SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-Q

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

For the quarterly period ending                 September 30, 1998
                               -------------------------------------------------

                                       or

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

         For the transition period from __________________ to __________________

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

                              United Capital Corp.
--------------------------------------------------------------------------------
             (Exact name of 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, New York               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 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 the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

           Common stock, $.10 par value 5,170,147 shares outstanding
                            as of October 30, 1998.

<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES


                                      INDEX

                          PART I FINANCIAL INFORMATION
                                                                            PAGE

ITEM 1.      FINANCIAL STATEMENTS

             Consolidated Balance Sheets as
             of  September 30, 1998 and December 31, 1997                    3

             Consolidated Statements of  Income for
             the Three Months Ended September 30, 1998 and
             1997                                                        4 - 5

             Consolidated Statements of Income for the Nine
             Months Ended September 30, 1998 and 1997                    6 - 7

             Consolidated Statements of Cash Flows for
             the Nine Months Ended September 30, 1998 and
             1997                                                        8 - 9

             Notes to Consolidated Financial Statements                 10 - 14

ITEM 2.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF
             FINANCIAL CONDITION AND RESULTS OF OPERATIONS              14 - 20

                            PART II OTHER INFORMATION

ITEM 1.      LEGAL PROCEEDINGS                                               21

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K                                21

SIGNATURES                                                                   21


                                  Page 2 of 21
<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES
              CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1998
                        (UNAUDITED) AND DECEMBER 31, 1997
                                 (In Thousands)
<TABLE>
<CAPTION>
                ASSETS                                               1998              1997
                ------                                               ----              ----

<S>                                                              <C>                <C>
CURRENT ASSETS:
  Cash and cash equivalents                                      $ 17,714           $  5,250
  Marketable securities                                             4,192                355
  Notes and accounts receivable, net                                8,582             11,319
  Inventories                                                       3,979              3,693
  Prepaid expenses and other current assets                           280                292
  Deferred income taxes                                             1,403              1,219
  Net current assets of discontinued operations                         0              4,492
                                                                 --------             ------
      Total current assets                                         36,150             26,620
                                                                 --------             ------

PROPERTY, PLANT & EQUIPMENT, net                                    4,118              4,299

REAL PROPERTY HELD FOR RENTAL, net                                 60,246             58,578

NONCURRENT NOTES RECEIVABLE                                         7,412              7,356

OTHER ASSETS                                                       10,993             11,185

DEFERRED INCOME TAXES                                               2,814              2,966

NET NONCURRENT ASSETS OF
   DISCONTINUED OPERATIONS                                              0              2,349
                                                                 --------           --------
                Total assets                                     $121,733           $113,353
                                                                 ========           ========
</TABLE>

<TABLE>
<CAPTION>
  LIABILITIES AND STOCKHOLDERS' EQUITY                               1998              1997
  ------------------------------------                               ----              ----

<S>                                                               <C>               <C>
  CURRENT LIABILITIES:
    Current maturities of long-term debt                          $  5,684          $  5,232
    Current portion of  borrowings under credit facilities           1,400             6,000
    Accounts payable and accrued liabilities                        12,549            14,129
    Income taxes payable                                            10,197             5,872
                                                                  --------          --------

        Total current liabilities                                   29,830            31,233
                                                                  --------          --------
  LONG-TERM LIABILITIES:
    Borrowings under credit facilities                               4,200             5,250
    Long-term debt                                                  27,277            26,560
    Other long-term liabilities                                     12,771            12,830
                                                                  --------          --------
                  Total liabilities                                 74,078            75,873
                                                                  --------          --------
  COMMITMENTS AND CONTINGENCIES

  STOCKHOLDERS' EQUITY:

    Common stock                                                       520               528
    Additional paid-in capital                                       4,856             6,819
    Retained earnings                                               42,644            29,997
    Net unrealized (loss)gain on marketable                           (365)              136
     securities, net of tax                                      ---------          --------
             Total stockholders' equity                             47,655            37,480
                                                                 ---------          --------
             Total liabilities and stockholders' equity           $121,733          $113,353
                                                                 =========          ========
</TABLE>
        THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE
                    AN INTEGRAL PART OF THESE BALANCE SHEETS.

                                  Page 3 of 21
<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)
                      (In Thousands, Except Per Share Data)

<TABLE>
<CAPTION>
                                                         1998         1997
                                                         ----         ----
<S>                                                    <C>           <C>   
REVENUES:
  Net sales                                            $7,487        $8,488
  Rental revenues from real estate operations           6,396         5,891
                                                       ------        ------
  Total revenues                                       13,883        14,379
                                                       ------        ------

COSTS AND EXPENSES:
  Cost of  sales                                        5,084         6,020
  Real estate operations -
    Mortgage interest expense                             664           747
    Depreciation expense                                1,348         1,455
    Other operating expenses                            1,574         1,887
  General and administrative expenses                   1,218         1,396
  Selling expenses                                        926         1,018
                                                       ------        ------

Total costs and expenses                               10,814        12,523
                                                       ------        ------

Operating income                                        3,069         1,856
                                                       ------        ------

OTHER INCOME:
  Interest income                                         390           400
  Interest expense                                       (202)         (288)
  Other income and expense, net                           212           121
                                                       ------        ------

Total other income                                        400           233
                                                       ------        ------

Income from continuing operations
   before income taxes                                  3,469         2,089

Provision for income taxes                              1,508         1,018
                                                       ------       -------

