

The  Company's  two hotel  properties,  as well as the hotels owned by the Hotel
Venture and Quebec Venture, are managed by Prime (See Note 9). Fees paid for the
management of the Company's two hotel  properties are based upon a percentage of
revenue and were  approximately  $68 and $78 for the nine months ended September
30, 2004 and 2003, respectively.  Included in marketable securities at September
30, 2004 and December 31, 2003 was $43,078 and $36,105,  respectively, of common
stock in Prime which represents approximately 7.9% of Prime's outstanding shares
at both periods.  In October 2004, the  shareholders  of Prime approved a merger
with an affiliate of The Blackstone Group whereby the affiliate  acquired all of
the  outstanding  shares of Prime in  exchange  for  $12.25  per  common  share.
Accordingly,  the Company's shares in Prime were sold,  resulting in proceeds of
approximately  $43.4 million and a gain of approximately  $19 million which will
be included in the Company's  results for the fourth quarter of 2004.  Effective
with the  merger,  the Board  Chairman  and the other  Director  resigned  their
positions with Prime (See Note 16).

12. 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.

                                       12




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

Environmental  studies at the second facility  indicate that  remediation may be
necessary. Based upon the facts presently available,  environmental experts have
advised the  Company  that under the most  probable  remediation  scenario,  the
estimated  cost to  remediate  this site is  anticipated  to  require  $2,300 in
initial costs,  including  capital  equipment  expenditures,  and $258 in annual
operating and maintenance costs over a 10 year period.  These 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 it is not currently possible to estimate the range or amount of
the ultimate liability,  the Company had approximately $11,000 recorded in other
long-term  liabilities  as of September  30, 2004 and December 31, 2003 to cover
such matters. In the opinion of management,  this amount should be sufficient to
address  these  matters  and  amounts  needed in  excess,  if any,  will be paid
gradually over a period of years.  Accordingly,  they should not have a material
adverse  effect  upon the  business,  liquidity  or  financial  position  of the
Company. However, adverse decisions or events,  particularly as to the merits of
the  Company's  factual  and legal  basis  could cause the Company to change its
estimate of liability with respect to such matters in the future.

The Company is subject to various other  litigation,  legal,  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  Consolidated   Financial  Statements,   depending  on  the
anticipated  payment  date.  At September  30, 2004 and  December 31, 2003,  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.

13.  COMPREHENSIVE INCOME

The components of comprehensive income are as follows:

                                                                         THREE MONTHS ENDED         NINE MONTHS ENDED
                                                                            SEPTEMBER 30,              SEPTEMBER 30,
                                                                      ----------------------      ----------------------
                                                                          2004         2003         2004           2003
                                                                      --------      --------      --------      --------
Net income                                                            $  8,094      $  2,960      $ 21,388      $  9,913
Other comprehensive income, net of tax:
    Change in net unrealized gain (loss) on available for sale
       securities, net of tax provision of $2,027, $2,790, $2,773
       and $2,518, respectively                                          3,766         5,181         5,153         4,677

    Reclassification adjustment for net gains realized in net
       income, net of tax provision of $2, $13, $297 and $13,
       respectively                                                         (3)          (23)         (551)          (23)
                                                                      --------      --------      --------      --------

Comprehensive income                                                  $ 11,857      $  8,118      $ 25,990      $ 14,567
                                                                      ========      ========      ========      ========

Accumulated other comprehensive  income included as a component of stockholders'
equity at September  30, 2004 and December 31, 2003  consists of net  unrealized
gains on  available-for-sale  securities of $13,473 and $8,872,  which is net of
$7,255 and $4,777 of taxes, respectively.

                                       13




14.  BUSINESS SEGMENTS

The Company operates through two business  segments:  real estate investment and
management and engineered  products.  The real estate  investment and management
segment is engaged in the  business of  investing  in and  managing  real estate
properties which are located throughout 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 which
are sold worldwide.

