FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D. C. 20549

[ X ]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended           December 31, 1996
                          ------------------------------------------------------
                                       or
[   ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

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
 incorporation or organization)                           Identification Number)

9 Park Place, Great Neck, New York                                  11021
-----------------------------------------         ------------------------------
(Address of principal executive offices)                          (Zip code)

Registrant's telephone number, including area code:           (516) 466-6464
                                                   -----------------------------

Securities registered pursuant to Section 12(b) of the Act:

        Title of Each Class            Name of Each Exchange on Which Registered
-------------------------------------  -----------------------------------------
Common Stock (Par Value $.10 Per Share)        American Stock Exchange

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. Yes /X/ No / /

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K /X/.

The  aggregate  market  value  of  the  shares  of  the  voting  stock  held  by
nonaffiliates  of  the  Registrant  as  of  March  21,  1997  was  approximately
$21,339,000.

The number of shares of the Registrant's $.10 par value common stock outstanding
as of March 21, 1997 was $5,279,723.

                       DOCUMENTS INCORPORATED BY REFERENCE

The  information  required  by Part III of Form  10-K  will be  incorporated  by
reference to certain  portions of a definitive proxy statement which is expected
to be filed by the  Registrant  pursuant to Regulation 14A within 120 days after
the close of its fiscal year.
<PAGE>
                                      -1-



                                     PART I

ITEM 1.     BUSINESS

GENERAL

United Capital Corp.  (the  "Registrant"),  incorporated in 1980 in the State of
Delaware, currently has three industry segments:

1.          Real Estate Investment and Management.

2.          Manufacture and Sale of Antenna Systems.

3.          Manufacture and Sale of Engineered Products.

The Registrant also invests excess  available cash in marketable  securities and
other financial instruments.

DESCRIPTION OF BUSINESS

            REAL ESTATE INVESTMENT AND MANAGEMENT

The  Registrant  is engaged in the business of  investing  in and managing  real
estate  properties  and the making of  high-yield,  short-term  loans secured by
desirable  properties.  Most real estate  properties owned by the Registrant are
leased under net leases  pursuant to which the tenants are  responsible  for all
expenses relating to the leased premises, including taxes, utilities,  insurance
and  maintenance.  The Registrant also owns properties that it manages which are
operated  by the City of New York as  day-care  centers  and  offices  and other
properties leased as department  stores,  hotels and shopping centers around the
country.  In addition,  the Registrant  owns  properties  available for sale and
lease with the assistance of a consultant or a realtor  working in the locale of
the premises.

The majority of properties are leased to single  tenants.  Approximately  97% of
the total square footage of the Registrant's properties are currently leased.

            ANTENNA SYSTEMS

The Registrant designs and manufactures antenna systems marketed internationally
under the Dorne & Margolin trade name. Its products include airborne,  naval and
ground-based  navigation,  weather tracking, air traffic control,  communication
and  satellite  communication  antennas for military,  commercial  transport and
general aviation aircraft.  These products are sold internationally to military,
commercial and general aviation original  equipment  manufacturers as well as to
the end  user as  replacement  and  spare  antenna  systems.  Additionally,  the
Registrant's  products  address  a number  of  commercial  nonaviation  markets,
including global positioning  systems (GPS) and personal  communication  systems
(PCS).

Approximately  51% and 59% of the antenna systems sold by the Registrant in 1996
and  1995,  respectively,  were  for use by the  United  States  Government  and
purchased by the United States Government or its contractors.

<PAGE>
                                      -2-


            ENGINEERED PRODUCTS

The  Registrant's  engineered  products are  manufactured  through the Technical
Products  Division of Metex  Corporation  ("Metex") and AFP  Transformers,  Inc.
("AFP Transformers"),  wholly-owned subsidiaries of the Registrant.  The knitted
wire  products and  components  manufactured  by Metex must  function in adverse
environments  and meet rigid  performance  requirements.  The principal areas in
which these products have  application are as high temperature  gaskets,  seals,
components for use in airbags,  shock and vibration  isolators,  noise reduction
elements and air, liquid and solid filtering devices.

Metex has been an original  equipment  manufacturer for the automobile  industry
since 1974 and presently  supplies many  automobile  manufacturers  with exhaust
seals and components for use in exhaust emission control devices.

The  Registrant's  transformer  products are marketed  under several  brandnames
including  Field  Transformer,  ISOREG  and  EPOXYCAST  for a  wide  variety  of
industrial  and research  applications  including  machine  power  transformers,
rectifier and inverter transformers and transformers for heating.

Sales by the Engineered Products segment to its three largest customers (each in
excess of 10% of the segment's net sales) accounted for approximately 40% of the
segment's  sales for 1996.  During  1995  sales to its three  largest  customers
accounted for approximately 35% of the segment's sales.

            SUMMARY FINANCIAL INFORMATION

The  following  table  sets  forth the  revenues,  operating  income  (loss) and
identifiable  assets of each continuing  business  segment of the Registrant for
1996, 1995 and 1994.
<TABLE>
<CAPTION>
                                               1996                  1995                 1994
                                             --------              --------              --------
                                                                (in thousands)

Real Estate Investment and Management-

<S>                                          <C>                   <C>                   <C>     
Rental revenues                              $ 23,936              $ 22,652              $ 21,988
                                             ========              ========              ========

Operating income                             $  6,342              $  5,129              $  5,009
                                             ========              ========              ========

Identifiable assets                          $ 98,044              $ 88,954              $ 92,479
                                             ========              ========              ========

Antenna Systems-

Net sales                                    $ 18,883              $ 20,307              $ 19,495
                                             ========              ========              ========

Operating loss                               ($ 2,258)             ($ 1,103)             ($ 1,527)
                                             ========              ========              ========

Identifiable assets                          $ 11,603              $ 15,291              $ 15,580
                                             ========              ========              ========

Engineered Products-

Net sales                                    $ 42,055              $ 41,687              $ 35,511
                                             ========              ========              ========

Operating income                             $  3,792              $  3,779              $  2,477
                                             ========              ========              ========

Identifiable assets                          $ 12,174              $ 12,955              $ 14,365
                                             ========              ========              ========
</TABLE>
<PAGE>
                                      -3-



            DISTRIBUTION

The Registrant's  manufactured  products are distributed by a direct sales force
and  through   distributors   to  industrial   consumers,   original   equipment
manufacturers and the United States Government.

            PRODUCT METHODS AND SOURCES OF RAW MATERIALS

The Registrant's products are manufactured at its own facilities. The Registrant
purchases  raw  materials,   including  drawn  wire,   castings  and  electronic
components from a wide range of suppliers of such materials.  Most raw materials
purchased by the Registrant are available from several suppliers. The Registrant
has not had and does not expect to have any problems fulfilling its raw material
requirements during 1997.

            PATENTS AND TRADEMARKS

The Registrant owns several patents,  patent licenses and trademarks.  While the
Registrant  considers that in the aggregate its patents and  trademarks  used in
the antenna systems and engineered  products operations are significant to those
businesses,  it does not believe that any of these patents or trademarks  are of
such importance that the loss of one or more of such patents or trademarks would
materially affect its consolidated financial condition or results of operations.

            EMPLOYEES

At March 21, 1997, the Registrant employed approximately 575 persons. Certain of
the Registrant's  employees are represented by unions.  The Registrant  believes
that its relationships with its employees are good.

            COMPETITION

The Registrant  competes with at least 25 other companies in the sale of antenna
systems; and at least 21 other companies in the sale of engineered products. The
Registrant  stresses product performance and service in connection with the sale
of antenna systems and engineered products.  The principal  competition faced by
the  Registrant  results  from  the  sales  price  of the  products  sold by its
competitors.

            BACKLOG

The dollar value of unfilled orders of the Registrant's  antenna systems segment
was approximately $13,000,000 at December 31, 1996, as compared with $12,945,000
at December 31, 1995. The Registrant  anticipates that  approximately 85% of the
1996 year-end backlog will be filled in 1997.

The dollar  value of unfilled  orders of the  Registrant's  engineered  products
segment was  approximately  $2,197,000  at December 31, 1996,  as compared  with
$2,190,000 at December 31, 1995. It is anticipated that  substantially  all such
backlog  will be filled in 1997.  The order  backlog  referred to above does not
include any order backlog with respect to sales of knitted wire mesh  components
for exhaust  emission  control devices or exhaust seals because of the manner in
which customer orders are received.

<PAGE>
                                      -4-


            ENVIRONMENTAL REGULATIONS

Federal, state and local requirements regulating the discharge of materials into
the environment or otherwise relating to the protection of the environment, have
had and will  continue to have a significant  impact upon the  operations of the
Registrant.  It is the policy of the Registrant to manage,  operate and maintain
its  facilities  in  compliance,  in  all  material  respects,  with  applicable
standards for the prevention,  control and abatement of environmental  pollution
to prevent damage to the quality of air, land and resources.

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 become 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
(see Item 3, "Legal  Proceedings").  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.

As a result  of the  foregoing,  the  Registrant  has not  recorded  a charge to
operations for the environmental  remediation,  noted above, in the Consolidated
Financial  Statements,  as anticipated  proceeds from  insurance  recoveries are
expected to offset such liabilities. The Registrant has reached settlements with
several insurance carriers in this matter.



<PAGE>
                                      -5-



At December 31, 1996 and 1995 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 $4.1
million of  insurance  recoveries.  The  remaining  balance  of $2.9  million at
December  31,  1996  (from  a  total  of $7  million)  is in  dispute  with  the
Registrant's  insurance  carriers  as more  fully  discussed  in  Item 3  "Legal
Proceedings" and Note 18 to Consolidated Financial Statements,  "Contingencies."
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.

ITEM 2.   PROPERTIES

REAL PROPERTY HELD FOR RENTAL

As of March 21, 1997 the Registrant owned 205 properties  strategically  located
throughout  the  United  States.  The  properties  are  primarily  leased  under
long-term net leases.  The Registrant's  classification and gross carrying value
of its properties at December 31, 1996 are as follows:

<TABLE>
<CAPTION>
                                                                      
                                                                       Gross Carrying                         Number of
                        Description                                        Value            Percentage        Properties
                                                                        ------------        ----------      ------------
<S>                                                                     <C>                    <C>              <C>
            Shopping centers and retail outlets                         $ 74,809,508            60.0%            32
            Commercial properties                                         30,228,786            24.2            142
            Day-care centers and offices                                   7,561,636             6.1             12
            Hotel properties                                               2,915,795             2.3              2
            Other                                                          9,252,575             7.4             19
                                                                        ------------         -------            ---

                                 Total                                  $124,768,300           100.0%           207
                                                                        ============         =======            ===
</TABLE>

            SHOPPING CENTERS AND RETAIL OUTLETS

Shopping  centers  and retail  outlets  include 23  department  stores and other
properties  which are primarily leased under net leases.  Taxes,  maintenance of
the properties and all other expenses are the responsibility of the tenants. The
leases for certain  shopping  centers and retail outlets  provide for additional
rents based on sales volume and renewal options at higher rents.  The department
stores  include 11 K-Mart  stores,  three  Macy's  stores,  an IKEA store and an
Office  Depot with a total of  approximately  1,064,000,  538,000,  160,000  and
111,000 square feet,  respectively.  The K-Mart stores are primarily  located in
the  Midwest  region of the  United  States.  The  Macy's  and IKEA  stores  are
primarily  located  in the  Pacific  Coast and  Southwest  regions of the United
States.
<PAGE>
                                      -6-


            COMMERCIAL PROPERTIES

Commercial properties consist of properties leased as 100 restaurants,  29 Midas
Muffler  Shops,   three   convenience   stores,   seven  office   buildings  and
miscellaneous other properties. Commercial properties are primarily leased under
net leases which in certain cases, have renewal options at higher rents. Certain
of these leases also provide for additional rents based on sales volume. The 100
restaurants,  located throughout the United States, include properties leased as
Boston  Market,  Roy Rogers,  Pizza Hut,  Hardee's,  Wendy's and Kentucky  Fried
Chicken.