Income from continuing operations                       1,961         1,071
                                                       ------       -------
</TABLE>

                                  Page 4 of 21
<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
       FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (Continued)
                                   (UNAUDITED)
                      (In Thousands, Except Per Share Data)

<TABLE>
<CAPTION>

                                                       1998          1997
                                                       ----          ----
<S>                                                  <C>           <C>
DISCONTINUED OPERATIONS:
  Operating income, net of tax provision of  $278        $0          $448
                                                     ------         -----
Income from discontinued operations, net of tax           0           448
                                                     ------         -----


Net income                                           $1,961        $1,519
                                                     ======        ======

BASIC EARNINGS PER COMMON SHARE:
  Income from continuing operations                    $.38          $.20
  Discontinued operations                               .00           .09
                                                    -------        ------
  Net income per common share                          $.38          $.29
                                                    =======        ======

DILUTED EARNINGS PER COMMON SHARE:
  Income from continuing operations                    $.37          $.20
  Discontinued operations                               .00           .08
                                                    -------        ------
  Net income per common share-assuming dilution        $.37          $.28
                                                    =======        ======
</TABLE>

          THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    ARE AN INTEGRAL PART OF THESE STATEMENTS

                                  Page 5 of 21
<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)
                      (In Thousands, Except Per Share Data)

<TABLE>
<CAPTION>

                                                      1998           1997
                                                      ----           ----
<S>                                                 <C>            <C>   
REVENUES:
  Net sales                                        $24,427        $27,692
  Rental revenues from real estate operations       19,000         17,979
                                                   -------        -------
  Total revenues                                    43,427         45,671
                                                   -------        -------

COSTS AND EXPENSES:
  Cost of  sales                                    16,965         19,919
  Real estate operations -
  Mortgage interest expense                          2,018          2,336
  Depreciation expense                               4,143          4,403
  Other operating expenses                           3,952          5,097
 General and administrative expenses                 4,393          4,512
 Selling expenses                                    2,824          3,170
                                                   -------        -------

Total costs and expenses                            34,295         39,437
                                                   -------        -------

Operating income                                     9,132          6,234
                                                   -------        -------

OTHER INCOME:
  Interest income                                    1,137          1,881
  Interest expense                                    (631)        (1,102)
  Other income and expense, net                      3,996          2,766
                                                   -------       --------

Total other income                                   4,502          3,545
                                                   -------       --------

Income from continuing operations
   before income taxes                              13,634          9,779

Provision for income taxes                           5,836          4,436
                                                  --------        -------
Income from continuing operations                    7,798          5,343
                                                  --------        -------
</TABLE>

                                  Page 6 of 21
<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
        FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (Continued)
                                   (UNAUDITED)
                      (In Thousands, Except Per Share Data)

<TABLE>
<CAPTION>
                                                            1998        1997
                                                            ----        ----
<S>                                                        <C>           <C>
DISCONTINUED OPERATIONS:
  Operating income, net of tax provision of  $590             $0        $801
  Gain on disposal of discontinued operations, net
    of tax provision of $3,700                             4,849           0
                                                         -------      ------

Income from discontinued operations, net of tax            4,849         801
                                                         -------      ------

Net income                                               $12,647      $6,144
                                                         =======      ======

BASIC EARNINGS PER COMMON SHARE:
  Income from continuing operations                        $1.49       $1.01
  Discontinued operations                                    .93         .15
                                                         -------      ------
  Net income per common share                              $2.42       $1.16
                                                         =======      ======

DILUTED EARNINGS PER COMMON SHARE:
  Income from continuing operations                        $1.46       $1.01
  Discontinued operations                                    .91         .15
                                                         -------      ------
  Net income per common share-assuming dilution            $2.37       $1.16
                                                         =======      ======
</TABLE>


          THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    ARE AN INTEGRAL PART OF THESE STATEMENTS

                                  Page 7 of 21
<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)
                                 (In Thousands)
<TABLE>
<CAPTION>

                                                                                     1998                   1997
                                                                                   ---------              --------
<S>                                                                                <C>                     <C>   
Cash Flows From Operating Activities:
  Net income                                                                       $12,647                 $6,144
                                                                                   -------                 ------
  Adjustments to reconcile net income to net cash
    provided by operating activities:
  Gain on sale of discontinued operations, net of tax                               (4,849)                     0
  Purchase of  trading securities                                                   (5,891)                     0
  Proceeds from sale of trading securities                                           5,966                      0
  Depreciation and amortization                                                      4,678                  5,012
  Loss from equity investments                                                         392                    238
  Gain on sale of trading securities                                                   (75)                     0
  Changes in assets and liabilities, net of effects from business disposals (A)     (4,399)                 8,919
                                                                                   -------                 ------

     Total adjustments                                                              (4,178)                14,169
                                                                                   -------                 ------

       NET CASH PROVIDED BY OPERATING ACTIVITIES                                     8,469                 20,313
                                                                                   -------                 ------

Cash Flows from Investing Activities:
     Proceeds from sale of discontinued operations                                  16,000                      0
     Purchase of available for sale securities                                      (4,596)                     0
     Acquisition of property, plant and equipment                                     (930)                  (451)
     Investment in and advances to affiliates                                          (26)                (5,527)
     Investing activities of discontinued operations                                     0                    (97)
                                                                                   -------                --------

        NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                         10,448                 (6,075)
                                                                                   -------                -------

