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                March 31, 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 5,202,447 shares outstanding
                               as of May 8, 1998.

                                  Page 1 of 18

<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES


                                      INDEX

                          PART I FINANCIAL INFORMATION

                                                                            PAGE




ITEM 1.     FINANCIAL STATEMENTS

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

            Consolidated Statements of  Income for
            the Three Months Ended March 31, 1998 and 1997                4 - 5

            Consolidated Statements of Cash Flows for
            the Three Months Ended March 31, 1998 and 1997                6 - 7

            Notes to Consolidated Financial Statements                   8 - 12

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS               12 - 17

                            PART II OTHER INFORMATION


ITEM 1.     LEGAL PROCEEDINGS                                           17 - 18

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K                                 18

SIGNATURES                                                                   18


                                  Page 2 of 18
<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES

        CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1998 (UNAUDITED) AND
                               DECEMBER 31, 1997
                                 (In Thousands)
<TABLE>
<CAPTION>
                           ASSETS                                                                        1998                 1997 
                           ------                                                                        ----                 ---- 
<S>                                                                                                    <C>                  <C>
CURRENT ASSETS:
     Cash and cash equivalents                                                                         $ 12,598             $  5,250
     Marketable securities                                                                                  350                  355
     Notes and accounts receivable, net                                                                  10,612               11,319
     Inventories                                                                                          3,289                3,693
     Prepaid expenses and other current assets                                                              426                  292
     Deferred income taxes                                                                                1,220                1,219

     Net current assets of discontinued operations                                                            0                4,492
                                                                                                       --------             --------

              Total current assets                                                                       28,495               26,620
                                                                                                       --------             --------



PROPERTY, PLANT AND EQUIPMENT, net                                                                        4,077                4,299



REAL PROPERTY HELD FOR RENTAL, net                                                                       59,508               58,578


NONCURRENT NOTES RECEIVABLE                                                                               7,337                7,356


OTHER ASSETS                                                                                             11,267               11,185



DEFERRED INCOME TAXES                                                                                     2,980                2,966


NET NONCURRENT ASSETS OF DISCONTINUED OPERATIONS
                                                                                                              0                2,349
                                                                                                       --------             --------

                Total assets                                                                           $113,664             $113,353
                                                                                                       ========             ========



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

CURRENT LIABILITIES:
      Current maturities of long-term debt                                                             $  5,237             $  5,232
      Current portion of borrowings under credit facilities                                               1,400                6,000
      Accounts payable and accrued liabilities                                                           11,048               14,129
      Income taxes payable                                                                               10,011                5,872
                                                                                                       --------             --------

                   Total current liabilities                                                             27,696               31,233
                                                                                                       --------             --------


LONG-TERM LIABILITIES:
      Borrowings under credit facilities                                                                  4,900                5,250
      Long-term debt                                                                                     25,298               26,560
      Other long-term liabilities                                                                        12,769               12,830
                                                                                                       --------             --------

                   Total liabilities                                                                     70,663               75,873
                                                                                                       --------             --------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
      Common stock                                                                                          521                  528
      Additional paid-in capital                                                                          5,087                6,819
      Retained earnings                                                                                  37,260               29,997
      Net unrealized gain on marketable securities, net of  tax                                             133                  136
                                                                                                       --------             --------


                   Total stockholders' equity                                                            43,001               37,480
                                                                                                       --------             --------


                   Total liabilities and stockholders' equity                                          $113,664             $113,353
                                                                                                       ========             ========
</TABLE>

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

                                  Page 3 of 18

<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
               FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
                                   (UNAUDITED)
                      (In Thousands, Except Per Share Data)


<TABLE>
<CAPTION>
                                                                                                            Three Months Ended
                                                                                                            ------------------

                                                                                                      1998                    1997
                                                                                                      ----                    ----
<S>                                                                                                <C>                     <C>     
REVENUES:
      Net sales                                                                                    $  8,306                $  9,574
      Rental revenues from real estate operations                                                     6,242                   5,626
                                                                                                   --------                --------


      Total revenues                                                                                 14,548                  15,200
                                                                                                   --------                --------


COSTS AND EXPENSES:
      Costs of sales                                                                                  5,884                   6,970
      Real estate operations -
          Mortgage interest expense                                                                     693                     811
          Depreciation expense                                                                        1,399                   1,491
          Other operating expenses                                                                      711                   1,586
      General and administrative expenses                                                             1,123                   1,702
      Selling expenses                                                                                  937                   1,080
                                                                                                   --------                --------