            DAY-CARE CENTERS AND OFFICES

The 12 day-care  centers and offices are located in New York City and are leased
to the City of New York. The Registrant  has been  negotiating  with the City of
New York to extend,  on a long-term basis, many of these leases which expired in
years  through  1993.  To date, 11 new leases have been signed and the remaining
lease has been extended. Although  there can be no assurance that the Registrant
will in fact enter into the remaining lease,  the Registrant  believes that with
continued  negotiations  with  the  City  of New  York,  such  lease  should  be
forthcoming.

            HOTEL PROPERTIES

The  Registrant's  two hotel  properties  are located in Georgia and  California
which are managed through a local on-site management company that is responsible
for all day-to-day operations of the hotels.

The following  summarizes  real  property held for rental by geographic  area at
December 31, 1996:

                                                                    Gross
                                   Number of                       Carrying
                                   Properties                       Value
                                  -----------                   ------------

            Northeast                   92                       $32,140,018
            Southeast                   42                        24,446,946
            Midwest                     44                        27,624,471
            Southwest                    9                         9,810,790
            Pacific Coast                8                        25,142,886
            Pacific Northwest            6                         2,098,197
            Rocky Mountain               6                         3,504,992
                                  -----------                   ------------

                                       207                      $124,768,300
                                  ===========                   ============

            MANUFACTURING FACILITIES

The Registrant  maintains  facilities located at 2950 Veterans Memorial Highway,
Bohemia,  New York, on a ten-acre site  approximately  two miles from  MacArthur
Airport  on Long  Island  for use in its  antenna  systems  business.  This site
contains four one-story buildings  aggregating  approximately 90,000 square feet
of floor space,  an outdoor  antenna  testing area,  several  pattern ranges and
airframe  mock-ups.  Approximately  30,000  square feet was added during 1994 to
accommodate the consolidation of the D&M/Chu operations into this facility.  The
Registrant owns the site together with the structures.

<PAGE>
                                      -7-


The  Registrant's  engineered  products are manufactured at 970 New Durham Road,
Edison, New Jersey, in a one-story building having  approximately  53,000 square
feet of floor  space  and  also in a second  facility  at 206  Talmadge  Road in
Edison,  New Jersey which has  approximately  54,500  square feet of space.  The
Registrant owns these facilities together with the sites.

ITEM 3.                 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,  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. 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 has been  removed to the
United  States  District  Court,  District of New Jersey.  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.

METEX CORPORATION VS. AFFILIATED FM INSURANCE CO., ET AL.

On June 27,  1990,  Metex filed an action in the  Superior  Court of New Jersey,
Chancery Division,  Middlesex County,  against several insurance  companies that
provided Metex with liability  insurance  between 1967 and 1986. To date,  Metex
has reached settlements with several carriers. The action seeks both declaratory
relief  and  monetary  damages in  connection  with  reimbursement  of the costs
incurred  and to be  incurred  by Metex in  connection  with the  completion  of
environmental studies and remedial action required at its two Edison, New Jersey
facilities.  The declaratory  relief sought is a determination that the terms of
the liability  insurance policies at issue obligate the defendants to defend and
indemnify  Metex  with  respect  to all  costs  and  expenses  related  to these
environmental  matters.  Metex also  seeks  monetary  damages in an  unspecified
amount for breach of the defendants' duty to indemnify Metex.

In June 1995 the court dismissed,  without  prejudice,  the New Durham site from
this action. The court ruled that without a governmental  directive to remediate
the  site no  third-party  liability  exists  and  accordingly  no  coverage  is
available  under the policies.  The Registrant  appealed the decision to the New
Jersey Appellate  Division which heard the case in February 1996. In April 1996,
the  Appellate  Division  issued a published  ruling in favor of the  Registrant
reinstating the action as to the general liability  insurance policies regarding
both sites and remanded to the trial court to determine whether the umbrella and
excess  insurance  policies should be similarly  reinstated as to the New Durham
Road site. In November  1996, the umbrella and excess  insurance  companies once
again moved to dismiss the New Durham site. The motion to dismiss was argued and
denied by the trial court on January 24,  1997.  Pretrial  discovery  is not yet
complete. The Registrant intends to continue to vigorously pursue this action.

<PAGE>
                                      -8-

OTHER LITIGATION

The  Registrant is involved in various other  litigation and legal matters which
are being defended and handled in the ordinary course of business.

None of the  foregoing  is  expected  to result in a judgment  having a material
adverse effect on the Registrant's consolidated financial position or results of
operations.

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

            None.

                                     PART II

ITEM 5.     MARKET FOR THE REGISTRANT'S COMMON STOCK
            AND RELATED SECURITY HOLDER MATTERS

The Registrant's Common Stock is traded on the American Stock Exchange under the
symbol AFP.  The table below shows the high and low sales  prices as reported in
the composite transactions for the American Stock Exchange.

                                               High                   Low
                                               ----                   ---

1996        First quarter                      $7-3/8               $6-1/2
----        Second quarter                      8-3/4                7-1/8
            Third quarter                      10                    7-1/2
            Fourth quarter                      9-5/8                8-1/2

1995        First quarter                      $9-1/4               $8-3/8
----        Second quarter                      9-7/8                9-1/8
            Third quarter                       9-1/2                7-5/8
            Fourth quarter                      8-1/8                6-5/8

As of March 21,  1997,  there  were  approximately  590  record  holders  of the
Registrant's  Common Stock. The closing sales price for the Registrant's  Common
Stock on such date was $12-3/8. The Registrant has never paid any cash dividends
on its Common  Stock.  The payment of dividends is within the  discretion of the
Registrant's  Board of Directors,  however in view of potential  working capital
needs  and in  order  to  finance  future  growth  and as a  result  of  certain
restrictions in the Registrant's Revolving Credit Agreement, it is unlikely that
the  Registrant  will pay any cash  dividends  on its  Common  Stock in the near
future.

<PAGE>
                                      -9-

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The  selected  consolidated  financial  data  presented  below should be read in
conjunction  with,  and is  qualified  in its  entirety  by  reference  to,  the
Consolidated Financial Statements and the Notes thereto.
<TABLE>
<CAPTION>
                                                         1996             1995             1994             1993            1992 (2)
                                                      ----------       ----------       ----------       ----------       ----------
                                                                      (in thousands except per share amounts)
<S>                                                   <C>              <C>              <C>              <C>              <C>       
Total revenues (1)                                    $   84,874       $   84,646       $   76,994       $   69,556       $   70,875
                                                      ==========       ==========       ==========       ==========       ==========

Income from continuing operations                     $    5,837       $    3,569       $    3,621       $    4,367       $    2,866
                                                      ==========       ==========       ==========       ==========       ==========

Income from continuing operations
   per common share                                   $     1.06       $      .61       $      .59       $      .70       $      .44
                                                      ==========       ==========       ==========       ==========       ==========

Total assets, end of year                             $  121,821       $  117,200       $  127,714       $  114,882       $  116,849
Total liabilities, end of year                            92,246           90,971           94,933           84,704           89,684
Stockholders' equity, end of year                         29,575           26,229           32,781           30,178           27,165
                                                      ==========       ==========       ==========       ==========       ==========

Weighted average number of
   common shares outstanding                           5,510,891        5,893,246        6,169,031        6,267,540        6,569,215
                                                      ==========       ==========       ==========       ==========       ==========
</TABLE>
Notes to Selected Consolidated Financial Data

(1)         Certain  reclassifications have been reflected in the financial data
            to conform prior years' data to the current classifications.

(2)         Operating   results   for  1992   include  the  results  of  D&M/Chu
            Technology,  Inc.  and AFP  Transformers,  Inc.  since  April 2, and
            October 23, 1992, respectively.

ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS 1996 AND 1995

            GENERAL

The following discussion of the Registrant's  financial condition and results of
operations   should  be  read  in  conjunction   with  the  description  of  the
Registrant's  business and  properties  contained in Items 1 and 2 of Part I and
the consolidated  financial statements and notes thereto,  included elsewhere in
this report.

Total  revenues  generated by the  Registrant  during 1996 were  $84,874,000  an
increase  of  $228,000  from total 1995  revenues  of  $84,646,000.  Income from
continuing  operations  for the  period  was  $5,837,000  or $1.06  per share as
compared to income from  continuing  operations  of $3,569,000 or $.61 per share
for 1995. Net loss in the prior year period was ($1,904,000) or ($.32) per share
as this period included both losses from the Registrant's discontinued resilient
vinyl flooring operations as well as the write-off of its investment in Kentile,
Inc. See Note 2 to consolidated financial statements,  "Acquisition and Disposal
of Operating Companies."
<PAGE>
                                      -10-


          REAL ESTATE OPERATIONS

Rental revenues from real estate operations during 1996 increased  $1,284,000 or
6% over those of the prior year  primarily  as a result of  additional  revenues
related to existing real estate properties and 1995 property  acquisitions.

Mortgage  interest  expense for 1996  decreased  by $747,000 as compared to such
expense  incurred  during 1995. This decrease of 17% results from the continuing
amortization  of mortgages which  approximated  $10.4 million during the current
year, including repayments associated with properties sold.

Depreciation  expense  associated with real properties held for rental decreased
approximately  $81,000 or  approximately  1% from such  expense  incurred in the
preceding  year.  This decrease is primarily  attributable to properties sold in
1996 and 1995.

Other  operating  expenses  associated  with the  management of real  properties
increased approximately  $1,692,000 during 1996 versus such expenses incurred in
1995.  This increase  primarily  results from the operating  costs of additional
properties added by the Registrant in the current year, the  reclassification of
prior  manufacturing  facilities  to real property held for rental and operating
costs associated with existing real estate properties.

         ANTENNA SYSTEMS

The  operating  results  of the  antenna  systems  segment  for the years  ended
December 31, 1996 and 1995 are as follows-
<TABLE>
<CAPTION>
                                                                      1996                   1995
                                                                  -------------      -----------------
                                                                           (in thousands)
<S>                                                               <C>                <C>
               Net sales                                             $18,883                $20,307
                                                                  =============      =================

               Cost of sales                                         $16,207                $16,658
                                                                  =============      =================

               Selling, general and administrative expenses           $4,934                 $4,752
                                                                  =============      =================

               Loss from operations                                  ($2,258)               ($1,103)
                                                                  =============      =================
</TABLE>
Net sales of the antenna systems segment decreased  approximately  $1,424,000 or
7% during  1996 as compared to such sales in 1995.  This  decrease is  primarily
attributable to a decrease in net sales of approximately  $2,100,000  during the
six months ended June 30, 1996 as compared with the  comparable  period in 1995,
while net sales for the six months ended December 31, 1996 actually increased by
approximately  $700,000 compared to such sales in 1996.  Reductions in sales for
the six months ended June 30, 1996 was the result of lower manufacturing output.