Cash Flows from Financing Activities:
     Principal payments on mortgage commitments, notes and loans                    (3,969)                (5,169)
     Proceeds from mortgage commitments, notes and loans                             5,138                      0
     Net borrowings under credit facilities                                         (5,650)                (7,320)
     Purchase and retirement of common shares                                       (1,990)                  (666)
     Proceeds from exercise of stock options                                            18                     60
     Financing activities of discontinued operations                                     0                 (1,385)
                                                                                   -------                --------

        NET CASH USED IN FINANCING ACTIVITIES                                       (6,453)               (14,480)
                                                                                   -------                --------

Net increase (decrease) in cash and cash equivalents                                12,464                   (242)

CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD                                    5,250                  2,579
                                                                                   -------                -------

CASH AND CASH EQUIVALENTS, AT END OF PERIOD                                        $17,714                 $2,337
                                                                                   =======                =======
</TABLE>

                                  Page 8 of 21
<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
        FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (Continued)
                                   (UNAUDITED)
                                 (In Thousands)
<TABLE>
<CAPTION>

                                                         1998            1997
                                                      ---------      ---------
<S>                                                     <C>             <C>   
Supplemental Disclosures of Cash Flow
   Information:
     Cash Paid During the Period For:
       Interest                                         $2,641          $3,731
       Taxes                                             5,202           2,300
                                                        ======          ======

Supplemental Schedule of Noncash Investing
   and Financing Activities:
        Noncash Investing Activities:
        Capital lease obligations                           $0            $511
                                                            ==            ====
</TABLE>

(A) Changes in assets and  liabilities  for the nine months ended  September 30,
1998 and 1997, net of effects from business disposal, are as follows:

<TABLE>
<CAPTION>

<S>                                                     <C>             <C>   
Decrease in notes and accounts receivable, net          $2,736          $4,687
Decrease (increase) in inventories                        (285)            617
Decrease in prepaid expenses and other current assets       12              46
Decrease (increase) in deferred income taxes               226            (915)
Decrease (increase) in real property held for rental,
  net                                                   (5,234)          3,067
Increase in noncurrent notes receivable                    (55)         (1,510)
Increase in other assets                                  (175)            (39)
Decrease in accounts payable and accrued liabilities    (2,190)           (403)
Increase in income taxes payable                           625           3,526
Decrease in other long-term liabilities                    (59)           (272)
Discontinued operations - noncash charges and
 working capital changes                                     0             115
                                                       -------         -------

           Total                                       ($4,399)         $8,919
                                                       ========        =======
</TABLE>

       THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
                        INTEGRAL PART OF THESE STATEMENTS

                                  Page 9 of 21
<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

BASIS OF PRESENTATION

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

         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, 1997.

         All  adjustments  necessary for a fair statement of the results for the
interim periods presented have been recorded.

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

DISPOSAL OF OPERATING COMPANY

         On January 2, 1998, the  Registrant  completed the sale of the stock of
its Dorne & Margolin,  Inc.  ("D&M")  subsidiary  to AIL  Systems,  Inc. for $16
million in cash,  resulting  in a pretax gain from  discontinued  operations  of
approximately  $8.6 million for the quarter ended March 31, 1998. The net assets
and operating  results of D&M are presented as a  discontinued  operation in the
accompanying  consolidated  financial  statements for periods prior to the sale.
Net current assets of discontinued  operations  consisted primarily of inventory
and  accounts  receivable,  partially  offset by  accounts  payable  and accrued
expenses.  Net noncurrent assets of discontinued  operations consisted primarily
of machinery and  equipment.  The  Registrant  retained D&M's 90,000 square foot
manufacturing facility in Bohemia, New York, which has been reclassified to real
property held for rental in the accompanying consolidated financial statements.

INVENTORIES

The components of inventory are as follows:

(In thousands)                     September 30, 1998       December 31, 1997
                                   ------------------       -----------------

Raw materials                            $1,936                  $1,959
Work in process                             318                     265
Finished goods                            1,725                   1,469
                                         ------                  ------
                                         $3,979                  $3,693
                                         ======                  ======

                                 Page 10 of 21
<PAGE>
CONTINGENCIES

         The Registrant has undertaken the completion of  environmental  studies
and/or remedial action at Metex' two New Jersey facilities.

         The process of remediation has begun at one facility pursuant to a plan
filed with the New Jersey  Department  of  Environmental  Protection  and Energy
("NJDEPE").  Environmental experts engaged by the Registrant estimate that under
the  most  probable  remediation  scenario  the  remediation  of  this  site  is
anticipated to require initial  expenditures  of $860,000  including the cost of
capital equipment,  and $86,000 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  Registrant  that under the most  probable  remediation
scenario,  the estimated  cost to remediate  this site is anticipated to require
$2.3 million in initial costs,  including  capital equipment  expenditures,  and
$258,000 in annual  operating and maintenance  costs over a 10-year period.  The
Registrant  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 Registrant as new or
additional  information in these matters becomes  available or should the NJDEPE
or other  regulatory  agencies  require  additional or  alternative  remediation
efforts in the future.  It is not  currently  possible to estimate  the range or
amount of any such liability.

