SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

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

For the quarterly period ending                 June 30, 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 5,203,447 shares outstanding
                              as of July 29, 1998.

                                  Page 1 of 21
<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES

                                      INDEX

                          PART I FINANCIAL INFORMATION

                                                                            PAGE
                                                                            ----

ITEM 1.   FINANCIAL STATEMENTS

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

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

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

          Consolidated Statements of Cash Flows for
          the Six  Months Ended June 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                    14-19

                            PART II OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS                                                   19

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

ITEM 5.   OTHER INFORMATION                                                   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 JUNE 30, 1998 AND DECEMBER 31, 1997
                           (In Thousands) (UNAUDITED)
<TABLE>
<CAPTION>
                  ASSETS                                         1998           1997
                  ------                                         ----           ----
<S>                                                             <C>            <C>
CURRENT ASSETS:
   Cash and cash equivalents                                    $ 14,455       $  5,250
   Marketable securities                                             338            355
   Notes and accounts receivable, net                              8,426         11,319
   Inventories                                                     3,531          3,693
   Prepaid expenses and other current assets                         323            292
   Deferred income taxes                                           1,225          1,219
   Net current assets of discontinued operations                       0          4,492
                                                                 -------        -------
         Total current assets                                     28,298         26,620
                                                                 -------        -------

PROPERTY, PLANT & EQUIPMENT, net                                   4,028          4,299

REAL PROPERTY HELD FOR RENTAL, net                                61,476         58,578

NONCURRENT NOTES RECEIVABLE                                        7,427          7,356

OTHER ASSETS                                                      11,525         11,185

DEFERRED INCOME TAXES                                              2,620          2,966

NET NONCURRENT ASSETS OF
  DISCONTINUED OPERATIONS                                              0          2,349
                                                                --------       --------
           Total assets                                         $115,374       $113,353
                                                                ========       ========
</TABLE>
<TABLE>
<CAPTION>

LIABILITIES AND STOCKHOLDERS' EQUITY                              1998           1997
------------------------------------                              ----           ----

<S>                                                             <C>            <C> 
CURRENT LIABILITIES:
   Current maturities of long-term debt                         $  4,675       $  5,232
   Current portion of  borrowings under credit facilities          1,400          6,000
   Accounts payable and accrued liabilities                       11,451         14,129
   Income taxes payable                                           10,178          5,872
                                                                --------        -------
          Total current liabilities                               27,704         31,233
                                                                --------        -------

LONG-TERM LIABILITIES:
   Borrowings under credit facilities                              4,550          5,250
   Long-term debt                                                 24,172         26,560
   Other long-term liabilities                                    12,764         12,830
                                                                --------        -------
          Total liabilities                                       69,190         75,873
                                                                --------        -------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Common stock                                                       520            528
  Additional paid-in capital                                       4,856          6,819
  Retained earnings                                               40,683         29,997
  Net unrealized gain on marketable securities, net of  tax          125            136
                                                                --------        -------
          Total stockholders' equity                              46,184         37,480
                                                                --------        -------

          Total liabilities and stockholders' equity            $115,374       $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 JUNE 30, 1998 AND 1997
                                   (UNAUDITED)
                      (In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>

                                                              1998                       1997
                                                              ----                       ----
<S>                                                          <C>                        <C>   
REVENUES:
     Net sales                                               $8,634                     $9,630
     Rental revenues from real estate operations              6,362                      6,462
                                                             ------                     ------

     Total Revenues                                          14,996                     16,092
                                                             ------                     ------

COSTS AND EXPENSES:
     Cost of  sales                                           5,997                      6,929
     Real estate operations -
        Mortgage interest expense                               661                        778
        Depreciation expense                                  1,396                      1,457
        Other operating expenses                              1,667                      1,624
     General and administrative expenses                      2,052                      1,414
     Selling expenses                                           961                      1,072
                                                             ------                     ------