Cost of sales  as a  percentage  of net  sales of the  antenna  systems  segment
increased  approximately 4% from that of 1995. This increase  results  primarily
from  additional  costs  resulting  from  lower  factory  absorption  caused  by
manufacturing output below planned levels and a shift in product mix.

Selling,  general and  administrative  expenses of the antenna  systems  segment
increased  by  approximately  $182,000  during  1996 as  compared  to such costs
incurred in the  previous  year.  This  increase is  primarily  due to increased
selling expenses, primarily salary and salary related expenses.


<PAGE>
                                      -11-
          ENGINEERED PRODUCTS

The Registrant's  engineered products segment includes Metex Corporation and AFP
Transformers,  Inc. The operating results of the engineered products segment for
the years ended December 31, 1996 and 1995 are as follows-
<TABLE>
<CAPTION>
                                                                      1996                   1995
                                                                  -------------      -----------------
                                                                           (in thousands)
<S>                                                               <C>                <C>
               Net sales                                             $42,055                $41,687
                                                                  =============      =================

               Cost of sales                                         $30,891                $31,237
                                                                  =============      =================

               Selling, general and administrative expenses           $7,372                 $6,671
                                                                  =============      =================

               Income from operations                                 $3,792                 $3,779
                                                                  =============      =================
</TABLE>
Net sales of the engineered  products segment were  $42,055,000,  an increase of
$368,000  versus  such  sales in  1995.  This  growth  resulted  primarily  from
increased  transformer  sales as sales of knitted wire products were  consistent
with prior year levels.

Cost of sales as a percentage of net sales  decreased  approximately  1% between
1996 and 1995. This decline is primarily a result of the mix of product sales.

Selling, general and administrative expenses ("SG&A") of the engineered products
segment  increased  $701,000  or 11% during  1996,  as compared to such costs in
1995. This increase  primarily results from additional selling related expenses,
principally  salary and travel  related  expenses,  associated  with new product
development and business development.

          GENERAL AND ADMINISTRATIVE EXPENSES

General  and  administrative  expenses  not  associated  with the  manufacturing
operations  decreased  approximately  $408,000  during  1996 as compared to such
expenses  incurred in the preceding  year. This decrease is primarily due to the
reclassification,   in  the  current  year,  of  costs   associated  with  prior
manufacturing facilities to real estate operations.  Such costs were included in
general and administrative expenses in the prior year period.

          OTHER INCOME AND EXPENSE, NET

Other  income  and  expense,  net for  1996 of  approximately  $4.8  million  is
comprised  of  approximately  $3,919,000  in gains from the sales of real estate
assets and  approximately  $1.4  million  in  settlement  of all claims  from an
investment  that  was  principally  written  off in  1990.  These  amounts  were
partially offset by $561,000 of miscellaneous other expense.

The 1995 components of other income and expense,  net were as follows:  $865,000
in gains from the sale of real estate  assets,  $230,000 from realized  gains on
the sale of marketable  securities and  approximately  $549,000 in miscellaneous
other income.
<PAGE>
                                      -12-


          RESULTS OF OPERATIONS 1995 AND 1994

Total  revenues  generated by the  Registrant  during 1995 were  $84,646,000  an
increase of  $7,652,000  from total 1994 revenues of  $76,994,000.  Net loss for
1995 was  ($1,904,000)  or ($.32) per share versus net income of  $2,933,000  or
$.48 per share for 1994.  The 1995  results  include  losses  from  discontinued
operations of ($5,473,000) on a net of tax basis or ($.93) per share. See Note 2
to Consolidated  Financial  Statements,  "Acquisition  and Disposal of Operating
Companies."

          REAL ESTATE OPERATIONS

Rental revenues from real estate operations during 1995 increased $664,000 or 3%
over  those of the  prior  year  primarily  as a result of  additional  revenues
generated  from  the  operations  of  the  Registrant's   existing  real  estate
properties, and the signing of leases on properties acquired during 1995.

Mortgage  interest  expense for 1995  decreased  by $531,000 as compared to such
expense  incurred  during 1994. This decrease of 11% results from the continuing
amortization  of mortgages  which  approximated  $6.7 million during the current
year. No new encumbrances  were added to the Registrant's  real estate portfolio
during 1995.

Depreciation  expense  associated with real properties held for rental increased
approximately  $18,000 or less than 1% from such expense  incurred in 1994. This
increase   primarily  results  from  depreciation   associated  with  additional
properties  purchased and improvements to existing  properties added during 1995
and is offset by depreciation  associated with the sale of several properties in
1995 and 1994.

Other  operating  expenses  associated  with the  management of real  properties
increased approximately $483,000 or 8% during 1995 versus such expenses incurred
during 1994. This increase  primarily  results from  additional  operating costs
incurred in  connection  with the  operation of the  Registrant's  existing real
estate  properties of approximately  $358,000 and the balance from the operating
costs of additional properties added by the Registrant in 1995.

         ANTENNA SYSTEMS

The  operating  results  of the  antenna  systems  segment  for the years  ended
December 31, 1995 and 1994 are as follows-
<TABLE>
<CAPTION>
                                                                      1995                  1994
                                                                  -------------      -----------------
                                                                           (in thousands)
<S>                                                               <C>                <C>


               Net sales                                             $20,307                $19,495
                                                                  =============      =================

               Cost of sales                                         $16,658                $15,665
                                                                  =============      =================

               Selling, general and administrative expenses           $4,752                 $5,357
                                                                  =============      =================

               Loss from operations                                  ($1,103)               ($1,527)
                                                                  =============      =================
</TABLE>
Net sales of the antenna systems segment increased  approximately $812,000 or 4%
during 1995 as compared to such sales in 1994.  Increased emphasis on commercial
product  applications and exploring new market niches,  have favorably  impacted
this segment of the Registrant's business.

Cost of sales  as a  percentage  of net  sales of the  antenna  systems  segment
increased  approximately 2% from that of 1994. This increase  results  primarily
from additional costs incurred as the Registrant moved to consolidate production
of its two manufacturing facilities.


<PAGE>
                                      -13-


SG&A of the antenna systems segment  decreased by approximately  $605,000 during
1995 as compared to such costs incurred in the previous year. Continuing savings
from the consolidation of D&M/Chu's operations into Dorne & Margolin principally
accounted for this  reduction.  The integration of D&M/Chu into Dorne & Margolin
has been  substantially  completed and further  reductions in SG&A costs are not
anticipated from this consolidation.

          ENGINEERED PRODUCTS

The Registrant's  engineered products segment includes Metex Corporation and AFP
Transformers,  Inc. The operating results of the engineered products segment for
the years ended December 31, 1995 and 1994 are as follows-
<TABLE>
<CAPTION>
                                                                      1995                1994
                                                                  -------------      -----------------
                                                                           (in thousands)
<S>                                                               <C>                <C>

               Net sales                                             $41,687              $35,511
                                                                  =============      =================

               Cost of sales                                         $31,237              $27,043
                                                                  =============      =================

               Selling, general and administrative expenses           $6,671               $5,991
                                                                  =============      =================

               Income from operations                                 $3,779               $2,477
                                                                  =============      =================
</TABLE>

Net sales of the engineered  products segment were  $41,687,000,  an increase of
$6,176,000 or 17% versus such sales in 1994. This growth is a result of stronger
demand and increased  marketing  efforts  which  produced an 18% increase in the
sale of knitted  wire  products  and a 13%  increase in the sale of  transformer
products.

Cost of sales as a percentage of net sales  decreased  approximately  1% between
1995 and 1994. This decline is primarily a result of the mix of product sales.

SG&A  expenses of the  engineered  products  segment  increased  $680,000 or 11%
during 1995, as compared to such costs in 1994. This increase  primarily results
from additional  selling related expenses  associated with the 17% rise in sales
noted above and from additional administrative personnel in 1995.

          GENERAL AND ADMINISTRATIVE EXPENSES

General  and  administrative  expenses  not  associated  with the  manufacturing
operations  increased  approximately  $719,000  during  1995 as compared to such
expenses  incurred  in the  preceding  year.  This  represents  less  than 1% of
consolidated  revenues  and is  primarily a result of  additional  salaries  and
professional fees incurred in 1995.

          OTHER INCOME AND EXPENSE, NET

Other  income  and  expense,  net for  1995 of  approximately  $1.6  million  is
comprised  of  approximately  $865,000  in gains  from the sales of real  estate
assets,  $230,000 from realized  gains on the sale of marketable  securities and
approximately $549,000 in miscellaneous other income.

The 1994  components  of other  income and  expense,  net were as follows:  $1.4
million  in gains  from the  sales of real  estate  assets,  $1.2  million  from
realized  gains on the sale of  marketable  securities,  $46,000 in income  from
equity  investments  which  represents  nonrecurring  cash  distributions,   and
$171,000 in miscellaneous other income.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1996, the  Registrant's  current  liabilities  exceeded  current
assets by approximately $5.8 million.  This shortfall in working capital results
from financing the purchase of long-term assets utilizing short-term


<PAGE>
                                      -14-

borrowings and from the classification of current mortgage  obligations  without
the benefit of a corresponding current asset for such properties.  Management is
confident  that through  cash flow  generated  from  operations,  together  with
borrowings  available  under the line of credit  discussed below and the sale of
select assets, all obligations will be satisfied as they become due.

The Registrant  maintained an unsecured line of credit  arrangement  with a bank
which provided for  borrowings up to  $15,000,000.  Effective  November 19, 1996
this line was  temporarily  increased  to $20  million.  At December  31,  1996,
approximately  $19.8 million was  outstanding  under this facility at the Bank's
prime  rate  of  interest  ("Prime").  At  December  31,  1996,  the  Registrant
classified $9,789,000 of borrowings outstanding under this facility as long-term
debt as the  Registrant  has both the ability and the intent to refinance  these
amounts on a long-term basis under the new credit  facility.  Effective  January
15, 1997, the Registrant entered into a Revolving Credit Agreement  ("Revolver")
with two banks that  provides  for  borrowings  of up to $40  million  and which
expires on January 15, 2000. Amounts  outstanding under the previously  existing
line of credit were converted to borrowings under the Revolver. Borrowings under
the Revolver,  at the Registrant's  option, bear interest at Prime or LIBOR plus
1.75%.  Under the terms of the Revolver,  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.  The
terms of the Revolver  contain  certain  financial  and  restrictive  covenants,
including minimum consolidated equity,  interest coverage, debt service coverage
and  capital  expenditures  (other  than for real  estate).  At March 21,  1997,
approximately $24 million was available to be borrowed under the Revolver.

The  Registrant  has  undertaken  the  completion of  environmental  studies and
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.