         Although the  Registrant  believes  that it is entitled to full defense
and indemnification with respect to environmental  investigation and remediation
costs under its insurance policies,  the Registrant's  insurers have denied such
coverage.  Accordingly,  the  Registrant  has  filed an action  against  certain
insurance carriers seeking defense and indemnification with respect to all prior
and future costs incurred in the  investigation  and remediation of these sites.
Upon the advice of counsel,  the  Registrant  believes that based upon a present
understanding of the facts and the present state of the law in New Jersey, it is
probable that the Registrant will prevail in the pending  litigation and thereby
access all or a very  substantial  portion of the insurance  coverage it claims;
however, the ultimate outcome of litigation cannot be predicted.

         At September 30, 1998 and December 31, 1997, a total of $2.9 million in
anticipated  insurance  recoveries is recorded in the accompanying  consolidated
financial statements and is included in other assets. Additionally,  in 1995 the
Company  received  approximately  $4.1  million  of  insurance  recoveries.  The
remaining  balance of $2.9  million at  September  30,  1998 (from a total of $7
million ) is in dispute with the  Registrant's  insurance  carriers.  Management
believes that recoveries in excess of the amounts  reflected in the accompanying
consolidated  financial  statements,  are available under the insurance policies
but  have  not been  recorded.  There  can be no  assurance,  however,  that the
Registrant  will prevail in its efforts to obtain amounts at or in excess of the
estimated recoveries.

         In the opinion of management,  these matters will be resolved favorably
and such  amounts,  if any,  not  recovered  under  the  Registrant's  insurance
policies will be paid gradually over a period of years and, accordingly,  should
not have a material  adverse  effect upon the  business,  liquidity


                                 Page 11 of 21
<PAGE>
or financial position of the Registrant.  However,  adverse decisions or events,
particularly as to the merits of the Registrant's  factual and legal basis could
cause the  Registrant  to change its estimate of liability  with respect to such
matters in the future.

         The  Registrant  is  involved  in various  other  litigation  and legal
matters which are being defended and handled in the ordinary course of business.
See Part II Other  Information - Item 1. Legal  Proceedings  for a discussion of
Rosatelli vs. United Capital Corp., et al. None of these matters are expected to
result in a  judgment  having a  material  adverse  effect  on the  Registrant's
consolidated financial position or results of operations.

EARNINGS PER SHARE

         In 1997,  the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement No. 128,  "Earnings per Share" ("SFAS No. 128"). SFAS No. 128 replaced
the  calculation of primary and fully diluted  earnings per share with basic and
diluted  earnings  per share.  Basic  earnings  per share  excludes any dilutive
effects of options,  warrants and convertible  securities.  Diluted earnings per
share  gives  effect  to  all  potentially  dilutive  common  shares  that  were
outstanding  during the period.  Earnings per share amounts have been presented,
and where appropriate, restated to conform to the SFAS No. 128 requirements.

The following table sets forth the computation of basic and diluted earnings per
share-

<TABLE>
<CAPTION>

                                                       Three Months                               Nine Months
                                                    Ended September 30,                        Ended September 30,
                                                    -------------------                        -------------------

(In thousands, except per share data)                1998          1997                  1998                       1997
                                                     ----          ----                  ----                       ----

<S>                                                 <C>           <C>                   <C>                        <C>   
Numerator-
 Income from continuing operations                  $1,961        $1,071                $7,798                     $5,343
                                                    ------        ------                ------                     ------
Denominator-
 Denominator for basic earnings per
    share -weighted-average shares outstanding       5,203         5,285                 5,219                      5,289
Effect of dilutive securities-
 Employee stock options                                103            52                   120                         15
                                                    ------        ------                ------                     ------
 Denominator for diluted earnings per
    share-adjusted weighted-average shares
    and assumed conversions                          5,306         5,337                 5,339                      5,304
                                                    ------        ------                ------                     ------

Basic earnings per share                              $.38          $.20                 $1.49                      $1.01
                                                      ====          ====                 =====                      =====

Diluted earnings per share                            $.37          $.20                 $1.46                      $1.01
                                                      ====          ====                 =====                      =====
</TABLE>

                                 Page 12 of 21
<PAGE>
COMPREHENSIVE INCOME

         In June  1997,  the  FASB  issued  Statement  of  Financial  Accounting
Standards  No. 130,  "Reporting  Comprehensive  Income,"  which is effective for
fiscal years  beginning after December 15, 1997.  Reclassification  of financial
statements  for earlier  periods is  required.  The  Registrant's  comprehensive
income   consists  of   unrealized   gains  and  losses  from   investments   in
available-for-sale securities.

<TABLE>
<CAPTION>

                                              Three Months            Nine Months
                                            Ended September 30      Ended September 30
                                            ------------------      ------------------

(In thousands)                             1998           1997      1998          1997
                                           ----           ----      ----          ----

<S>                                       <C>            <C>       <C>          <C>   
Net income                                $1,961         $1,519    $12,647      $6,144

Other comprehensive income, net of tax:
Unrealized  holding  gains  (losses),
net of tax  benefit  (provision)  of
$252,  ($18),  $258 and ($22),
respectively                                (490)            35       (501)         43
                                          ------        -------    -------      ------

                                          $1,471         $1,554    $12,146      $6,187
                                          ======         ======    =======      ======
</TABLE>

         The Registrant's portfolio of available for sale securities experienced
a significant  decline in market value at September 30, 1998,  which  management
believed was temporary.  As of October 30, 1998, the  Registrant's  portfolio of
available for sale  securities had fully  recovered from this loss and reflected
an unrealized gain of approximately $1 million.