Total costs and expenses                                     12,734                     13,274
                                                             ------                     ------

Operating income                                              2,262                      2,818
                                                             ------                     ------

OTHER INCOME:
     Interest income                                            352                        837
     Interest expense                                          (206)                      (436)
     Other income and expense, net                            3,607                        122
                                                             ------                     ------

Total other income                                            3,753                        523
                                                             ------                     ------

Income from continuing operations before income taxes         6,015                      3,341

Provision for income taxes                                    2,592                      1,455
                                                             ------                     ------

Income from continuing operations                             3,423                      1,886
                                                             ------                     ------
</TABLE>


                                  Page 4 of 21
<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
          FOR THE THREE MONTHS ENDED JUNE 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 $121           $0                $104
                                                          ------              ------
Income from discontinued operations, net of tax                0                 104
                                                          ------              ------

Net Income                                                $3,423              $1,990
                                                          ======              ======

BASIC EARNINGS PER COMMON SHARE:
     Income from continuing operations                      $.66               $ .36
     Discontinued operations                                 .00                 .02
                                                          ------              ------
     Net income per common share                            $.66               $ .38
                                                          ======              ======

DILUTED EARNINGS PER COMMON SHARE:
     Income from continuing operations                      $.64               $ .35
     Discontinued operations                                 .00                 .02
                                                          ------              ------
     Net income per common share-assuming dilution          $.64               $ .37
                                                          ======              ======
</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 SIX MONTHS ENDED JUNE 30, 1998 AND 1997
                                   (UNAUDITED)
                      (In Thousands, Except Per Share Data)

<TABLE>
<CAPTION>

                                                            1998                1997
                                                            ----                ----
<S>                                                       <C>                 <C>    
REVENUES:
     Net sales                                            $16,940             $19,204
     Rental revenues from real estate operations           12,604              12,088
                                                          -------             -------

     Total Revenues                                        29,544              31,292
                                                          -------             -------
COSTS AND EXPENSES:
     Cost of  sales                                        11,881              13,899
     Real estate operations -
        Mortgage interest expense                           1,354               1,589
        Depreciation expense                                2,795               2,948
        Other operating expenses                            2,378               3,210
     General and administrative expenses                    3,175               3,116
     Selling expenses                                       1,898               2,152
                                                          -------             -------

Total costs and expenses                                   23,481              26,914
                                                          -------             -------

Operating income                                            6,063               4,378
                                                          -------             -------

OTHER INCOME:
     Interest income                                          747               1,481
     Interest expense                                        (429)               (814)
     Other income and expense, net                          3,784               2,645
                                                          -------             -------

Total other income                                          4,102               3,312
                                                          -------             -------
Income from continuing operations before income taxes      10,165               7,690

Provision for income taxes                                  4,328               3,418
                                                          -------             -------

Income from continuing operations                           5,837               4,272
                                                          -------             -------
</TABLE>


                                  Page 6 of 21

<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
           FOR THE SIX MONTHS ENDED JUNE 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  $312                                       $0                   $353
     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                    353
                                                                                      -------                 ------

Net Income                                                                            $10,686                 $4,625
                                                                                      =======                 ======


BASIC EARNINGS PER COMMON SHARE:
     Income from continuing operations                                                  $1.12                  $ .81
     Discontinued operations                                                              .92                    .07
                                                                                      -------                 ------
     Net income per common share                                                        $2.04                  $ .88
                                                                                      =======                 ======


DILUTED EARNINGS PER COMMON SHARE:
     Income from continuing operations                                                  $1.09                  $ .80
     Discontinued operations                                                              .91                    .07
                                                                                      -------                 ------
     Net income per common share-assuming dilution                                      $2.00                  $ .87
                                                                                      =======                 ======
</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 SIX MONTHS ENDED JUNE 30, 1998 AND 1997
                                   (UNAUDITED)
                                 (In Thousands)
<TABLE>
<CAPTION>