At December 31, 1996 and 1995 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 proceeds.  The remaining balance of $2.9
million at December 31, 1996 (from a total of $7 million) is in dispute with the
Registrant's  insurance  carriers  as more  fully  discussed  in  Item 3  "Legal
Proceedings" and Note 18 to Consolidated  Financial Statements  "Contingencies."
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  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 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.
<PAGE>

                                      -15-

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,  other  financial  instruments,
certificates of deposit and government securities.

BUSINESS TRENDS

Total 1996 revenues of the Registrant increased approximately $228,000 from 1995
levels to $84.9 million. Net income increased by $7,742,000 to $5,837,000 during
1996 as compared to 1995 levels.

The results of the Registrant's real estate operations  reflect a 6% increase in
sales.  Operating  income from this  segment was $6.3  million,  up 24% from the
prior year. Continuing lease renewals and mortgage amortization will continue to
have a positive effect upon the revenues and operating profit of this segment.

Sales in the Registrant's  engineered products segment increased less than 1% in
1996,  after posting 17% growth in the prior year,  principally due to increased
sales of  transformers.  Knitted wire product sales were  consistent  with prior
year levels.  Operating  income from this segment was up slightly from the prior
year and the  transformer  component of this segment was again  profitable  this
year.  Sales in 1997 are anticipated to approximate 1996 levels due to increased
competition  in a number of markets for knitted wire product  sales.  Management
continues  to invest  in new  product  development  and in new  markets  for its
products and believes there is future opportunity for growth in this segment.

The results of the Registrant's antenna systems segment reflect a 7% decrease in
sales  during 1996 and the loss from  operations  increased to $2.3 million from
$1.1 million in the prior year. The sales reduction is principally  attributable
to operational  problems  experienced in the first half of the year as sales for
the second half of 1996 exceeded the  comparable  period in 1995.  The increased
operating  loss  resulted  from  lower  factory  overhead  absorption  caused by
manufacturing output below planned levels and a shift in product mix. Management
is  concentrating  on maintaining or increasing the sales volume,  reducing both
direct and indirect costs and increasing the margins on all products.



<PAGE>
                                      -16-


FORWARD LOOKING STATEMENTS

This Form 10-K 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 (the  "Exchange  Act"),  which are
intended to be covered by the safe harbors created thereby.  All forward-looking
statements  involve  risks and  uncertainty  including  without  limitation  the
statements  expressed  under  "Business  Trends" above.  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-K  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.

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial  statements and  supplementary  information  filed as part of this
Item 8 are listed under Part IV, Item 14,  "Exhibits,  Financial  Statements and
Schedules  and Reports on Form 8-K" and are  contained in this Form 10-K at page
F-1.

ITEM 9.     DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

            None

                                    PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

This  information will be contained in the Proxy Statement of the Registrant for
the 1997  Annual  Meeting  of  Stockholders  under  the  captions  "Election  of
Directors" and "Executive Officers" and is incorporated herein by reference.

ITEM 11.    EXECUTIVE COMPENSATION

This  information will be contained in the Proxy Statement of the Registrant for
the  1997  Annual  Meeting  of   Stockholders   under  the  caption   "Executive
Compensation  and  Compensation  of  Directors"  and is  incorporated  herein by
reference.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

This  information will be contained in the Proxy Statement of the Registrant for
the 1997 Annual Meeting of Stockholders under the captions "Security  Ownership"
and "Election of Directors" and is incorporated herein by reference.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

This  information will be contained in the Proxy Statement of the Registrant for
the 1997 Annual Meeting of Stockholders under the caption "Certain Relationships
and Related Transactions" and is incorporated herein by reference. Also see Note
13,  "Transactions  with Related  Parties," of Notes to  Consolidated  Financial
Statements, contained elsewhere in this report.


<PAGE>
                                      -17-

                                     PART IV

ITEM 14.    EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) CONSOLIDATED   FINANCIAL  STATEMENTS.   The  following  Consolidated
       Financial Statements and Consolidated  Financial Statement Schedules
       of the  Registrant  are  included  in this  Form  10-K at the  pages
       indicated:

              INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                                                                        Page

       Report of Independent Public Accountants                         F-1
       Consolidated Balance Sheets as of December 31, 1996 and 1995     F-2
       Consolidated Statements of Operations for the Years              F-3
          Ended December 31, 1996, 1995 and 1994                        to
                                                                        F-4
       Consolidated Statements of Stockholders' Equity for              F-5
          the Years Ended December 31, 1996, 1995 and 1994
       Consolidated Statements of Cash Flows for the                    F-6
          Years Ended December 31, 1996, 1995 and 1994                  to
                                                                        F-8
       Notes to Consolidated Financial Statements                       F-9
                                                                        to
                                                                        F-27
   (2) Consolidated Financial Statement Schedules

       Schedule II   --   Allowance for Doubtful Accounts               F-28
       Schedule III  --   Real Property Held for Rental and             F-29
                             Accumulated Depreciation
       Schedule IV   --   Mortgage Loans on Real Estate                 F-30

   (3) Supplementary Data

       Quarterly Financial Data (Unaudited)                             F-31

       Schedules  not  listed  above  are  omitted  as  not  applicable  or  the
       information is presented in the financial statements or related notes.

(b) Reports on Form 8-K

No reports on Form 8-K were filed by the  Registrant  during the last quarter of
fiscal 1996.

(c) Exhibits

            3.1.  Amended  and  restated  Certificate  of  Incorporation  of the
Registrant (incorporated by reference to exhibit 3.1 filed with the Registrant's
report on Form 10-K for the fiscal year ended December 31, 1993).

            3.2. By-laws of the Registrant (incorporated by reference to exhibit
3 filed  with the  Registrant's  report on Form 10-K for the  fiscal  year ended
December 31, 1980).

            10.1. 1988 Incentive Stock Option Plan of the Registrant, as amended
(incorporated by reference to exhibit 10.1 filed with the Registrant's report on
Form 10-K for the fiscal year ended December 31, 1994).
<PAGE>
                                      -18-


            10.2. 1988 Joint Incentive and  Non-Qualified  Stock Option Plan, as
amended  (incorporated  by reference to exhibit 10.2 filed with the Registrant's
report on Form 10-K for the fiscal year ended December 31, 1994).

            10.3.  Employment  Agreement  dated  as of  January  1,  1990 by and
between the  Registrant  and A. F.  Petrocelli  (incorporated  by  reference  to
exhibit 10.9 filed with the Registrant's report on Form 10-K for the fiscal year
ended December 31, 1989).

            10.4. Amendment dated as of December 3, 1990 to Employment Agreement
dated as of January 1, 1990, by and between the Registrant and A. F.  Petrocelli
(incorporated by reference to exhibit 10.10 filed with the  Registrant's  report
on Form 10-K for the fiscal year ended December 31, 1990).

            10.5.  Amendment  dated as of June 8, 1993 to  Employment  Agreement
dated as of January 1, 1990 by and between the Registrant  and A. F.  Petrocelli
(incorporated by reference to exhibit 10.5 filed with the Registrant's report on
Form 10-K for the fiscal year ended December 31, 1993).

            *21. Subsidiaries of the Registrant

            *23.  Accountants'  consent to the  incorporation  by  reference  in
Registrant's  Registration  Statements on Form S-8 of the Report of  Independent
Public Accountants included herein.

            *27. Financial Data Schedule

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

* Filed herewith
<PAGE>
                                      -19-


                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) 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:  March 21, 1997         By: /s/ A.F. Petrocelli
        --------------             -------------------
                                     A. F. Petrocelli
                                     Chairman, President and
                                     Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the date indicated.

Dated:  March 21, 1997         By: /s/ A.F. Petrocelli
        --------------             -------------------
                                     A. F. Petrocelli
                                     Chairman, President and
                                     Chief Executive Officer

Dated:  March 21, 1997         By: /s/ Howard M. Lorber
        --------------             --------------------
                                     Howard M. Lorber
                                     Director

Dated:  March 21, 1997         By: /s/ Anthony J. Miceli
        --------------             ---------------------
                                     Anthony J. Miceli
                                     Chief Financial Officer,
                                     Chief Accountant, Secretary and Director

Dated:  March 21, 1997         By: /s/ Arnold S. Penner
        --------------             --------------------
                                     Arnold S. Penner
                                     Director
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors
   and Stockholders of

                     United Capital Corp.:


We have audited the accompanying  consolidated  balance sheets of United Capital
Corp.  (a Delaware  Corporation)  and  subsidiaries  as of December 31, 1996 and
1995,  and the related  consolidated  statements  of  operations,  stockholders'
equity and cash flows for each of the three years in the period  ended  December
31, 1996. These consolidated  financial statements and the schedules referred to
below are the responsibility of the Company's management.  Our responsibility is
to express an opinion on these  financial  statements and schedules based on our
audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  financial  position of United  Capital  Corp.  and
subsidiaries  as of  December  31,  1996  and  1995,  and the  results  of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial  statements  taken as a whole.  The  schedules  listed in the index to
consolidated  financial  statements  and schedules are presented for purposes of
complying with the Securities and Exchange  Commission's  rules and are not part
of the basic  financial  statements.  These schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our  opinion,  fairly  state in all  material  respects  the  financial  data
required to be set forth therein in relation to the basic  financial  statements
taken as a whole.



                                                ARTHUR ANDERSEN LLP


Roseland, New Jersey
March 14, 1997

                                      F-1
<PAGE>
                     UNITED CAPITAL CORP. AND SUBSIDIARIES

          CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
                                                             ASSETS              1996                  1995
                                                             ------              ----                  ----
<S>                                                                         <C>                    <C>         
CURRENT ASSETS:
   Cash and cash equivalents                                                $  3,177,878           $  3,527,925
   Marketable securities                                                         313,294                 83,760
   Notes and accounts receivable, net of allowance for doubtful
      accounts of $501,406 and $471,406, respectively                         22,443,743             16,253,100
   Inventories                                                                 7,853,229              7,764,873
   Prepaid expenses and other current assets                                     801,639                687,535
   Deferred income taxes                                                       1,831,768              1,893,205
                                                                            ------------           ------------

                     Total current assets                                     36,421,551             30,210,398
                                                                            ------------           ------------



PROPERTY, PLANT AND EQUIPMENT, net                                             7,694,438              9,957,648



REAL PROPERTY HELD FOR RENTAL, net                                            63,842,891             68,063,502


NONCURRENT NOTES RECEIVABLE                                                    5,931,744              3,624,188


OTHER ASSETS                                                                   5,912,647              4,387,064



DEFERRED INCOME TAXES                                                          2,017,247                956,991
                                                                            ------------           ------------

                     Total assets                                           $121,820,518           $117,199,791
                                                                            ============           ============


                 LIABILITIES AND STOCKHOLDERS' EQUITY                            1996                  1995
                 ------------------------------------                            ----                  ----

CURRENT LIABILITIES:
  Current maturities of long-term debt                                     $   7,711,408          $  10,085,227
  Current portion of borrowings under revolving credit facilities             10,031,000              7,785,000
  Accounts payable and accrued liabilities                                    17,286,927             19,144,363
  Income taxes payable                                                         7,212,520              3,680,639
                                                                           -------------          -------------

                   Total current liabilities                                  42,241,855             40,695,229


LONG-TERM LIABILITIES:
  Borrowings under revolving credit facilities                                 9,789,000                      0
  Long-term debt                                                              31,670,258             41,899,690
  Other long-term liabilities                                                  8,544,581              8,375,643
                                                                           -------------          -------------

                   Total liabilities                                          92,245,694             90,970,562

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Common stock $.10 par value, authorized 7,500,000 shares;
     issued and outstanding 5,346,123 and 5,606,079 shares, respectively         534,612                560,608
  Additional paid-in capital                                                   7,415,664             10,101,147
  Retained earnings                                                           21,515,762             15,678,511
  Minimum pension liability, net of tax                                                0               (165,659)
  Net unrealized gain on marketable securities, net of tax                       108,786                 54,622
                                                                           -------------          -------------

                   Total stockholders' equity                                 29,574,824             26,229,229
                                                                           -------------          -------------

                   Total liabilities and stockholders' equity              $ 121,820,518          $ 117,199,791
                                                                           =============          =============
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
                              of these statements.