NEW ACCOUNTING PRONOUNCEMENTS

         In June  1997,  the  FASB  issued  Statement  of  Financial  Accounting
Standards No. 131,  "Disclosures  about  Segments of an  Enterprise  and Related
Information"  ("SFAS No.  131"),  which  establishes  standards for the way that
companies  report  information  about  operating  segments  in annual  financial
statements  and  requires  that  companies  report  selected  information  about
operating  segments in interim  financial  reports,  based on the approach  that
management   utilizes  to  organize  the  segments  within  the  Registrant  for
management  reporting and decision  making.  It also  establishes  standards for
related  disclosures  about products and services,  geographic  areas, and major
customers.  SFAS No. 131 is effective for financial  statements for fiscal years
beginning  after  December 15, 1997 and is not required to be applied to interim
financial  statements  in the  initial  year of  adoption.  Financial  statement
disclosures for prior periods are required to be restated.  The Registrant is in
the process of evaluating the disclosure requirements.  The adoption of SFAS No.
131 will have no impact on the Registrant's  consolidated results of operations,
financial position or cash flows.

         In February  1998,  the FASB issued  Statement of Financial  Accounting
Standards   No.  132,   "Employer's   Disclosures   about   Pensions  and  Other
Postretirement  Benefits"  ("SFAS No. 132"),  which


                                 Page 13 of 21
<PAGE>
standardizes the disclosure  requirements for pensions and other  postretirement
benefits to provide  information  that is more comparable,  understandable,  and
concise and that would better serve users' needs.  SFAS No. 132 is effective for
fiscal years beginning after December 15, 1997. Financial statement  disclosures
for prior periods are required to be restated. The adoption of SFAS No. 132 will
have no impact on the Registrant's consolidated results of operations, financial
position or cash flows.

         In June  1998,  the  FASB  issued  Statement  of  Financial  Accounting
Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities"
("SFAS No. 133"),  which  establishes  accounting  and  reporting  standards for
derivative  instruments.  SFAS No. 133  requires  that an entity  recognize  all
derivatives  as either  assets or  liabilities  in the  statement  of  financial
position and measure those  instruments  at fair value.  The statement  requires
that changes in the derivative's fair value be recognized  currently in earnings
unless  specific  hedge  accounting  criteria are met.  Special  accounting  for
qualifying  hedges  allows a  derivative's  gains and  losses to offset  related
results on the hedged item in the income statement.  This statement is effective
for  fiscal  years   beginning  after  June  15,  1999  and  cannot  be  applied
retroactively to financial statements of prior periods. The Registrant is in the
process of evaluating  the accounting  and reporting  requirements  and believes
that SFAS No. 133 will not have a material impact on the consolidated results of
operations, financial position or cash flows.

USE OF ESTIMATES

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

RECLASSIFICATIONS

         Certain amounts have been  reclassified in the prior year  consolidated
financial  statements  to present  them on a basis  consistent  with the current
year.

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

RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
---------------------------------------------

         Revenues for the three month period ended September 30, 1998 were $13.9
million versus $14.4 million during the comparable  period in 1997.  Income from
continuing operations for the third quarter of 1998 was $2.0 million or $.38 per
share versus $1.1 million or $.20 per share during the comparable 1997 period.

         Revenues for the nine month period ended  September 30, 1998 were $43.4
million resulting in income from continuing  operations of $7.8 million or $1.49
per share versus revenues of $45.7 million and income from continuing operations
of $5.3 million or $1.01 per share during the comparable 1997 period. On January
2, 1998, the Registrant  completed the stock sale of D&M to AIL Systems Inc. for

                                 Page 14 of 21
<PAGE>

$16 million in cash, resulting in a pretax gain from discontinued  operations of
approximately  $8.6 million or $.93 per share on an after tax basis.  Net income
for the nine month period was $12.6  million or $2.42 per share in 1998 compared
to net income of $6.1 million or $1.16 per share for the same period in 1997.

REAL ESTATE OPERATIONS

         Rental revenues from real estate  operations  increased  $505,000 or 9%
and $1.0 million or 6% respectively,  for the three and nine month periods ended
September  30,  1998 as  compared  to the  comparable  periods  in  1997.  These
increases are due primarily to revenues  associated with properties  acquired in
the current and prior year.

         Mortgage  interest expense  decreased $83,000 or 11% during the current
quarter and $318,000 or 14% for the nine month period ended  September 30, 1998,
when compared to the corresponding  periods in 1997. These decreases result from
continuing mortgage amortization which approximated $4.8 million during the last
12 months,  including  repayments  associated  with  properties  sold during the
period.

         Depreciation   expense  associated  with  rental  properties  decreased
$107,000  or 7% during the three  month  period  ended  September  30,  1998 and
$260,000  or  6%,  during  the  first  nine  months  of  1998  compared  to  the
corresponding  periods of 1997.  These  decreases  are  primarily due to reduced
depreciation  expense  associated  with  properties  sold,  partially  offset by
depreciation expense on acquisitions.

         Operating  expenses  associated  with  the  management  of real  estate
properties decreased $313,000 or 17% during the current quarter as compared with
the prior year quarter  principally  due to  reductions in real estate taxes and
utility  expenses.  For the nine  months  ended  September  30,  1998  operating
expenses associated with the management of real estate properties decreased $1.1
million as  compared to the same  period in 1997  principally  due to a one time
adjustment  in the  first  quarter  of 1998  associated  with  real  estate  tax
abatements and reduced real estate taxes and utility expenses.