Total costs and expenses                                                                             10,747                  13,640
                                                                                                   --------                --------


Operating income                                                                                      3,801                   1,560
                                                                                                   --------                --------


OTHER INCOME:
      Interest income                                                                                   395                     644
      Interest expense                                                                                 (223)                   (378)
      Other income and expense, net                                                                     177                   2,523
                                                                                                   --------                --------


Total other income                                                                                      349                   2,789
                                                                                                   --------                --------


Income from continuing operations before income taxes                                                 4,150                   4,349


Provision for income taxes                                                                            1,736                   1,963
                                                                                                   --------                --------


Income from continuing operations                                                                     2,414                   2,386
                                                                                                   --------                --------
</TABLE>

                                  Page 4 of 18

<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
         FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (Continued)
                                   (UNAUDITED)
                      (In Thousands, Except Per Share Data)

<TABLE>
<CAPTION>
                                                                                                           Three Months Ended
                                                                                                           ------------------

                                                                                                         1998                  1997
                                                                                                         ----                  ----
<S>                                                                                                  <C>                   <C>      
DISCONTINUED OPERATIONS:
       Operating income, net of tax provision of ($191)                                              $       0             $     249
       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                   249
                                                                                                     ---------             ---------


Net Income                                                                                           $   7,263             $   2,635
                                                                                                     =========             =========


BASIC EARNINGS PER COMMON SHARE:
       Income from continuing operations                                                             $     .46             $     .45
       Discontinued operations                                                                             .92                   .05
                                                                                                     ---------             ---------
       Net income per common share                                                                   $    1.38             $     .50
                                                                                                     =========             =========


DILUTED EARNINGS PER COMMON SHARE:
       Income from continuing operations                                                             $     .45             $     .45
       Discontinued operations                                                                             .90                   .05
                                                                                                     ---------             ---------
       Net income per common share-assuming dilution                                                 $    1.35             $     .50
                                                                                                     =========             =========
</TABLE>

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

                                  Page 5 of 18
<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
                                   (UNAUDITED)
                                 (In Thousands)
<TABLE>
<CAPTION>
                                                                                                           1998               1997
                                                                                                           ----               ----
<S>                                                                                                     <C>                 <C>    
Cash Flows From Operating Activities:
      Net income                                                                                        $  7,263            $ 2,635
                                                                                                        --------            -------
      Adjustments to reconcile net income to net cash
            provided by (used in) operating activities:
      Gain on sale of discontinued operations                                                             (4,849)                 0
      Purchase of  trading securities                                                                     (5,891)                 0
      Proceeds from sale of trading securities                                                             5,966                  0
      Depreciation and amortization                                                                        1,604              1,699
      Loss from equity investments                                                                           126                 61
      Net realized gains on trading securities                                                               (75)                 0
      Changes in assets and liabilities (A)                                                               (4,217)             3,079
                                                                                                        --------            -------


            Total adjustments                                                                             (7,336)             4,839
                                                                                                        --------            -------

                 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                         (73)             7,474
                                                                                                        --------            -------

Cash Flows from Investing Activities:
            Proceeds from sale of discontinued operations                                                 16,000                  0
            Acquisition of property, plant and equipment                                                    (401)              (524)
            Investment in and advances to affiliates                                                        (231)            (5,407)
            Investing activities of discontinued operations                                                    0               (115)
                                                                                                        --------            -------
                 NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                                      15,368             (6,046)
                                                                                                        --------            -------

Cash Flows from Financing Activities:
            Principal payments on mortgage commitments, notes and loans                                   (1,257)            (1,792)
            Net borrowings under credit facilities                                                        (4,950)             1,300
            Purchase and retirement of common shares                                                      (1,740)              (657)
            Financing activities of discontinued operations                                                    0               (139)
                                                                                                        --------            -------

                 NET CASH USED IN FINANCING ACTIVITIES                                                    (7,947)            (1,288)
                                                                                                        --------            -------

Net increase in cash and cash equivalents                                                                  7,348                140

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

CASH AND CASH EQUIVALENTS, AT END OF PERIOD                                                             $ 12,598            $ 2,719
                                                                                                        ========            =======
</TABLE>

                                  Page 6 of 18
<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
         FOR THE THREE MONTHS ENDED MARCH 31, 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                                                                               $   908            $ 1,406
                  Taxes                                                                                      828                 97
                                                                                                         =======            =======


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


                  (A)  Changes in assets and liabilities for the three
                       months ended March 31, 1998 and 1997, net of
                       effects from business disposals, are as follows:


Decrease (increase) in notes and accounts receivable, net                                                $   707            ($  476)
Decrease in inventories                                                                                      404                433
Decrease (increase) in prepaid expenses
     and other current assets                                                                               (134)               111
Increase in deferred income taxes                                                                            (13)              (752)
Decrease (increase) in real property held for rental, net                                                 (1,911)             3,212
Decrease in noncurrent notes receivable                                                                       19                 21
Decrease (increase) in other assets                                                                           23               (138)
Decrease in accounts payable and
     accrued liabilities                                                                                  (3,690)            (1,145)
Increase in income taxes payable                                                                             439              1,269
Decrease in other long-term liabilities                                                                      (61)               (28)
Discontinued operations - noncash charges and working
     capital changes                                                                                           0                572
                                                                                                         -------            -------

            Total                                                                                        ($4,217)           $ 3,079
                                                                                                         =======            =======
</TABLE>
         THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE
                      AN INTEGRAL PART OF THESE STATEMENTS

                                  Page 7 of 18
<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                 (In Thousands, Except Share And Per Share Data)

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,  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.

                                  Page 8 of 18

<PAGE>
INVENTORIES
-----------

The components of inventory are as follows:

                                           March 31, 1998   December 31, 1997
                                           --------------   -----------------

Raw materials                                  $1,348             $1,959
Work in process                                   346                265
Finished goods                                  1,595              1,469
                                               ------             ------
                                               $3,289             $3,693
                                               ======             ======

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,  including  the cost of
capital  equipment,  and $86 in annual  operating and  maintenance  costs over a
15-year period.

         Environmental  studies at the second facility indicate that remediation
may be  necessary.  Based  upon the  facts  presently  available,  environmental
experts have advised the  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,  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.



                                  Page 9 of 18
<PAGE>
         At March 31, 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 March 31, 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 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 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.


                                 Page 10 of 18
<PAGE>
The following table sets forth the computation of  basic and diluted earnings 
per share-
<TABLE>
<CAPTION>
                                                                                                      Three Months Ended March 31,
                                                                                                      ----------------------------
                                                                                                       1998                     1997
                                                                                                     ------                   ------
<S>                                                                                                  <C>                      <C>   
Numerator-
     Income from continuing operations                                                               $2,414                   $2,386
                                                                                                     ------                   ------
Denominator-
     Denominator for basic earnings per
          share -weighted-average share                                                               5,250                    5,299
Effect of dilutive securities-
     Employee stock options                                                                             139                       17
                                                                                                     ------                   ------
     Denominator for diluted earnings per
          share-adjusted weighted-average
          shares and assumed conversions
                                                                                                      5,389                    5,316
                                                                                                     ------                   ------

Basic earnings per share                                                                             $  .46                   $  .45
                                                                                                     ======                   ======

Diluted earnings per share                                                                           $  .45                   $  .45
                                                                                                     ======                   ======
</TABLE>

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.


                                 Page 11 of 18

<PAGE>
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
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
------------------------------------------

         Revenues  for the three  month  period  ended March 31, 1998 were $14.5
million,  a $652,000 or 4% decrease from comparable  1997 revenues.  Income from
continuing  operations  during  this  period was $2.4  million or $.46 per share
versus $2.4 million or $.45 per share during the  comparable  period in 1997. On
January 2, 1998,  the Registrant  completed the sale of its antenna  business 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 period was $7.3  million or $1.38 per share
as compared to net income of $2.6  million or $.50 per share for the same period
in 1997.

REAL ESTATE OPERATIONS
----------------------

         Rental revenues from real estate  operations  increased by $616,000 for
the three months ended March 31, 1998  compared to the same period in 1997.  The
increase is  primarily  attributable  to  revenues  associated  with  properties
acquired in 1997.

         Mortgage  interest  expense  decreased  $118,000  or 15% for the  three
months ended March 31, 1998, versus such expense of the corresponding  period in
1997.  This  decrease  is  due  to  continuing   mortgage   amortization   which
approximated  $5 million  during the last twelve  months,  including  repayments
associated with properties sold.

         Depreciation   expense  associated  with  rental  properties  decreased
$92,000 for the three  months  ended  March 31,  1998  versus the  corresponding
period in 1997. This decrease is primarily due to reduced  depreciation  expense
associated  with  properties  sold in 1997,  partially  offset  by  depreciation
expense on acquisitions.