                                                                                                               1998        1997
                                                                                                            ---------    ---------
<S>                                                                                                          <C>         <C>     
Cash Flows From Operating Activities:
    Net income                                                                                               $ 10,686    $  4,625
                                                                                                             --------    --------
    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                                                                               3,237       3,348
    Loss from equity investments                                                                                  176         212
    Net realized gains on trading securities                                                                      (75)          0
    Changes in assets and liabilities, net of effects from business disposals (A)                              (4,880)      7,503
                                                                                                             --------    --------

        Total adjustments                                                                                      (6,316)     11,063
                                                                                                             --------    --------

           NET CASH PROVIDED BY OPERATING ACTIVITIES                                                            4,370      15,688
                                                                                                             --------    --------

Cash Flows from Investing Activities:
        Proceeds from sale of discontinued operations                                                          16,000           0
        Acquisition of property, plant and equipment                                                             (589)       (545)
        Investment in and advances to affiliates                                                                 (359)     (5,578)
        Investing activities of discontinued operations                                                             0        (218)
                                                                                                             --------    --------

           NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                                                 15,052      (6,341)
                                                                                                             --------    --------

Cash Flows from Financing Activities:
        Principal payments on mortgage commitments, notes and loans                                            (2,945)     (3,301)
        Net borrowings under credit facilities                                                                 (5,300)     (1,650)
        Purchase and retirement of common shares                                                               (1,990)       (657)
        Proceeds from exercise of stock options                                                                    18          58
        Financing activities of discontinued operations                                                             0      (1,385)
                                                                                                             --------    --------

           NET CASH USED IN FINANCING ACTIVITIES                                                              (10,217)     (6,935)
                                                                                                             --------    --------

Net increase in cash and cash equivalents                                                                       9,205       2,412

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

CASH AND CASH EQUIVALENTS, AT END OF PERIOD                                                                  $ 14,455    $  4,991
                                                                                                             ========    =========
</TABLE>


                                  Page 8 of 21
<PAGE>
                     UNITED CAPITAL CORP. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
          FOR THE SIX MONTHS ENDED JUNE 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                                                                                    $1,746          $2,525
           Taxes                                                                                        3,534           1,258
                                                                                                       ======          ======
</TABLE>

Supplemental Schedule of Noncash Investing
   and Financing Activities:
           See Notes to Consolidated Financial Statements

(A) Changes in assets and liabilities for the six months ended June 30, 1998 and
    1997, net of effects from business disposals, are as follows:
<TABLE>
<CAPTION>

<S>                                                                                                   <C>              <C>   
Decrease in notes and accounts receivable, net                                                         $2,892          $  419
Decrease in inventories                                                                                   163             751
Decrease (increase) in prepaid expenses and other current assets                                          (31)              1
Decrease (increase) in deferred income taxes                                                              346            (367)
Decrease (increase) in real property held for rental, net                                              (5,275)          3,085
Decrease (increase) in noncurrent notes receivable                                                        (70)             70
Increase in other assets                                                                                 (157)           (139)
Increase (decrease) in accounts payable and accrued liabilities                                        (3,288)          1,563
Increase in income taxes payable                                                                          606           1,756
Decrease in other long-term liabilities                                                                   (66)           (187)
Discontinued operations - noncash charges and working capital changes                                       0             551
                                                                                                      -------          ------

           Total                                                                                      ($4,880)         $7,503
                                                                                                      =======          ======
</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)                             June 30, 1998      December 31, 1997
                                           -------------      -----------------

Raw materials                                 $1,479             $1,959
Work in process                                  326                265
Finished goods                                 1,726              1,469
                                              ------              -----
                                              $3,531             $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 June 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 June 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 or


                                 Page 11 of 21

<PAGE>
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  discussion of
Rosatelli vs. United Capital Corp.  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               Six Months
                                                                       Ended June 30,             Ended June 30,
                                                                       --------------             --------------
(In thousands, except per share data)                                1998          1997         1998          1997
                                                                     ----          ----         ----          ----