                                 Page 15 of 21
<PAGE>
ENGINEERED PRODUCTS

         The Registrant's engineered products segment includes Metex Corporation
and AFP  Transformers,  Inc. The operating  results of the  engineered  products
segment are as follows:
<TABLE>
<CAPTION>

                                               Three Months              Nine Months
                                            Ended September 30,       Ended September 30,
                                            -------------------       -------------------

(In thousands)                              1998           1997       1998          1997
                                            ----           ----       ----          ----

<S>                                         <C>           <C>       <C>           <C>    
Net Sales                                   $7,487        $8,488    $24,427       $27,692
                                            ======        ======    =======       =======

Cost of  Sales                              $5,084        $6,020    $16,965       $19,919
                                            ======        ======    =======       =======

Selling, General and Administrative
Expenses                                    $1,611        $1,695     $4,934        $5,271
                                            ======        ======    =======       =======

Income from Operations                        $792          $773     $2,528        $2,502
                                            ======        ======    =======       =======
</TABLE>

         Net sales of the engineered  products segment decreased $1.0 million or
12% for the current  quarter and $3.3  million or 12% for the nine month  period
ended  September  30,  1998 versus the  corresponding  prior year  periods.  The
decrease in net sales was  primarily  due to continuing  price  competition  and
declining worldwide automotive sales.

         Cost of sales as a percentage of net sales  decreased by  approximately
3% and 2% respectively, for the three and nine month periods ended September 30,
1998 versus the  corresponding  periods in 1997.  These  decreases were due to a
favorable market for stainless steel purchases, and a continued emphasis on cost
reductions, productivity improvements and product mix.

         Selling, general and administrative expenses of the engineered products
segment  decreased  $84,000 or 5% and $337,000 or 6%,  respectively,  during the
quarter and nine month periods ended September 30, 1998 versus such costs of the
comparable 1997 periods. These reductions are principally due to reduced selling
expenses, primarily salary and salary related expenses.

GENERAL AND ADMINISTRATIVE EXPENSES

         General and  administrative  expenses not associated with manufacturing
operations decreased by $185,000 and $127,000 respectively,  for the three month
and nine month  periods  ended  September  30, 1998,  versus the same periods in
1997. The decrease in the current  quarter is due to  nonrecurring  items in the
prior  and  current   year.   Absent  the   nonrecurring   items,   general  and
administrative   expenses   not   associated   with   manufacturing   operations
approximated  prior year amounts for the three months ended  September 30, 1998.
For the nine month periods,  after adjusting for nonrecurring  items in both the
1998 and 1997 periods,  general and administrative  expenses not associated with
manufacturing  operations decreased approximately $99,000 primarily due to lower
salary and salary related expenses.


                                 Page 16 of 21
<PAGE>
OTHER INCOME AND EXPENSE

         The  components  of  other  income  and  expense  in  the  accompanying
consolidated statements of income are as follows:

<TABLE>
<CAPTION>

                                           Three Months         Nine Months
                                        Ended September 30,   Ended September 30,
                                        -------------------   -------------------

(In thousands)                          1998        1997      1998          1997
                                        ----        ----      ----          ----

<S>                                      <C>        <C>      <C>          <C>   
Gain on sale of real estate assets       $546       $145     $4,420       $2,966

Loss from equity investments             (216)       (26)      (392)        (238)

Gain on sale of trading securities          0          0         75            0

Other                                    (118)         2       (107)          38
                                        -----       ----     ------       ------

                                         $212       $121     $3,996       $2,766
                                        =====       ====     ======       ======
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

         The current  liabilities of the Registrant have  historically  exceeded
its current assets principally due to the financing of the purchase of long-term
assets utilizing  short-term  borrowings and from the  classification of current
mortgage   obligations   without  the  corresponding   current  asset  for  such
properties.  At September 30, 1998, the Registrant had positive  working capital
of approximately  $6.3 million  principally due to the sale of D&M on January 2,
1998 for $16 million in cash. A portion of these  proceeds  along with  existing
cash balances were utilized for general corporate  purposes and to pay down debt
of  approximately  $9.6  million,  to  purchase  and  retire  common  shares  of
approximately $2.0 million and for acquisitions of real property held for rental
of  approximately  $7.4  million.  It is  anticipated  that the  remaining  cash
balances will be reinvested  into the  Registrant's  businesses  during 1998 and
1999; future financial  statements may reflect current  liabilities in excess of
current  assets.  Management is confident  that through cash flow generated from
operations,  together  with  borrowings  available  under the  revolving  credit
facility  discussed below and the sale of select assets, all obligations will be
satisfied as they come due.

         The Registrant's portfolio of available for sale securities experienced
a  significant  decline in market  value at September  30, 1998,  resulting in a
pretax unrealized holding loss of approximately  $550,000.  Management  believed
that this decline was  temporary  and as of October 30, 1998,  the  Registrant's
portfolio of available for sale  securities  had fully  recovered from this loss
and reflected an unrealized gain of approximately $1 million.