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


                                                THREE MONTHS ENDED          NINE MONTHS ENDED
                                                    SEPTEMBER 30,              SEPTEMBER 30,
                                              ----------------------      ----------------------
                                                 2004         2003          2004           2003
                                              --------      --------      --------      --------

Net revenues and sales:
    Real estate investment and management     $  5,673      $  5,401      $ 16,348      $ 16,726
    Engineered products                          9,285         8,599        28,753        25,081
                                              --------      --------      --------      --------
                                              $ 14,958      $ 14,000      $ 45,101      $ 41,807
                                              ========      ========      ========      ========

Operating income:
    Real estate investment and management     $  2,840      $  2,476      $  8,428      $  8,079
    Engineered products                          1,098         1,009         3,287         2,323
    General corporate expenses                    (679)         (760)       (2,093)       (2,377)
                                              --------      --------      --------      --------
                                                 3,259         2,725         9,622         8,025

Other income, net                                  408           907         3,017         3,077
                                              --------      --------      --------      --------

Income from continuing operations before
    income taxes                              $  3,667      $  3,632      $ 12,639      $ 11,102
                                              ========      ========      ========      ========

15. 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        NINE MONTHS ENDED
                                        SEPTEMBER 30,            SEPTEMBER 30,
                                  --------------------      --------------------
                                    2004         2003          2004         2003
                                  -------      -------      -------      -------
Service cost                      $   (71)     $   (66)     $  (213)     $  (199)
Interest cost                        (163)        (162)        (488)        (485)
Actual return on plan assets         (118)         157            1        1,061
Net amortization and deferral         322          (19)         550         (647)
                                  -------      -------      -------      -------
Net periodic pension expense      $   (30)     $   (90)     $  (150)     $  (270)
                                  =======      =======      =======      =======


The Company did not  contribute to the pension plan during the nine months ended
September 30, 2004 as the plan is  overfunded.  The Company does not  anticipate
contributing to the plan during the remainder of 2004.

16.  SUBSEQUENT EVENTS

In October 2004, the  shareholders  of Prime approved a merger with an affiliate
of The Blackstone  Group whereby the affiliate  acquired all of the  outstanding
shares of Prime in  exchange  for  $12.25  per common  share.  Accordingly,  the
Company's  shares in Prime were sold,  resulting  in proceeds  of  approximately
$43.4 million and a gain of approximately  $19 million which will be included in
the Company's results for the fourth quarter of 2004.

                                       14




17.  RECENT ACCOUNTING PRONOUNCEMENTS

In  December  2003,  the FASB issued SFAS  No.132  (Revised  2003),  "Employers'
Disclosures about Pensions and Other Postretirement  Benefits" ("FAS No. 132R").
This  standard  requires new annual and interim  disclosures  about the types of
plan assets, investment strategy,  measurement date, plan obligations,  and cash
flows as well as the components of the net periodic  benefit cost  recognized in
interim  periods.  The Company has adopted the disclosures  required by SFAS No.
132R, except for the disclosure of expected future benefit payments,  which must
be disclosed for fiscal years ending after June 15, 2004.

18.  USE OF ESTIMATES

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

19.  RECLASSIFICATIONS

Certain  prior year  amounts have been  reclassified  to present them on a basis
consistent with the current year presentations.


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

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

RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

Net income for the quarter ended September 30, 2004 was $8,094 or $.89 per basic
share, an increase of 173% over net income of $2,960 or $.33 per basic share for
the comparable quarter of 2003. Income from continuing  operations increased 27%
to $3,166 or $.35 per basic share for the third quarter of 2004 versus $2,492 or
$.28 per basic share for the same period of 2003.  Total  revenues  were $14,958
for the three months ended  September 30, 2004, an increase of $958 or 6.8% from
the comparable 2003 period.

Net income for the nine months ended September 30, 2004 was $21,388 or $2.35 per
basic share versus  $9,913 or $1.09 per basic share for the same period in 2003,
a 116%  increase.  Income  from  continuing  operations  during  this period was
$10,141  or $1.11  per  basic  share,  an  increase  of  $2,803  or 38% over the
comparable prior year period. Total revenues for the nine months ended September
30, 2004 were $45,101,  an increase of $3,294 or 7.9% from the  comparable  2003
period.

REAL ESTATE INVESTMENT AND MANAGEMENT

Rental revenues from real estate operations increased $272 or 5.0% to $5,673 for
the quarter ended  September 30, 2004 and decreased  $378 or 2.3% to $16,348 for
the nine month period ended  September  30, 2004  compared to the  corresponding
periods  in  2003.  The  increase  for  the  quarter  is  primarily  due  to the
recognition  of  non-recurring  transactions,  scheduled  rent  increases and an
increase in hotel operating  revenue.  For the nine month period ended September
30,  2004,  the  decrease  is  primarily  attributable  to a  decrease  in hotel
operating  revenue  and  reduced  recognition  of  non-recurring   transactions,
partially  offset by scheduled rent increases.  Rental revenues from real estate
operations does not include revenue from properties  classified as held for sale
or those sold during 2004 and 2003,  as such results have been  reclassified  as
discontinued operations in accordance with SFAS No.144.