                                      F-2
<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
                                                                               1996                 1995                   1994
                                                                           ------------          ------------          ------------
<S>                                                                        <C>                   <C>                   <C>         
REVENUES:
   Net sales                                                               $ 60,938,306          $ 61,994,021          $ 55,005,965
   Rental revenues from real estate operations                               23,935,997            22,652,430            21,987,956
                                                                           ------------          ------------          ------------

                     Total revenues                                          84,874,303            84,646,451            76,993,921
                                                                           ------------          ------------          ------------

COSTS AND EXPENSES:
   Cost of sales                                                             47,098,729            47,895,213            42,737,647
   Real estate operations-
      Mortgage interest expense                                               3,671,034             4,417,574             4,948,591
      Depreciation expense                                                    6,299,110             6,379,775             6,362,426
      Other operating expenses                                                7,623,883             5,932,051             5,449,007
   General and administrative expenses                                        7,709,876             8,295,515             7,128,586
   Selling expenses                                                           6,519,155             6,253,362             6,021,789
                                                                           ------------          ------------          ------------

                     Total costs and expenses                                78,921,787            79,173,490            72,648,046
                                                                           ------------          ------------          ------------

                     Operating income                                         5,952,516             5,472,961             4,345,875
                                                                           ------------          ------------          ------------

OTHER INCOME (EXPENSE):
   Interest income                                                            1,205,508               709,967               567,615
   Interest expense                                                          (1,125,779)           (1,145,076)           (1,099,985)
   Other income and expense, net                                              4,801,006             1,644,856             2,819,493
                                                                           ------------          ------------          ------------

                     Total other income (expense)                             4,880,735             1,209,747             2,287,123
                                                                           ------------          ------------          ------------

   Income from continuing operations before
      income taxes                                                           10,833,251             6,682,708             6,632,998

   Provision for income taxes                                                 4,996,000             3,114,000             3,012,000
                                                                           ------------          ------------          ------------

   Income from continuing operations                                          5,837,251             3,568,708             3,620,998
</TABLE>

                                      F-3
<PAGE>
<TABLE>
<CAPTION>
                                                                                  1996                 1995                 1994
                                                                               -----------         -----------          -----------

<S>                                                                            <C>                 <C>                  <C>         
DISCONTINUED OPERATIONS:
   Operating loss, net of tax benefit of $780,000
      and $360,000, respectively                                               $         0         ($1,512,961)         ($  688,354)
   Provision for disposition, net of tax benefit
      of $2,040,000                                                                      0          (3,960,000)                   0
                                                                               -----------         -----------          -----------

                     Loss from discontinued operations,
                        net of tax                                                       0          (5,472,961)            (688,354)
                                                                               -----------         -----------          -----------

                     Net income (loss)                                         $ 5,837,251         ($1,904,253)         $ 2,932,644
                                                                               ===========         ===========          ===========

EARNINGS (LOSS) PER SHARE:
   Income from continuing operations                                           $      1.06         $       .61          $       .59
   Loss from discontinued operations, net of tax                                         0                (.93)                (.11)
                                                                               -----------         -----------          -----------

                     Net income (loss) per common share                        $      1.06         ($      .32)         $       .48
                                                                               ===========         ===========          ===========

WEIGHTED AVERAGE NUMBER OF
   COMMON SHARES OUTSTANDING                                                     5,510,891           5,893,246            6,169,031
                                                                               ===========         ===========          ===========
</TABLE>
       The accompanying notes to consolidated financial statements are an
                       integral part of these statements.

                                      F-4
<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
                                                                                                         Net
                                                                                                       Unrealized
                                                                                           Minimum      Gain on
                                  Common Stock Issued       Additional                     Pension     Marketable       Total
                                 --------------------        Paid-in         Retained     Liability,   Securities,  Stockholders'
                                 Shares        Amount        Capital         Earnings     Net of Tax   Net of Tax      Equity
                                 ------        ------        -------         --------     ----------   ----------   -------------

<S>                             <C>          <C>          <C>             <C>             <C>          <C>          <C>         
BALANCE -- January 1, 1994      6,063,261    $ 606,326    $ 14,921,406    $ 14,650,120    $       0    $       0    $ 30,177,852

   Purchase and retirement
     of common shares            (124,916)     (12,491)     (1,009,548)              0            0            0      (1,022,039)
   Proceeds from the
     exercise of stock
     options                      112,921       11,292         619,462               0            0            0         630,754
   Cumulative effect of
     change in accounting
     principle                          0            0               0               0            0      346,825         346,825
   Change in net
     unrealized gain on
     marketable securities,
     net of tax                         0            0               0               0            0     (284,962)       (284,962)
   Net income                           0            0               0       2,932,644            0            0       2,932,644
                               ----------    ---------    ------------    ------------    ---------    ---------    ------------

BALANCE -- December 31, 1994    6,051,266      605,127      14,531,320      17,582,764            0       61,863      32,781,074
                               ----------    ---------    ------------    ------------    ---------    ---------    ------------

   Purchase and retirement
     of common shares            (445,887)     (44,589)     (4,433,603)              0            0            0      (4,478,192)
   Proceeds from the
     exercise of stock
     options                          700           70           3,430               0            0            0           3,500
   Change in net
     unrealized gain on
     marketable securities,
     net of tax                         0            0               0               0            0       (7,241)         (7,241)
   Change in minimum
     pension liability,
     net of tax                         0            0               0               0     (165,659)           0        (165,659)
   Net loss                             0            0               0      (1,904,253)           0            0      (1,904,253)
                               ----------    ---------    ------------    ------------    ---------    ---------    ------------

BALANCE -- December 31, 1995    5,606,079      560,608      10,101,147      15,678,511     (165,659)      54,622      26,229,229
                               ----------    ---------    ------------    ------------    ---------    ---------    ------------

   Purchase and retirement
     of common shares            (425,206)     (42,521)     (3,575,208)              0            0            0      (3,617,729)
   Proceeds from the
     exercise of stock
     options                      165,250       16,525         889,725               0            0            0         906,250
   Change in net
     unrealized gain on
     marketable securities,
     net of tax                         0            0               0               0            0       54,164          54,164
   Change in minimum
     pension liability,
     net of tax                         0            0               0               0      165,659            0         165,659
   Net income                           0            0               0       5,837,251            0            0       5,837,251
                               ----------    ---------    ------------    ------------    ---------    ---------    ------------

BALANCE-- December 31, 1996     5,346,123    $ 534,612    $  7,415,664    $ 21,515,762    $       0    $ 108,786    $ 29,574,824
                               ==========    =========    ============    ============    =========    =========    ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
                              of these statements.

                                      F-5
<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
                                                                                 1996                 1995                 1994
                                                                             ------------         ------------         ------------
<S>                                                                          <C>                  <C>                  <C>         
CASH FLOWS FROM OPERATING
   ACTIVITIES:
      Net income (loss)                                                      $  5,837,251         ($ 1,904,253)        $  2,932,644
                                                                             ------------         ------------         ------------

      Adjustments to reconcile net income (loss)
         to net cash provided by
         operating activities-
            Depreciation and amortization                                       7,751,939            7,938,095            7,493,571
            Disposal of discontinued operations                                         0            1,868,597                    0
            Net realized gains on marketable securities                                 0             (229,979)          (1,203,463)
            Changes in assets and liabilities
               net of effects from business
                acquisitions and disposals (A)                                 (9,515,871)           5,228,219           (3,410,232)
                                                                             ------------         ------------         ------------

                     Total adjustments                                         (1,763,932)          14,804,932            2,879,876
                                                                             ------------         ------------         ------------

                     Net cash provided by operating
                        activities                                              4,073,319           12,900,679            5,812,520
                                                                             ------------         ------------         ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchase of marketable securities                                          (147,467)                   0             (558,584)
      Proceeds from sale of marketable
         securities                                                                     0              729,318            2,979,985
      Acquisition of property, plant and
         equipment                                                               (996,169)          (2,520,169)          (2,075,975)
      Cash paid in acquisition of operating business                                    0                    0           (2,688,565)
      Investing activities of discontinued operations                                   0                    0           (1,384,920)
                                                                             ------------         ------------         ------------

                     Net cash used in investing
                        activities                                             (1,143,636)          (1,790,851)          (3,728,059)
                                                                             ------------         ------------         ------------
</TABLE>

                                      F-6
<PAGE>
<TABLE>
<CAPTION>
                                                                                1996                  1995                1994
                                                                             ------------         ------------         ------------
<S>                                                                          <C>                  <C>                  <C>          
CASH FLOWS FROM FINANCING
   ACTIVITIES:
      Principal payments on mortgage
         commitments, notes and loans                                        ($13,628,197)        ($ 9,626,955)        ($ 8,487,381)
      Proceeds from mortgage commitments,
         notes and loans                                                        1,024,946            3,150,000                    0
      Net borrowings under revolving credit
         facilities                                                            12,035,000            1,785,000            6,000,000
      Purchase and retirement of common
         shares                                                                (3,617,729)          (4,478,192)          (1,022,039)
      Proceeds from the exercise of stock options                                 906,250                3,500              630,754
      Financing activities of discontinued operations                                   0                    0           (1,370,352)
                                                                             ------------         ------------         ------------

                     Net cash used in financing
                        activities                                             (3,279,730)          (9,166,647)          (4,249,018)
                                                                             ------------         ------------         ------------

                     Net increase (decrease) in cash and
                        cash equivalents                                         (350,047)           1,943,181           (2,164,557)

CASH AND CASH EQUIVALENTS AT
   BEGINNING OF PERIOD                                                          3,527,925            1,584,744            3,749,301
                                                                             ------------         ------------         ------------

CASH AND CASH EQUIVALENTS AT END
   OF PERIOD                                                                 $  3,177,878         $  3,527,925         $  1,584,744
                                                                             ============         ============         ============

SUPPLEMENTAL DISCLOSURES OF CASH
   FLOW INFORMATION:
      Cash paid during the period for-
         Interest                                                            $  4,847,000         $  5,423,000         $  5,918,000
         Taxes                                                                  2,876,000            1,874,000            2,756,000
                                                                             ============         ============         ============