Numerator-
<S>                                                                <C>           <C>          <C>           <C>   
   Income from continuing operations                               $3,423        $1,886       $5,837        $4,272
                                                                   ------        ------       ------        ------
Denominator-
   Denominator for basic earnings per
           share -weighted-average shares outstanding               5,204         5,283        5,227         5,291
Effect of dilutive securities-
   Employee stock options                                             116            51          128            37
                                                                    -----        ------       ------        ------
   Denominator for diluted earnings per
           share-adjusted weighted-average shares and assumed
           conversions                                              5,320         5,334        5,355         5,328
                                                                    -----        ------       ------        ------

Basic earnings per share                                             $.66          $.36        $1.12          $.81
                                                                     ====          ====        =====          ====

Diluted earnings per share                                           $.64          $.35        $1.09          $.80
                                                                     ====          ====        =====          ====
</TABLE>


                                  Page 12 of 21

<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS

            In June 1997,  the FASB issued  Statement  of  Financial  Accounting
Standards No. 130,  "Reporting  Comprehensive  Income"  ("SFAS No. 130"),  which
establishes standards for reporting comprehensive income and its components. The
provisions of SFAS No. 130 are not material to the Registrant and accordingly, a
statement  of  comprehensive  income has not been  included in the  consolidated
financial statements.

            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.  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  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


                                 Page 13 of 21
<PAGE>

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
SIX MONTHS ENDED JUNE 30, 1998 AND 1997

            Revenues  for the three month  period ended June 30, 1998 were $15.0
million versus $16.1 million during the comparable  period in 1997.  Income from
continuing  operations  for the second  quarter of 1998 was $3.4 million or $.66
per share  versus  $1.9  million or $.36 per share  during the  comparable  1997
period.

            Revenues  for the six month  period  ended June 30,  1998 were $29.5
million resulting in income from continuing  operations of $5.8 million or $1.12
per share versus revenues of $31.3 million and income from continuing operations
of $4.3 million or $.81 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
$16 million in cash, resulting in a pretax gain from discontinued  operations of
approximately  $8.6 million or $.92 per share on an after tax basis.  Net income
for the six month period was $10.7 million or $2.04 per share as compared to net
income of $4.6 million or $.88 per share for the same period in 1997.

REAL ESTATE OPERATIONS

            Rental revenue from real estate operations decreased $100,000 or 2%,
for the three month period ended June 30, 1998 as compared to the same period in
1997.  This decrease is primarily  attributable  to a  nonrecurring  retroactive
adjustment  recorded  in the  second  quarter  of 1997 for  percentage  rents on
certain properties. Rental revenues for the six month period ended June 30, 1998
were $12.6  million,  an increase of $516,000 or 4% versus such  revenues of the
comparable  1997  period.  This  increase  is due to  revenues  associated  with
properties acquired in the current and prior year.

            Mortgage  interest  expense  decreased  $117,000  during the current
quarter and $235,000  for the six month  period  ended June 30,  1998,  or a 15%
reduction  from  such  expense  of the  corresponding  periods  in  1997.  These
decreases result from continuing  mortgage  amortization which approximated $5.0
million  during  the  last  12  months,  including  repayments  associated  with
properties sold during the period.

            Depreciation  expense  associated with rental  properties  decreased
$61,000 or 4% during the three month  period ended June 30, 1998 and $153,000 or
5%, during the first six months of 1998



                                 Page 14 of 21

<PAGE>

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  increased  $43,000 or 3% during the current quarter as compared with
the prior year quarter  principally  due to the timing of expenses.  For the six
months ended June 30, 1998 operating expenses  associated with the management of
real estate properties decreased $832,000 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.