                                       15




Mortgage  interest expense  decreased $73 or 32.0% to $155 for the quarter ended
September  30,  2004,  and  $203 or 28.2%  to $518  for the  nine  months  ended
September  30,  2004,  compared  to the  corresponding  periods  in 2003.  These
decreases are a result of  continuing  mortgage  amortization.  At September 30,
2004, the outstanding  mortgage balance on the Company's real estate  properties
was reduced to $9.1 million.

Depreciation  expense  associated with real properties held for rental decreased
$51 or 7.2% for the three months ended  September 30, 2004 and $242 or 11.6% for
the nine months ended  September  30, 2004 compared to the same periods in 2003.
These  decreases are primarily due to reduced  depreciation  expense  associated
with certain  properties  becoming  fully  depreciated  in the current and prior
year.  Depreciation  expense from property sales and properties held for sale in
2004 and 2003 has been  reclassified  as  discontinued  operations in accordance
with SFAS No.144.

Other  operating  expenses  associated  with the  management of real  properties
increased  $32 or 1.6%  for the  three  months  ended  September  30,  2004  and
decreased  $282 or 4.8% for the nine months ended June 30, 2004  compared to the
same periods in 2003. The increase for the three months ended September 30, 2004
is primarily due to increases in hotel  operating and legal  expenses  partially
offset by decreases in broker and property  maintenance  expenses.  For the nine
month  period ended  September  30, 2004,  the  decrease is  principally  due to
decreases in hotel operating and property maintenance expenses.

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          NINE MONTHS ENDED
                                             SEPTEMBER 30,               SEPTEMBER 30,
                                        ----------------------      ----------------------
                                           2004          2003          2004          2003
                                        --------      --------      --------      --------

Net sales                               $  9,285      $  8,599      $ 28,753      $ 25,081
Cost of sales                             (6,393)       (5,849)      (20,177)      (17,729)
Selling, general and administrative
   expenses                               (1,794)       (1,741)       (5,289)       (5,029)
                                        --------      --------      --------      --------
Operating income                        $  1,098      $  1,009      $  3,287      $  2,323
                                        ========      ========      ========      ========


Net sales of the  engineered  products  segment  increased  $686 or 8.0% for the
three months ended  September  30, 2004,  compared  with the same period in 2003
primarily as a result of increased demand for the Company's  transformer product
line.  On a  year-to-date  basis,  sales from this  segment rose $3.7 million or
14.6% from that of the first nine  months of 2003.  During  this  period,  sales
improved in virtually all markets aided by the general  improvement  in the U.S.
economy and an increase in capital  spending,  which had declined  over the last
several years.

Cost of sales as a percentage of sales remained  relatively  consistent for both
the three and nine month  period  ended  September  30,  2004,  compared  to the
corresponding periods in 2003; fluctuating by less then 1% in each period.

Selling,  general and administrative expenses of the engineered products segment
increased  $53 or 3.0% and  $260 or 5.2% for the  three  and nine  months  ended
September 30,  respectively,  over the comparable 2003 periods.  These increases
are primarily due to increased freight costs as well as from higher  commissions
and  related  costs  which  also  fluctuate  with  the  change  in  sales.  Cost
containment efforts in administrative spending helped offset these increases.

GENERAL AND ADMINISTRATIVE EXPENSES

General  and  administrative  expenses  not  associated  with the  manufacturing
operations for the three and nine months ended  September 30, 2004 decreased $81
or 10.7% and $284 or 11.9%, respectively, compared to such expenses incurred for
the  comparable  2003  periods.  These  decreases  are  primarily  due to  lower
compensation  costs,  pension  related  expenses and  professional  fees and are
offset by higher insurance costs.

                                       16




OTHER INCOME AND EXPENSE, NET

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

                                                                 THREE MONTHS ENDED        NINE MONTHS ENDED
                                                                    SEPTEMBER 30,            SEPTEMBER 30,
                                                               --------------------      --------------------
                                                                  2004        2003         2004         2003
                                                               -------      -------      -------      -------

Net gain on sale of available-for sale
  securities                                                   $     5      $    36      $   850      $    36
Net realized and unrealized gain on
  derivative instruments                                           153          114          146        1,096
Net realized gain on trading securities                             --           --           --           57
Gain on sale of other assets                                        --           --          363           --
Equity in (losses) earnings of hotel
  ventures                                                        (226)         433         (216)         720
Net gain on sale of real estate assets                               1           --            2          152
Casualty insurance settlement                                       --           --          831           --
Other, net                                                          94          (11)         105          (15)
                                                               -------      -------      -------      -------
                                                               $    27      $   572      $ 2,081      $ 2,046
                                                               =======      =======      =======      =======

INCOME TAXES

The effective tax rate from continuing operations has been reduced for the three
and nine months ended September 30, 2004 from that of the comparable  periods in
2003 as a result of tax  benefits  from the  donation of certain  properties  to
qualified  organizations  which are being  recognized  ratably  over the current
year.