SUPPLEMENTAL SCHEDULE OF NONCASH
   INVESTING AND FINANCING ACTIVITIES:
</TABLE>
                 See notes to consolidated financial statements

                                      F-7
<PAGE>
<TABLE>
<CAPTION>
                        (A)         Changes  in assets and  liabilities  for the
                                    years  ended  December  31,  1996,  1995 and
                                    1994,   net   of   effects   from   business
                                    acquisitions  and disposals in 1995 and 1994
                                    are as follows:

                                                                       1996              1995              1994
                                                                    -----------       -----------       -----------
<S>                                                                 <C>               <C>               <C>         
                Increase in notes and accounts
                   receivable, net                                  ($6,190,643)      ($  107,014)      ($2,464,223)
                Decrease (increase) in inventories                      (88,356)        1,190,224          (885,822)
                Decrease (increase) in prepaid
                   expenses and other current assets                   (114,104)        3,876,776        (4,017,518)
                Increase in deferred income taxes                    (1,112,060)       (1,571,542)         (128,477)
                Increase in real property held for
                   rental, net                                         (271,950)       (2,362,858)       (5,321,617)
                Decrease (increase) in noncurrent
                   notes receivable                                  (2,307,556)         (274,462)          126,313
                Decrease (increase) in other assets                  (1,314,335)          366,281        (2,933,952)
                Increase (decrease) in accounts payable
                   and accrued liabilities                           (1,817,686)        4,076,255         2,425,119
                Increase (decrease) in income
                   taxes payable                                      3,531,881           (38,931)         (635,612)
                Increase (decrease) in other
                   long-term liabilities                                168,938            73,490         6,850,316
                Discontinued operations - noncash
                   charges and working capital changes                        0                 0         3,575,241
                                                                    -----------       -----------       -----------

                      Total                                         ($9,515,871)      $ 5,228,219       ($3,410,232)
                                                                    ===========       ===========       ===========
</TABLE>
       The accompanying notes to consolidated financial statements are an
                       integral part of these statements.

                                      F-8
<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 1996, 1995 AND 1994




(1)   SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES:

         NATURE OF BUSINESS-

            United Capital Corp. (the  "Registrant")  and its  subsidiaries  are
            currently  engaged in the  investment  and management of real estate
            and in the  manufacture  and sale of antenna  systems and engineered
            products.

         PRINCIPLES OF CONSOLIDATION-

            The consolidated  financial  statements  include the accounts of the
            Registrant  and  its  wholly-owned  subsidiaries.   All  significant
            intercompany  accounts and transactions  have been  eliminated.  The
            equity method of accounting is used for  investments  in 50% or less
            owned  companies  over  which  the  Registrant  has the  ability  to
            exercise significant influence.

         INCOME RECOGNITION --
         REAL ESTATE OPERATIONS-

            The Registrant leases substantially all of its properties to tenants
            under net leases.  Under this type of lease, the tenant is obligated
            to pay all  operating  costs of the property  including  real estate
            taxes,  insurance,   repairs  and  maintenance.   Rental  income  is
            recognized  based  on  the  terms  of  the  leases.   Certain  lease
            agreements  provide for  additional  rent based on a  percentage  of
            tenants' sales.  Such  additional  rents are recorded as income when
            they can be  reasonably  estimated.  Gains  on sales of real  estate
            assets  are  recorded  when  the  gain  recognition  criteria  under
            generally accepted accounting principles have been met.

         REVENUE RECOGNITION --
         MANUFACTURING OPERATIONS-

            Generally,  sales are  recorded  when  products  are  shipped to the
            customer. In the antenna systems segment, sales and gross profits on
            contracts with relatively few deliverable  units, when produced over
            an extended period,  usually in excess of 12 months,  are recognized
            on a  percentage-of-completion  basis. For such projects,  sales and
            gross profit are adjusted  prospectively  for revisions in estimated
            total  contract  costs and  contract  values.  Estimated  losses are
            recorded when identified.  Sales also include royalties  received in
            connection  with  the  licensing  of  certain  of  the  Registrant's
            products.

                                      F-9
<PAGE>
         MARKETABLE SECURITIES-

            Investments in debt  securities  are classified as  held-to-maturity
            and measured at amortized  cost in the  consolidated  balance sheets
            only if the Registrant  has the positive  intent and ability to hold
            those  securities to maturity.  Debt and equity  securities that are
            purchased  and held  principally  for the  purpose of selling in the
            near term will be measured at fair value and  classified  as trading
            securities.  For the  purpose  of  calculating  realized  gains  and
            losses,  the  cost of  investments  sold  is  determined  using  the
            first-in,  first-out method.  Unrealized gains and losses on trading
            securities  are included in current  earnings.  All  securities  not
            classified  as  trading  or   held-to-maturity   are  classified  as
            available-for-sale and measured at fair value.  Unrealized gains and
            losses on  securities  available-for-sale  are  recorded  net,  as a
            separate   component  of   stockholders'   equity  until   realized.
            Management  determines the appropriate  classification of securities
            at the time of purchase and  reassesses the  appropriateness  of the
            classification at each reporting date.

            The Registrant  adopted Statement of Financial  Accounting  Standard
            No.  115,  "Accounting  for Certain  Investments  in Debt and Equity
            Securities"  ("SFAS 115")  effective  January 1, 1994. The effect of
            the adoption increased stockholders' equity by $346,825, net of tax,
            at such date.

         CASH AND CASH EQUIVALENTS-

            The  Registrant  considers  all  highly  liquid  investments  with a
            maturity,  at the purchase  date, of three months or less to be cash
            equivalents.

         INVENTORIES-

            Inventories  are stated at the lower of cost or market  and  include
            material, labor and manufacturing overhead. The first-in,  first-out
            (FIFO) method is used to determine the cost of  inventories  in each
            of the Registrant's business segments.

            The  components  of  inventory  at December 31, 1996 and 1995 are as
            follows-

                                            1996                1995
                                      ---------------     ------------------

               Raw materials               $3,893,865          $3,948,129
               Work in process              2,126,849           2,125,044
               Finished goods               1,832,515           1,691,700
                                      ---------------     ------------------

                                           $7,853,229          $7,764,873
                                      ===============     ==================

         DEPRECIATION AND AMORTIZATION-

            Depreciation and amortization are provided on a straight-line  basis
            over the estimated useful lives of the related assets as follows-

               Real property held for rental-
                  Buildings                               5 to 39 years
                  Equipment                               5 to 7 years

               Property, plant and equipment-
                  Buildings and improvements              18 to 40 years
                  Machinery and equipment                  3 to 10 years



                                      F-10
<PAGE>
         REAL PROPERTY HELD FOR RENTAL-

            Real  property  held for rental is carried at cost less  accumulated
            depreciation.   Major  renewals  and  betterments  are  capitalized.
            Maintenance and repairs are expensed as incurred.

            Certain  mortgage  obligations  assumed  by the  Registrant  contain
            provisions  whereby the mortgage  holder may acquire,  under certain
            conditions,  an interest in the properties  securing the obligation,
            for a nominal amount. The Registrant considers any costs incurred as
            a result of these  provisions  to be a cost of  acquisition  and the
            basis in such properties is adjusted accordingly.

         RESEARCH AND DEVELOPMENT-

            The   Registrant   expenses   research,   development   and  product
            engineering costs as incurred.  Approximately $543,000, $403,000 and
            $641,000 of such costs were incurred by the Registrant in 1996, 1995
            and 1994, respectively.  Provisions for losses are made for research
            and  development  contracts  when the  estimated  costs  under  such
            contracts exceed the proceeds.

         COMMON STOCK-BASED COMPENSATION-

            The  Registrant  accounts  for  stock-based  compensation  plans  in
            accordance  with  Accounting   Principles   Board  Opinion  No.  25,
            "Accounting   for   Stock   Issued   to   Employees"   and   related
            Interpretations  (APB No. 25).  Under APB No. 25, when the  exercise
            price of the  Company's  employee  stock  options  equals the market
            price of the underlying  stock on the date of grant, no compensation
            cost is recognized.

         NET INCOME (LOSS) PER COMMON SHARE-

            Net  income  (loss)  per  common  share is  computed  based upon the
            weighted  average  number of common and dilutive  common  equivalent
            shares  outstanding  during the  period.  Fully  diluted and primary
            earnings  per common  share are  approximately  the same amounts for
            each of the periods presented.

         PRIOR YEAR FINANCIAL STATEMENTS-

            Certain amounts have been  reclassified in the December 31, 1995 and
            1994  financial  statements  and notes  thereto to present them on a
            basis consistent with the current year.

         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.


                                      F-11
<PAGE>
         IMPAIRMENT OF LONG-LIVED ASSETS-

            During 1996, the  Registrant  adopted the new Statement of Financial
            Accounting  Standards (SFAS) No.  121-"Accounting for the Impairment
            of Long-Lived  Assets and for Long-Lived  Assets To Be Disposed Of,"
            which requires impairment losses to be recorded on long-lived assets
            used in operations when indicators of impairment are present and the
            undiscounted  cash flows  estimated  to be generated by those assets
            are less than the assets' carrying amount.  The adoption thereof had
            no  material  effect  on  the  Registrant's  financial  position  or
            operating results.

(2)   ACQUISITION AND DISPOSAL OF OPERATING COMPANIES:

         On  March  14,  1994,  the  Registrant,   through  a  new  wholly-owned
         subsidiary known as Kentile, Inc. ("Kentile"),  purchased substantially
         all of the operating assets of Kentile Floors,  Inc. ("Kentile Floors")
         for  approximately  $9.6 million.  The purchase  price was comprised of
         approximately $6.5 million in new bank financing and approximately $3.1
         million in cash.

         In August 1995, the operations of the Registrant's  Kentile  subsidiary
         ceased when its raw material  stocks were  exhausted  resulting from an
         unwillingness  of major trade  suppliers  of Kentile to extend  further
         credit.  In December  1995, the assets of Kentile were assigned for the
         benefit of creditors and are currently being liquidated.  In connection
         with the write-off of the Registrant's  investment in Kentile, a pretax
         charge  of  approximately  $6  million,  including  estimated  costs of
         disposition was recorded in 1995. Additional costs could be incurred by
         the Registrant as a result of this matter.  Management will continue to
         monitor this situation very closely, including the values received upon
         the disposition of the Kentile assets.

         In addition,  the  accompanying  consolidated  statements of operations
         include operating losses of Kentile during 1995,  incurred prior to its
         closure, of approximately $2.3 million, on a pre-tax basis.

(3)   REAL PROPERTY HELD FOR RENTAL:

         The  Registrant  is the lessor of real estate  under  operating  leases
         which expire in various years through 2071.