         The Registrant's Credit Agreement with two banks provides for both a $7
million  term loan ("Term  Loan") and a $40 million  revolving  credit  facility
("Revolver").  Under the terms of the Credit  Agreement,  the Registrant will be
provided  with  eligibility  based  upon  the  sum of (i)  50% of the  aggregate
annualized  and  normalized   year-to-date  net  operating  income  of  eligible
properties, as defined,  capitalized at 11.5% and (ii) the lesser of $12 million
or the sum of 75% of eligible accounts

                                 Page 17 of 21
<PAGE>
receivable  and 50% of  eligible  inventory,  as  defined.  Eligibility  is also
limited by  amounts  outstanding  under the Term Loan.  At  September  30,  1998
eligibility under the Revolver was $40 million,  based upon the above terms. 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).  The  Registrant  was in
compliance  with all covenants at September 30, 1998. The Credit  Agreement also
contains  provisions  which allow the lenders 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  Registrant's
option,  bear  interest at the bank's  prime  lending  rate  ("Prime") or at the
London  Interbank  Offered Rate ("LIBOR") plus 1.75% while  borrowings under the
Term Loan bear  interest at 90 day LIBOR plus 1.4%.  The Term Loan is payable in
quarterly  principal  installments  of  $350,000  with the final  payment due on
September 30, 2002.  The Revolver  expires on January 15, 2000. In January 1998,
the Registrant paid all amounts outstanding under the Revolver. At September 30,
1998, $5.6 million was outstanding on the Term Loan.

         Also,  the  Registrant  has  an   interest-rate   swap  agreement  that
effectively  converts  its floating  rate Term Loan to a fixed rate basis,  thus
reducing the impact of interest rate changes on future  expense.  Under the swap
agreement,  the Registrant  exchanged with the  counterparty (a commercial bank)
the  difference  between  the fixed and  floating  rate  interest  amounts.  The
differential to be paid or received on the interest rate swap is recognized over
the term of the agreement as an adjustment to interest  expense.  The fair value
of the swap agreement is not recognized in the financial statements.

         Management  is  confident   that  with  the  available  cash  resources
discussed  above and cash  generated  by  operations,  all  obligations  will be
satisfied as they become due.

         The Registrant has undertaken the completion of  environmental  studies
and/or  remedial  action at Metex'  two New Jersey  facilities  and has filed an
action against certain insurance carriers seeking recovery of costs incurred and
to be incurred in these  matters.  Based upon the advice of counsel,  management
believes  such  recovery is probable  and  therefore  should not have a material
effect on the liquidity or capital  resources of the  Registrant.  However,  the
ultimate  outcome of litigation  cannot be predicted.  To date  settlements have
been  reached with several  carriers in this matter.  See Notes to  consolidated
financial statements.

         At September  30, 1998 and December 31, 1997 a total of $2.9 million in
anticipated   insurance   recoveries  has  been  recorded  in  the  accompanying
consolidated financial statements and is included in other assets. Additionally,
in  1995  the  Registrant  received  approximately  $4.1  million  of  insurance
recoveries.  The remaining balance of $2.9 million at September 30, 1998 (from a
total of $7 million) is in dispute  with the  Registrant's  insurance  carriers.
Management  believes that  recoveries in excess of the amounts  reflected in the
accompanying   consolidated  financial  statements,   are  available  under  the
insurance  policies  but have  not been  recorded.  There  can be no  assurance,
however, that the Registrant will prevail in its efforts to obtain amounts at or
in excess of the estimated recoveries.

         In October 1998,  the  Registrant's  Board of Directors  authorized the
repurchase of up to $5 million of the Registrant's common stock.  Purchases will
be made from time to time in the open market at prevailing market prices and may
be made in privately negotiated transactions, subject to available resources.


                                 Page 18 of 21

<PAGE>
         The  cash  needs of the  Registrant  have  been  satisfied  from  funds
generated by current operations and additional  borrowings.  It is expected that
future   operational  cash  needs  and  the  cash  required  to  repurchase  the
Registrant's  common stock will also be satisfied  from existing cash  balances,
ongoing operations and additional borrowings on the Revolver. The primary source
of capital to fund  additional real estate  acquisitions  and to make additional
high-yield mortgage loans will come from existing funds, the sale, financing and
refinancing of the  Registrant's  properties and from the 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 Registrant may acquire
real  properties  in  exchange  for  the  issuance  of the  Registrant's  equity
securities.  The Registrant 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.

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

BUSINESS TRENDS

         Total revenues of the  Registrant  decreased $2.2 million or 5% for the
first nine  months of 1998  versus such  results of the  comparable  1997 period
principally  due to a  decline  in  revenues  from the  Registrant's  engineered
products segment. Income from continuing operations for the first nine months of
1998 was  approximately  $7.8  million or $1.49 per share versus $5.3 million or
$1.01 per share during the same period in 1997.

         The results of the Registrant's real estate  operations  reflect a $2.7
million or 45% increase in  operating  profit for the first nine months of 1998,
due to increased operating profit associated with 1997 and 1998 acquisitions and
real estate tax abatements.  The real estate segment was also favorably impacted
by a 14% reduction in mortgage  interest expense resulting from the repayment of
approximately  $4.8  million in  mortgage  indebtedness  during the last  twelve
months.  Mortgage  amortization will continue to have a favorable impact on this
segment and will reduce current mortgage indebtedness to zero in less than eight
years.

         Where  appropriate,  management may use permanent  long-term  financing
rather than its short-term  revolving credit facility to finance its real estate
acquisitions. In September 1998, the Registrant borrowed $5.1 million secured by
a mortgage on two properties  that the Registrant  purchased in May 1998.  These
properties  are leased for five years with option  periods  and the  mortgage is
self amortizing over the primary lease term,  bearing interest at 6.66%.  Future
acquisitions of real estate may also be financed with self amortizing mortgages.