DISCONTINUED OPERATIONS

Operating  income from  properties  sold or held for sale and  accounted  for as
discontinued operations was $51 and $137 on a net of tax basis for the three and
nine months ended September 30, 2004, respectively, versus $132 and $730 for the
comparable  2003 periods.  Prior year amounts have been  reclassified to reflect
results of operations of real properties held for sale as of September 30, 2004,
or disposed of during 2004 and 2003, as  discontinued  operations.  Net gains on
the disposal of real estate assets accounted for as discontinued operations were
$4,877 and $11,110 for the three and nine months  ended  September  30, 2004 and
$336 and $1,845 for the three and nine months ended September 30, 2003, on a net
of tax basis.

LIQUIDITY AND CAPITAL RESOURCES

The Company experienced a net cash inflow from operations of $7,383 for the nine
months  ended  September  30,  2004  versus  $8,900  for the nine  months  ended
September  30,  2003.  The $1,517  decrease  in  operating  cash flow  primarily
resulted  from  changes in working  capital,  primarily  income  taxes  payable,
partially  offset by an increase in income from  operations  and lower  proceeds
from the sale of trading securities.

Net cash provided by investing  activities  increased $8,309 for the nine months
ended  September 30, 2004  compared with the same period in 2003.  This increase
primarily  results from an additional  $16,332 in proceeds from the sale of real
estate  assets  and  from  the  timing  of the  purchase  or sale of  marketable
securities  and other  assets  offset by a decrease  in  distributions  from the
Company's investments in joint ventures.

Net cash used in financing  activities was $2.1 million and $11.9 million during
the nine months ended September 30, 2004 and 2003,  respectively.  The reduction
in cash used for  financing  activities  primarily  results  from the payment of
dividends of $9.1 million and the purchase and retirement of $1.2 million of the
Company's  common stock during the nine months ended  September  30, 2003.  Such
transactions did not occur in 2004.

At September 30, 2004,  the Company's  cash and  marketable  securities  totaled
$146.6  million and  working  capital  was $127.3  million  compared to cash and
marketable  securities of $108.8 million and working capital of $96.1 million at

                                       17




December 31, 2003.  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  along with the $80.0 million of
availability on the revolving credit facility, discussed below, puts the Company
in an opportune  position to fund  acquisitions  and grow its portfolio,  if and
when attractive long-term opportunities become available.

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  and  borrowings  under the Revolver (as  hereinafter  defined).  The
primary source of capital to fund  additional  real estate  acquisitions  and to
make  additional  high-yield  mortgage  loans  will  come from  existing  funds,
borrowings  under the  Revolver,  the sale,  financing  and  refinancing  of the
Company's  properties  and from third party  mortgages and purchase  money notes
obtained in connection with specific acquisitions.

In addition to the  acquisition  of properties for  consideration  consisting of
cash and mortgage financing proceeds, the Company may acquire real properties in
exchange for the issuance of the Company's  equity  securities.  The Company may
also finance  acquisitions of other companies in the future with borrowings from
institutional  lenders and/or the public or private  offerings of 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 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.  Although interest
rates have begun to rise over the past couple of months, given the level of cash
and other interest  bearing  investments  held by the Company and the decline in
U.S.  interest  rates over the past several years,  the Company's  earnings have
been negatively impacted.