         The following is a summary of real property held for rental at December
         31-

                                                     1996              1995
                                                --------------    --------------

            Land                                  $12,406,082      $12,094,596
            Buildings                             112,362,218      113,888,625
                                                --------------    -------------

                                                  124,768,300      125,983,221

            Less- Accumulated depreciation        (60,925,409)     (57,919,719)
                                                --------------    -------------

                                                  $63,842,891      $68,063,502
                                                ==============    ==============


                                      F-12
<PAGE>
         As of December 31, 1996,  total minimum  future  rentals to be received
         under  noncancellable  leases  for  each of the  next  five  years  and
         thereafter are as follows-

            Year Ended December 31-
               1997                                 $16,476,000
               1998                                  13,974,000
               1999                                  11,527,000
               2000                                   9,928,000
               2001                                   8,198,000
               Thereafter                            53,175,000
                                              -----------------

            Total Minimum Future Rental            $113,278,000
                                              =================

         Minimum  future rentals do not include  additional  rentals that may be
         received under certain leases which provide for such rentals based upon
         a  percentage  of  lessees'  sales.  Percentage  rents  included in the
         determination  of income from  operations  in 1996,  1995 and 1994 were
         approximately $1,045,000, $1,029,000 and $915,000, respectively.

(4)   PROPERTY, PLANT AND EQUIPMENT:

         Property,  plant and equipment is principally  used in the Registrant's
         manufacturing operations and consists of the following at December 31-


                                                   1996               1995
                                             ---------------   -----------------

            Land                                   $92,950            $992,950
            Buildings and improvements           2,945,339           4,143,125
            Machinery and equipment             11,760,344          10,865,986
                                             ---------------   -----------------

                                                14,798,633          16,002,061

            Less- Accumulated depreciation      (7,104,195)         (6,044,413)
                                             ---------------   -----------------

                                                $7,694,438          $9,957,648
                                             ===============   =================

         At  December  31,  1995,   property,   plant  and  equipment   includes
         approximately   $2.3  million  of  land  and  buildings   used  in  the
         Registrant's D&M/Chu antenna business. The Registrant ceased operations
         at D&M/Chu,  Massachusetts  in 1996 and  reclassified  such property to
         real property held for rental.

(5)   MARKETABLE SECURITIES:

         The  aggregate  market value of  marketable  securities,  which are all
         equity securities and  available-for-sale,  was $313,294 and $83,760 at
         December  31,  1996 and  1995,  respectively,  while  gross  unrealized
         holding  gains  were  $108,786  and  $54,622  on a net  of  tax  basis,
         respectively.

                                      F-13
<PAGE>
         There were no sales of marketable securities in 1996. Proceeds from the
         sales of securities, which were designated as available-for-sale in all
         years  presented  and the  resulting  gross  realized  gains and losses
         included  in the  determination  of net  income  for  the  years  ended
         December 31, 1995 and 1994 are as follows-


                                            1995            1994
                                        -----------     -----------

            Proceeds                    $   729,318     $ 2,979,985
                                        ===========     ===========

            Realized gains              $   229,979     $ 1,233,389
                                        ===========     ===========

            Realized losses             $         0     ($   29,926)
                                        ===========     ===========

(6)   NOTES RECEIVABLE:

         Notes receivable consist of the following at December 31-
<TABLE>
<CAPTION>
                                                                  1996                  1995
                                                               -----------           ----------

<S>                                                            <C>                   <C>       
            High yield mortgage loans (a)                      $13,498,773           $2,997,000
            Mortgage note receivable (b)                         3,248,497            2,958,229
            Mortgage notes receivable (c)                          665,406              695,530
            Due from related party (Note 13)                       468,000              415,000
            Other                                                  299,158               81,394
                                                               -----------           ----------

                                                                18,179,834            7,147,153
            Less- Current portion included in notes
               and accounts receivable                          12,248,090            3,522,965
                                                               -----------           ----------

                                                               $ 5,931,744           $3,624,188
                                                               ===========           ==========
</TABLE>

         (a)      In 1996,  the  Registrant  participated  in several high yield
                  mortgage loans which in certain instances, may include related
                  party  participants  (see Note 13). At December 31, 1996 there
                  are nine notes  outstanding with balances ranging from $50,000
                  to  $6,500,000,  with  varying  terms,  from  January  1997 to
                  October  1998.  The  notes  are  secured  by a first or second
                  mortgage  lien against the property  which is generally  fully
                  leased  with a  substantial  value-to-loan  ratio.  Management
                  believes  that  sufficient  collateral  exists to satisfy  the
                  obligation.  The notes are interest bearing and in most cases,
                  the Registrant  receives a commitment fee of 4%. The effective
                  yields  on  these  notes  vary  from  10% to 18%.  High  yield
                  mortgage  loans at December  31, 1995  consisted  of two notes
                  (see Note 13), which were fully satisfied in 1996.

         (b)      In February  1994,  the  Registrant  acquired  the  underlying
                  mortgage  secured by Kentile  Floors'  South  Plainfield,  New
                  Jersey  facility  for $2.25  million  plus the  assumption  of
                  certain   liabilities   in  connection   with   operating  and
                  maintaining the property.  The mortgage note has a face amount
                  outstanding  of  approximately  $6.5 million  plus  delinquent
                  accrued  interest.  Included  in  the  carrying  value  of the
                  mortgage note  receivable are costs  associated  with readying
                  the  underlying  property  for  rental  in  1998.   Management
                  believes  that the  fair  value of the  property  exceeds  the
                  carrying value of the mortgage note.


                                      F-14
<PAGE>
         (c)      As partial  consideration  in the sale of several  properties,
                  the Registrant received mortgage notes in the aggregate amount
                  of $1,880,000.  The notes, which are secured by the properties
                  sold,  bore interest in 1996 and 1995 at various rates ranging
                  between 9% and 10.25% and bear  interest in future  periods at
                  rates ranging between 9% and 11%.  Interest under the notes is
                  due  monthly.  Principal  repayment  terms vary with  periodic
                  installments through December 2008.

                  In accordance with generally accepted  accounting  principles,
                  the gains from the sales of certain  of these  properties  are
                  being   recognized   under   the   installment   method,   and
                  accordingly, the carrying value of noncurrent notes receivable
                  has been reduced by deferred gains of  approximately  $849,000
                  and $896,000 at December 31, 1996 and 1995, respectively.  The
                  deferred gains are being  recognized as income as payments are
                  received under the note.

(7)   OTHER ASSETS:

         Other assets consist of the following at December 31-

<TABLE>
<CAPTION>
                                                                                               1996              1995
                                                                                            ----------        ----------

<S>                                                                                         <C>               <C>       
            Anticipated insurance recoveries (a)                                            $2,893,000        $2,943,000
            Deposits                                                                           852,491           810,805
            Pension (Note 16)                                                                  572,359                 0
            Covenants not to compete                                                            37,500           204,889
            Cash surrender value of life insurance policies, net                               313,549           295,410
            Patents, net of accumulated amortization                                           156,862           176,134
            Investments in and advances to affiliate (b)                                     1,306,581                 0
            Other                                                                              575,476           644,361
                                                                                            ----------        ----------

                                                                                             6,707,818         5,074,599

            Less- Amounts included in prepaid expenses and
                        other current assets                                                   795,171           687,535
                                                                                            ----------        ----------

                                    Total other assets                                      $5,912,647        $4,387,064
                                                                                            ==========        ==========
</TABLE>

         (a)      In  accordance   with  Staff   Accounting   Bulletin  92,  the
                  Registrant has recorded the  anticipated  recoveries  from its
                  insurance   carriers  in  connection  with  the  environmental
                  investigation  and remediation  costs to be incurred at two of
                  its   manufacturing   sites  in  New  Jersey.   See  Note  18,
                  "Contingencies."

         (b)      Through its  subsidiaries,  the Registrant owns a 50% interest
                  in Indian Creek Hotel, LLP, a Miami, Florida hotel operated as
                  a Holiday Inn. The hotel began operations in January 1997 and,
                  accordingly,  through  December  31,  1996,  the  Registrant's
                  equity in the results of operations  have been immaterial (See
                  Note 13).

                                      F-15
<PAGE>
(8)   ACCOUNTS PAYABLE
      AND ACCRUED LIABILITIES:

         Accounts  payable and accrued  liabilities  consist of the following at
         December 31-
<TABLE>
<CAPTION>
                                                                                           1996                 1995
                                                                                       -----------           -----------

<S>                                                                                    <C>                   <C>        
            Accounts payable                                                           $ 5,857,202           $ 8,658,096
            Accrued wages and benefits                                                   2,748,281             2,477,483
            Liabilities for discontinued operations                                      2,815,674             3,236,311
            Other accrued expenses                                                       5,865,770             4,772,473
                                                                                       -----------           -----------

                                                                                       $17,286,927           $19,144,363
                                                                                       ===========           ===========
</TABLE>

(9)   LONG-TERM DEBT:

         Long-term debt consists of the following at December 31-
<TABLE>
<CAPTION>
                                                                                         1996                    1995
                                                                                      -----------            -----------
<S>                                                                                   <C>                    <C>        
            First mortgages on real property (a)                                      $34,366,355            $43,816,859
            Second mortgages on real property (b)                                         316,186                355,431
            Loan payable to bank (c)                                                      740,827              2,010,832
            Loan payable to bank (d)                                                      393,750              1,575,000
            Loan payable to bank (e)                                                    2,362,500              2,992,500
            Note payable (f)                                                            1,200,000              1,200,000
            Other                                                                           2,048                 34,295
                                                                                      -----------            -----------

                                                                                       39,381,666             51,984,917

            Less- Current maturities                                                    7,711,408             10,085,227
                                                                                      -----------            -----------

                                                                                      $31,670,258            $41,899,690
                                                                                      ===========            ===========
</TABLE>
         (a)      First mortgages  bearing  interest at rates ranging from 4% to
                  10.5%  per  annum  are  collateralized  by  the  related  real
                  property.  Such  amounts  are  scheduled  to mature at various
                  dates from May 1997 through February 2010.

         (b)      Second  mortgages  bearing  interest at rates of approximately
                  10.125%  per  annum are  collateralized  by the  related  real
                  property.  Such  amounts  are  scheduled  to mature at various
                  dates from October 2001 through November 2002.

         (c)      In July 1992, the Registrant  borrowed  $6,350,000 from a bank
                  to refinance a note to a former  shareholder  which was issued
                  in connection with the merger of BMG Equities,  Corp. ("BMG").
                  This note bore  interest at the bank's prime lending rate plus
                  1/4% until  April 1993 when it was  converted  to a fixed rate
                  note at 6.2% for the remainder of the term. The note is due in
                  60  equal  principal   installments,   together  with  accrued
                  interest  thereon,  through  July  1997.  The  loan  agreement
                  contains,  among other  things,  several  financial  covenants
                  regarding net worth and debt-to-equity ratios.


                                      F-16
<PAGE>
         (d)      In connection with the acquisition of the operating  assets of
                  Chu Associates, Inc., the Registrant entered into a $4,725,000
                  loan  agreement  with a bank.  The loan bore  interest  at the
                  bank's  prime  lending rate plus 1/4% until April 1993 when it
                  was  converted to a fixed rate note at 6.3% for the  remainder
                  of the  term.  The  note is  payable  monthly,  with 48  equal
                  monthly principal installments beginning in May 1993. The loan
                  agreement  contains  several  financial   covenants  regarding
                  working  capital,  net worth,  capital  expenditures and debt-
                  to-equity ratios.