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

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

<S>                                                               <C>             <C>                      <C>            <C>    
Net Sales                                                         $8,634          $9,630                   $16,940        $19,204
                                                                  ======          ======                   =======        =======

Cost of  Sales                                                    $5,997          $6,929                   $11,881        $13,899
                                                                  ======          ======                   =======        =======

Selling, General and Administrative Expenses                      $1,701          $1,778                  $  3,323       $  3,576
                                                                  ======          ======                  ========       ========

Income from Operations                                            $  936         $   923                  $  1,736       $  1,729
                                                                  ======         =======                  ========       ========
</TABLE>

            Net sales of the engineered  products segment decreased  $996,000 or
10% for the  current  quarter and $2.3  million or 12% for the six month  period
ended June 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, both of which were exacerbated by the General Motors
strike.  However, the General Motors strike did not have a significant impact on
the results of operations for the six months ended June 30, 1998.

            Cost  of  sales  as  a   percentage   of  net  sales   decreased  by
approximately  2% for the three and six month periods ended June 30, 1998 versus
the  corresponding  periods in 1997.  These  decreases  were due to a  continued
emphasis on cost reductions, productivity improvements and product mix.

            Selling,  general  and  administrative  expenses  of the  engineered
products segment decreased $77,000 or 4% and $253,000 or 7%, respectively during
the quarter and six month  periods  ended June 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.


                                 Page 15 of 21

<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSES

            General and  administrative  ("G&A")  expenses not  associated  with
manufacturing  operations increased by $603,000 for the three month period ended
June 30, 1998 and $58,000 for the six month period  ended June 30, 1998,  versus
the same periods in 1997. The increase in the current quarter is principally due
to nonrecurring charges. Absent these items, general and administrative expenses
not associated with manufacturing operations approximated prior year amounts for
the three months ended June 30, 1998. For the six 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 $97,000 due to lower salary and salary related expenses.

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                 Six Months
                                                                   Ended June 30,              Ended June 30,
                                                                   --------------              --------------
           (In thousands)                                         1998       1997           1998            1997
                                                                  ----       ----           ----            ----

<S>                                                             <C>          <C>          <C>             <C>   
           Gain on sale of real estate assets                   $3,653       $237         $3,874          $2,821

           Loss from equity investments                            (50)      (151)          (176)           (212)

           Gain on sale of marketable securities
                                                                     0          0             75               0

           Other                                                     4         36             11              36
                                                               -------       ----         ------          ------

                                                                $3,607       $122         $3,784          $2,645
                                                                ======       ====         ======          ======
</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 June 30, 1998, the Registrant  had positive  working  capital of
approximately $594,000 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   $8.2   million,   to  purchase  and  retire   common  shares  of
approximately $2.0 million and for acquisitions of real property held for rental
of  approximately  $7.0  million.  It is  anticipated  that the  remaining  cash
balances will be reinvested  into the  Registrant's  businesses  during 1998 and
that 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.


                                 Page 16 of 21

<PAGE>
            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 receivable and 50% of eligible inventory,
as defined.  Eligibility is also limited by amounts  outstanding  under the Term
Loan.  At June 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 June 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  under  the  terms of 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 June 30, 1998, $5,950,000 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 agreed to exchange 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 June 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 June 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


                                 Page 17 of 21


<PAGE>
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.

            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  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 $1.8 million or 6% for
the first  half 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 six months of
1998 was  approximately  $5.8  million or $1.12 per share versus $4.3 million or
$.81 per share during the same period in 1997.

            The results of the  Registrant's  real estate  operations  reflect a
$1.7  million or 40%  increase in  operating  profit for the first six months of
1998,  due  to  real  estate  tax  abatements  and  increased  operating  profit
associated  with 1997  acquisitions.  The real estate segment was also favorably
impacted by a 15%  reduction in mortgage  interest  expense  resulting  from the
repayment of approximately $5.0 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.