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

Under the Revolver, the Company will be provided with eligibility based upon the
sum of (i) 60.0% of the aggregate  annualized  and normalized  year-to-date  net
operating income of unencumbered eligible properties, as defined, capitalized at
10.0%,  (ii) 60.0% of the aggregate  annualized and normalized  year-to-date net
operating  income  of  unencumbered  eligible  hotel  properties,   as  defined,
capitalized at 10.5%,  not to exceed the lesser of $10.0 million or 10% of total
eligibility,  (iii)  the  lesser  of $20.0  million  or  50.0% of the  aggregate
annualized  and  normalized  year-to-date  net  operating  income of  encumbered
eligible properties, as defined,  capitalized at 12.0%, (iv) the sum of 75.0% of
eligible accounts receivable,  50.0% of eligible inventory,  and 50% of eligible
loans, as defined,  (v) cash and cash  equivalents in excess of working capital,
as defined, and (vi) 50% of marketable securities,  as defined. At September 30,
2004  eligibility  under the  Revolver was $80.0  million,  based upon the above
terms and there  were no  amounts  outstanding  under the  Revolver.  The credit
agreement  contains  certain  financial  and  restrictive  covenants,  including
minimum  consolidated  equity,  interest  coverage,  debt  service  coverage and
capital   expenditures  (other  than  for  real  estate),   and  limitations  on
indebtedness.  The Company was in compliance with all covenants at September 30,
2004.  The credit  agreement also contains  provisions  which allow the banks to
perfect a security  interest in certain  operating and real estate assets in the
event of a default,  as defined in the credit  agreement.  Borrowings  under the
Revolver,  at the  Company's  option,  bear interest at the bank's prime lending
rate or at the London  Interbank  Offered Rate ("LIBOR") (1.84% at September 30,
2004)  plus  2.0%  for  non-cash  collateralized  borrowings  and  1.0% for cash
collateralized borrowings.

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

                                       18




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 cost associated
therewith. See Note 12 of Notes to 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 a liability has been
incurred and such amounts are  reasonably  estimable,  the Company  provides for
amounts  that  include  judgments  and  penalties  that may be  assessed.  These
liabilities are usually included in accounts payable and accrued  liabilities or
other long-term liabilities in the Consolidated Financial Statements,  depending
on the anticipated payment date. None of these matters are expected to result in
a material adverse effect on the Company's  consolidated  financial  position or
results of operations.

RELATED PARTY TRANSACTIONS

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

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  2003 Annual Report on Form 10-K for a discussion of the
Company's critical  accounting  policies,  which include revenue recognition and
accounts   receivable,   marketable   securities,   inventories,   real  estate,
discontinued  operations,  long-lived assets and pension plans.  During the nine
months  ended  September  30,  2004,  there  were no  material  changes to these
policies.

RECENT ACCOUNTING PRONOUNCEMENTS

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

FORWARD-LOOKING STATEMENTS

Certain  statements in this Report on Form 10-Q and other statements made by the
Company  or its  representatives  that are not  strictly  historical  facts  are
"forward-looking"  statements  within  the  meaning  of the  Private  Securities
Litigation  Reform Act of 1995 that should be  considered as subject to the many
risks and  uncertainties  that exist in the  Company's  operations  and business
environment.  The forward-looking  statements are based on current  expectations
and involve a number of known and  unknown  risks and  uncertainties  that could
cause the actual  results,  performance  and/or  achievements  of the Company to
differ  materially  from  any  future  results,   performance  or  achievements,
expressed or implied, by the forward-looking  statements.  Readers are cautioned
not to place undue  reliance on these  forward-looking  statements,  and that in
light of the significant  uncertainties inherent in forward-looking  statements,
the inclusion of such statements  should not be regarded as a representation  by
the Company or any other person that the objectives or plans of the Company will
be achieved. The Company also assumes no obligation to publicly update or revise
its  forward-looking  statements or to advise of changes in the  assumptions and
factors on which they are based.  See the  Company's  2003 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.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

See Note 10 of Notes to  Consolidated  Financial  Statements for a discussion of
derivative  financial activity since December 31, 2003. 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, 2003, which is incorporated herein by reference.

                                       19





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-14.  Based
upon that evaluation,  the Chief Executive  Officer and Chief Financial  Officer
concluded that the Company's disclosure controls and procedures are effective in
timely alerting them to material  information relating to the Company (including
its consolidated subsidiaries) required to be included in the Company's periodic
reports.  There  have been no  significant  changes  in the  Company's  internal
controls 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 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Reports on Form 8-K

    On August 23, 2004, the Company filed a report on Form 8-K under Items 1 and
    9 announcing  that,  on August 18, 2004,  the Company  entered into a Voting
    Agreement with BREP IV Hotels Holding L.L.C., an affiliate of The Blackstone
    Group,  and A. F.  Petrocelli,  the Company's  Chairman and Chief  Executive
    Officer, regarding the Company's holdings in Prime Hospitality Corp.

(b) Exhibits:

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



                                   SIGNATURES

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

                                     UNITED CAPITAL CORP.


Dated:  November 8, 2004             By: /s/ Anthony J. Miceli
                                        ----------------------------
                                        Anthony J. Miceli
                                        Vice President, Chief Financial Officer
                                        and Secretary of the Company

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