         The Registrant's  engineered  products segment posted a 12% decrease in
revenues  during  the nine month  period  ended  September  30,  1998,  from the
comparable 1997 period while operating profits increased slightly.  The decrease
in net sales was  primarily due to continuing  price  competition  and


                                 Page 19 of 21
<PAGE>
declining worldwide automotive sales.  Operating profit as a percentage of sales
has continued to increase  principally  due to a favorable  market for stainless
steel  purchases,  as  well  as an  ongoing  emphasis  on  cost  reductions  and
productivity  improvements.   Management  is  aggressively  pursuing  new  sales
opportunities  including new geographical  markets for its existing products and
new applications  for its core  technologies.  In addition,  the results of this
segments'  transformer  operations continue to reflect significant  improvements
over the prior year and management is hopeful to continue this trend.

Year 2000 Conversion

         The Registrant currently believes that its essential processes, systems
and business functions will be ready for the millennium transition and is taking
the necessary steps to accomplish this objective.  The Registrant has undertaken
the  implementation  in  its  manufacturing  operations  of a  fully  integrated
Enterprise  Resource Planning (ERP) software  package.  Although the ERP package
was implemented for purposes other the remediating the Year 2000 issue,  the ERP
package is certified  as Year 2000  compliant.  As part of this  implementation,
which is on target for early 1999,  the  Registrant  also  believes  that it has
identified and addressed all its related Year 2000 hardware  issues.  The costs,
if any,  directly  associated  with Year 2000 compliance will not be material to
its  financial  conditions  or results of  operations.  Year 2000 issues are not
significant to the Registrant's real estate operations.  The Registrant believes
that the  potential  for  disruption  of its business from Year 2000 issues as a
result of significant  third parties (banks,  suppliers,  customers) is minimal.
Substantially  all of  these  third  parties  are  among  the  largest  and most
sophisticated  companies in the country and the Registrant is providing the data
necessary for these companies to evaluate their Year 2000 issues.

         The Registrant believes that it has taken reasonable steps in preparing
for the Year 2000 issue,  but cannot  ensure that all of its Year 2000 issues or
those  of  its   significant   third  parties  will  be  resolved  or  addressed
satisfactorily  before the Year 2000 commences.  Any resulting  disruption could
have an adverse impact on its business.

FORWARD-LOOKING STATEMENTS

         This Form 10-Q contains certain  forward-looking  statements within the
meaning of Section 27A of the  Securities  Act of 1933, as amended,  and Section
21E of the Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbors  created  thereby.  All  forward-looking  statements
involve risks and uncertainty,  including without  limitation,  general economic
conditions,  interest  rates,  competition,  potential  technology  changes  and
potential changes in customer  spending and purchasing  policies and procedures.
Although  the   Registrant   believes  that  the   assumptions   underlying  the
forward-looking   statements  contained  herein  are  reasonable,   any  of  the
assumptions could be inaccurate,  and therefore,  there can be no assurance that
the  forward-looking  statements  included  in this Form  10-Q will  prove to be
accurate.   In  light  of  the   significant   uncertainties   inherent  in  the
forward-looking  statements  included herein,  the inclusion of such information
should not be regarded as a representation by the Registrant or any other person
that the objectives and plans of the Registrant will be achieved.


                                 Page 20 of 21
<PAGE>



PART II OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Rosatelli vs. United Capital Corp.

         In  August  1996,  Dennis  Rosatelli,  the  Registrant's  former  Chief
Financial  Officer  commenced  an action in Superior  Court of New  Jersey,  Law
Division, Bergen County ("Superior Court"), seeking, among other things, payment
under his employment contract, and indemnification for claims against him by the
Internal  Revenue  Service and other matters in connection  with his tenure.  In
March 1997,  Mr.  Rosatelli  amended his  compliant  to include  Bank of America
Illinois,  Metex Corporation,  Kentile Inc., A.F. Petrocelli and another officer
of Kentile as additional defendants. The Registrant believes that as a result of
Mr. Rosatelli's gross negligence,  recklessness  and/or willful disregard of his
duties and responsibilities,  Mr. Rosatelli is not entitled to the recoveries he
seeks. Mr. Rosatelli's  employment was terminated by the Registrant in May, 1996
for cause.  The matter was removed to United States District Court,  District of
New Jersey in October 1996. In March 1998,  the U.S.  District  Court  dismissed
certain of Mr.  Rosatelli's claims and remanded the remainder of the action back
to the Superior  Court.  In May 1998,  Mr.  Rosatelli  amended his  complaint to
include  Kentile's  assignee  for the  benefit  of  creditors  as an  additional
defendant and to remove the officer of Kentile  previously  named as a defendant
from this action. The material allegations of the complaint are unchanged.  This
action is in the early stages of pretrial  discovery.  The Registrant intends to
vigorously  defend  this  action  and has  asserted  counterclaims  against  Mr.
Rosatelli  for,  among  other  things,  the set off of  amounts  by which he has
damaged the Registrant against his claims under his employment contract.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibit 27.  Financial Data Schedule
     (b)  Reports on Form 8-K.   None.



                                   SIGNATURES

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

                                    UNITED CAPITAL CORP.

Dated:  October 30, 1998            By: /s/Anthony J. Miceli
                                        ---------------------------------------
                                        Anthony J. Miceli
                                        Vice President, Chief Financial Officer
                                        and Secretary of the Registrant

                                 Page 21 of 21