                                 Page 12 of 18
<PAGE>
         Operating  expenses  associated  with the management of real properties
decreased  $875,000 for the quarter ended March 31, 1998 as compared to the same
period in 1997  principally  due to a one time  adjustment  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:

                                                              Three Months
(In Thousands)                                               Ended March 31,
                                                         -----------------------
                                                           1998             1997
                                                         ------           ------

Net Sales                                                $8,306           $9,574
                                                         ======           ======

Cost of Sales                                            $5,884           $6,970
                                                         ======           ======

Selling, General and
 Administrative Expenses                                 $1,622           $1,798
                                                         ======           ======

Income from Operations                                   $  800           $  806
                                                         ======           ======


         Net sales of the engineered  products segment decreased $1.3 million or
13% for the three  month  period  ended  March 31,  1998 as compared to the same
period in 1997.  The  decrease is  primarily  attributable  to  continued  price
competition and declining worldwide automotive sales for knitted wire products.

         Cost of sales as a percentage of net sales  decreased by  approximately
2% in  the  three  month  period  ended  March  31,  1998,  as  compared  to the
corresponding period in 1997. This decrease is principally due to an emphasis on
cost containment, productivity improvements and product mix.

         Selling, general and administrative expenses of the engineered products
segment decreased $176,000 or 10% during the quarter ended March 31, 1998 versus
the comparable 1997 period.  This decrease is due to reduced  selling  expenses,
primarily salary and salary related expenses.


                                 Page 13 of 18
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSES
-----------------------------------

         General and  administrative  ("G&A")  expenses not associated  with the
manufacturing  operations decreased by $546,000 for the three month period ended
March 31, 1998, versus the same period in 1997. These reductions are principally
due to a nonrecurring  charge  recorded in the 1997 period as well as a one time
expense  reduction in 1998. Absent these two items,  general and  administrative
expenses not associated with  manufacturing  operations  approximated prior year
amounts.

OTHER INCOME AND EXPENSE
------------------------

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

                                                                Three Months 
(In  Thousands)                                               Ended March 31,
                                                              ---------------
                                                            1998           1997
                                                            ----           ----


Gain on sale of real estate assets                       $   221        $ 2,584

Loss from equity investments                                (126)           (61)

Gain on sale of marketable securities                         75              0

Other                                                          7              0
                                                         -------        -------

                                                         $   177        $ 2,523
                                                         =======        =======


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 March 31, 1998, the Registrant had positive  working  capital of
approximately $800,000 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 in the quarter ended March 31, 1998 for general corporate
purposes  and to pay down debt of  approximately  $6 million,  to  purchase  and
retire common shares of approximately  $1.7 million and for acquisitions of real
property held for rental of approximately  $1.9 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
obligation will be satisfied as they come due.


                                 Page 14 of 18
<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 March 31, 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). At
March 31, 1998, the Registrant was in compliance with all covenants.  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 the
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 March 31, 1998, $6.3 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 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 March 31,  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


                                 Page 15 of 18
<PAGE>
insurance  recoveries.  The remaining  balance of $2.9 million at March 31, 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.

         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 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 $652,000 or 4% for the first
three  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 three months
of 1998 was approximately  $2.4 million or $.46 per share versus $2.4 million or
$.45 per share during the same period in 1997.

         The  results of the  Registrant's  real  estate  operations  reflect an
increase in revenues for the first three  months of 1998,  primarily as a result
of revenues associated with properties acquired in 1997. The real estate segment
was also  favorably  impacted by a 15%  reduction in mortgage  interest  expense
resulting   from  the  repayment  of   approximately   $5  million  in  mortgage
indebtedness during the last twelve months.  Mortgage amortization will continue
to have  favorable  impact on this  segment  and will  reduce  current  mortgage
indebtedness to virtually zero in less than eight years.


                                 Page 16 of 18
<PAGE>
         The Registrant's  engineered  products segment posted a 13% decrease in
revenues  during the first three months of 1998 versus  comparable 1997 results.
With continued decreases in worldwide  automobile sales,  management is 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   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,  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 


                                 Page 17 of 18
<PAGE>

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.  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.  The  Registrant  filed a report on Form 8-K with
          the Securities and Exchange  Commission on January 8, 1998 in response
          to Item 7. Financial  Statements,  Proforma Financial  Information and
          Exhibits.

          The  Registrant  filed a report on Form 8-K/A with the  Securities and
          Exchange Commission on March 16, 1998 in response to Item 7. Financial
          Statements, Proforma Financial Information and Exhibits.



                                   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:  May 11, 1998          By: /s/ Anthony J. Miceli
                                  ---------------------
                                  Anthony J. Miceli
                                  Vice President, Chief Financial Officer
                                  and Secretary of the Registrant