            The Registrant's  engineered  products segment posted a 12% decrease
in revenues during the six month period ended June 30, 1998, from the comparable
1997 period while operating profits remained virtually  unchanged.  The decrease
in net sales was  primarily due to continuing  price  competition  and declining
worldwide automotive sales, both of which were exacerbated by the General Motors
strike.  However, the General Motors strike did not have a significant impact on
the results of operations for the six months ended June 30, 1998.  Management is
aggressively pursuing new sales opportunities.  Operating profit as a percentage
of sales has  continued to increase  principally  due to an ongoing  emphasis on
cost reductions and productivity improvements.  In addition, the results of this


                                 Page 18 of 21

<PAGE>

segments' transformer operations 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 Year 2000 issue
is not  anticipated  to have a material  impact on the  Registrant's  results of
operations, financial position or its cash flows.

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.

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 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


                                 Page 19 of 21


<PAGE>
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On June 9, 1998, the Registrant held its Annual Meeting of Stockholders, whereby
the  stockholders  elected  Directors  and  approved  proposals  to (i)  provide
performance  criteria for the payment of bonuses to the Chief Executive  Officer
for the Registrant,  (ii) amend the Registrants'  stock option plans to increase
the number of shares available for issuance under the plans to 1,325,000 shares,
and (iii)  ratify  the  appointment  of  Arthur  Andersen  LLP as the  Company's
independent  auditors for the year ending  December  31, 1998.  The vote on such
matters was as follows:

1.     ELECTION OF DIRECTORS:

                                          For                           Withheld
                                          ---                           --------
        A. F. Petrocelli               4,154,007                         261,886
        Howard M. Lorber               4,164,007                         261,786
        Anthony J. Miceli              4,164,007                         261,786
        Arnold S. Penner               4,154,007                         261,886


2.     CRITERIA FOR CHIEF EXECUTIVE OFFICER BONUS COMPENSATION  PERFORMANCE:  To
       provide  criteria  for the  compensation  payable to the Chief  Executive
       Officer.

            For                      Against                           Abstain
            ---                      -------                           -------
          4,271,246                  150,436                            4,111

3.     APPROVAL OF AMENDMENTS TO 1988 JOINT  INCENTIVE AND  NON-QUALIFIED  STOCK
       OPTION PLAN AND THE 1988 INCENTIVE STOCK OPTION PLAN: To adopt amendments
       to the Joint Plan and the Incentive Plan to increase the number of shares
       reserved for issuance  pursuant to the exercise of options  granted under
       such plan.

            For                      Against                           Abstain
            ---                      -------                           -------
          3,596,122                  423,308                            1,966



                                 Page 20 of 21

<PAGE>
4.     RATIFICATION  OF  APPOINTMENT OF AUDITORS:  To ratify the  appointment of
       Arthur Andersen LLP as the independent auditors of the Registrant for the
       year ending December 31, 1998.

            For                      Against                           Abstain
            ---                      -------                           -------
          4,421,129                   2,292                             2,372

ITEM 5.  OTHER INFORMATION

            Pursuant  to  recent   amendments  to  the  proxy  rules  under  the
Securities Exchange Act of 1934, as amended,  the Registrant's  stockholders are
notified  that the deadline for providing  the  Registrant  timely notice of any
stockholder  proposal  to be  submitted  outside of the Rule 14a-8  process  for
consideration  at the  Registrant's  1999 Annual  Meeting of  Stockholders  (the
"Annual  Meeting")  will be March 29,  1999.  As to all such  matters  which the
Company  does not have  notice  on or prior  to March  29,  1999,  discretionary
authority shall be granted to the designated  persons in the Registrant's  proxy
statement for the Annual Meeting.

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:  August 5, 1998              By: /s/  Anthony J. Miceli
                                        ----------------------
                                        Anthony J. Miceli
                                        Vice President, Chief Financial Officer
                                        and Secretary of the Registrant



                                 Page 21 of 21