         (e)      In  August  1995,  the  Registrant   converted  $3.15  million
                  outstanding  under its  revolving  credit  facility to a fixed
                  rate  note at  7.94%  per  annum.  The note is due in 60 equal
                  principal   installments,   together  with  accrued   interest
                  thereon,  through September 2000. The loan agreement contains,
                  among other things,  several financial covenants regarding net
                  worth and debt-to-equity ratios.

         (f)      As partial  consideration  in the  acquisition  of D&M/Chu the
                  Registrant  issued a $1,200,000 note to the sellers.  The note
                  bore interest at 8.25% between May 1996 and December 1996. The
                  interest  rate  is  adjusted  annually  by no  more  than a 1%
                  increase  or  decrease  from  the  rate  of  the   immediately
                  preceding  twelve-month  period to the  published  prime  rate
                  charged by U. S.  banks.  The rate  during  the twelve  months
                  ended  May  1996,  1995  and 1994 was  7.75%,  6.75%  and 6.5%
                  respectively.  The note requires  quarterly  interest payments
                  and  matures  in  May  1997.  Under  certain  conditions,  the
                  Registrant may offset certain amounts against this note.

         The approximate  aggregate  maturities of these obligations at December
         31, 1996 are as follows-

               1997                         $7,711,408
               1998                          5,140,773
               1999                          4,877,984
               2000                          4,619,947
               2001                          3,950,060
               Thereafter                   13,081,494
                                          -------------

                                           $39,381,666
                                          =============

(10)     REVOLVING CREDIT FACILITIES:

            The Registrant  maintained an unsecured  line of credit  arrangement
            with  a  bank  which  provided  for  borrowings  up to  $15,000,000.
            Effective  November 19, 1996 this line was temporarily  increased to
            $20 million.  In conjunction  with the negotiation of the new credit
            facility discussed below, this line was terminated effective January
            15,  1997.  Advances  under this  facility  accrued  interest at the
            bank's  prime  lending rate  ("Prime"),  which was 8.25% and 8.5% at
            December 31, 1996 and 1995, respectively, or at the London Interbank
            Offered  Rate  ("LIBOR")  plus 2%, at the  Registrant's  option.  At
            December 31, 1996 approximately  $19.8 million was outstanding under
            this  facility  at Prime.  At  December  31,  1996,  the  Registrant
            classified $9,789,000 of borrowings  outstanding under this facility
            as  long-term  debt as the  Registrant  has both the ability and the
            intent to refinance these amounts on a long-term basis under the new
            credit facility  discussed below. At December 31, 1995, $1.8 million
            was outstanding at Prime and $6 million at approximately 7.25%.


                                      F-17
<PAGE>
            Effective January 15, 1997, the Registrant  entered into a Revolving
            Credit  Agreement  ("Revolver")  with two banks  that  provides  for
            borrowings  of up to $40  million  and which  expires on January 15,
            2000.  Amounts  outstanding  under the  previously  existing line of
            credit were converted to borrowings  under the Revolver.  Borrowings
            under the Revolver,  at the  Registrant's  option,  bear interest at
            Prime or LIBOR  plus  1.75%.  Under the terms of the  Revolver,  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.

            The terms of the Revolver contain certain  financial and restrictive
            covenants, including minimum consolidated equity, interest coverage,
            debt service coverage and capital  expenditures (other than for real
            estate).  The  Revolver  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  Revolver.  At  January  15,  1997  the  Registrant  was  in
            compliance  with all covenants.  At January 15, 1997,  approximately
            $20.2 million was available to be borrowed under the Revolver.

(11)     FAIR VALUE OF FINANCIAL INSTRUMENTS:

            The Company has limited  involvement with financial  instruments and
            does not use them for trading  purposes.  The following  methods and
            assumptions were used by the Registrant in estimating its fair value
            disclosures for financial instruments-

               The carrying amount reported in the  consolidated  balance sheets
               for cash and cash equivalents and accounts receivable approximate
               their fair value.

               The fair value of fixed rate notes receivable are estimated using
               discounted cash flow analyses,  with interest rates comparable on
               loans with similar terms and borrowers of similar credit quality.
               The carrying amounts of notes receivable approximate fair value.

               Marketable securities held for investment purposes are carried at
               fair value based on quoted market prices or dealer  quotes.  If a
               quoted  market  price is not  available,  fair value is estimated
               using quoted market prices for similar securities.

               Carrying   amounts  of  borrowings  under  the  revolving  credit
               facilities  approximate  their fair value.  The fair value of the
               long-term debt was calculated  based on interest rates  available
               for debt  with  terms  and due  dates  similar  to the  Company's
               existing debt  arrangements.  The fair value of long-term debt at
               December  31,  1996 and 1995 was  approximately  $39,598,000  and
               $51,640,000   respectively,   while   the   carrying   value  was
               $39,380,000 and $51,950,000 for the same periods.


                                      F-18
<PAGE>
(12)     STOCKHOLDERS' EQUITY:

            Stock Options-

               The Registrant  has two stock option plans under which  qualified
               and  nonqualified  options  may be  granted to key  employees  to
               purchase the  Registrant's  common stock at the fair market value
               at the date of grant.  Under both plans,  the  options  typically
               become  exercisable  in three equal  installments,  beginning one
               year from the date of grant. The 1988 Incentive Stock Option Plan
               (the  "Incentive  Plan")  provides  for the granting of incentive
               stock options not to exceed 325,000 options in the aggregate. The
               1988 Joint  Incentive  and  Non-Qualified  Stock Option Plan (the
               "Joint   Plan")   provides  for  the  granting  of  incentive  or
               nonqualified stock options, also not to exceed 325,000 options in
               the aggregate.

               At December  31,  1996,  there were  118,367  and 51,061  options
               outstanding   under   the   Joint   Plan  and   Incentive   Plan,
               respectively.  At December 31, 1995,  117,193 and 47,733  options
               were  outstanding  under  the  Joint  Plan  and  Incentive  Plan,
               respectively.

               In  addition  to  options  outstanding  under the Joint  Plan and
               Incentive  Plan, at December 31, 1995 and 1994 there were 180,000
               options outstanding at $5.50 per share. Such options were granted
               to Directors and certain  officers of the Registrant at $5.50 per
               share, which price was equal to the market value per share on the
               date of grant.  During 1996,  all such  options  were  exercised.
               Approximately  $490,000 of compensation expense was recognized in
               1996  resulting  from the exercise and repurchase of such options
               by two Directors of the Registrant.

               A summary of the  Registrant's  stock  options as of December 31,
               1996,  1995 and 1994, and changes during the years then ended are
               summarized below-


<TABLE>
<CAPTION>
                                                                                                  Weighted-
                                                                                                  Average
                                                                                                  Exercise
                                                                                Shares             Price
                                                                                ------            ---------

<S>                                                                            <C>               <C>
                Outstanding at January 1, 1994                                 506,328           $    7.40
                   Granted                                                           0
                   Exercised                                                  (112,921)          $    5.59
                   Forfeited                                                   (44,297)          $   11.03
                                                                              --------

                Outstanding at December 31, 1994                               349,110           $    7.53
                                                                                                      
                   Granted                                                           0
                   Exercised                                                      (700)          $    5.00
                   Forfeited                                                    (3,484)          $   10.51
                                                                              --------

                Outstanding at December 31, 1995                               344,926           $    7.51

                   Granted                                                      20,000           $    7.25
                   Exercised                                                  (185,250)          $    5.48
                   Forfeited                                                   (10,248)          $    7.49
                                                                              --------

                Outstanding at December 31, 1996                               169,428           $    9.45
                                                                              ========
</TABLE>


                                      F-19
<PAGE>

            The following table summarizes information about options outstanding
            and exercisable at December 31, 1996-
<TABLE>
<CAPTION>

                                                                       
                                       Options Outstanding and         Weighted-Average
                                       Exercisable at December       Remaining Contractual    Weighted-Average
            Range of Exercise Price           31, 1996                       Life              Exercise Price
            -----------------------    --------------------------    ---------------------    -----------------

<S>                                       <C>                           <C>                        <C>
                  $5.00-$7.25                     51,200                5.4 years                   $5.88
                $10.875-$11.00                   118,228                6.8 years                  $11.00
                                          -----------------

                                                 169,428                6.4 years                   $9.45
                                          =================
</TABLE>

            For purposes of estimating the fair value of each option on the date
            of grant, the Registrant  utilized the Black-Scholes  option-pricing
            model with the following  assumptions for 1996;  risk-free  interest
            rates of 5.84%; no dividend yield, expected life of three years; and
            an  expected  volatility  of 40%.  There were no options  granted in
            1995, the earliest year for which adoption of Statement of Financial
            Accounting Standard No. 123 "Accounting for Stock-Based Compensation
            to  Employees"  (SFAS No. 123) is required.  Pro forma  compensation
            costs for the  Registrant's  stock option plans  determined based on
            the fair value at the grant date for 1996 awards  under those plans,
            consistent with the method of SFAS No. 123, were not material.

(13)     TRANSACTIONS WITH RELATED PARTIES:

            In  September  1996,  the  Registrant  purchased a 50% interest in a
            limited  partnership  that owns and operates a hotel in Miami Beach,
            Florida.  Through  December 31, 1996,  the  Registrant  has invested
            approximately  $624,000 for its equity interest.  In September 1996,
            the Registrant  participated  in a $2.5 million loan  transaction to
            the  limited  partnership  secured by a mortgage  lien  against  the
            property.   The  Registrant  advanced   approximately   $682,500  in
            connection  with this note.  The remaining  amounts were advanced by
            the following:  a Director of the Registrant,  $250,000; the wife of
            the  Board  Chairman,  $1  million;  an  officer  of the  Registrant
            $100,000; and the balance by unrelated parties. All amounts invested
            in and  advanced  to the  partnership  by the  Registrant  have been
            classified  as  investments  in and  advances to  affiliate  and are
            included in other assets in the consolidated  financial  statements.
            The note bears interest at 14% per annum payable monthly and matures
            in September 1997. The  participants  also received a commitment fee
            of 4%. Upon maturity the note may be extended for a one year term in
            consideration of 4% of the outstanding balance.

            In 1996, in order to  effectively  manage the cost to the Registrant
            of the remediation  efforts at Metex' two New Jersey facilities (see
            Note 18),  the  Registrant  sold  approximately  a 2%  interest  for
            $22,000 in a subsidiary that manages the Registrant's  environmental
            remediation efforts to an Officer and Director of the Registrant and
            other  employees.  These  shares  contain  certain  restrictions  on
            transfer and, under certain circumstances, are redeemable at the net
            book value of the subsidiary.


                                      F-20
<PAGE>
            In May 1995,  the  Registrant  participated  in a $4.5  million loan
            transaction  secured by an  assignment of a mortgage note covering a
            commercial office building in New York City. The Registrant advanced
            approximately  $2.5  million  in  connection  with  this  loan.  The
            remaining amounts were advanced by the following:  a Director of the
            Registrant, $500,000; the wife of the Board Chairman, $1.45 million;
            and the balance by unrelated parties.  The note bore interest at 14%
            per annum, and was fully satisfied together with accrued interest in
            August 1996. The  participants  also received a commitment fee of 4%
            in  connection  with the loan.  A Director of the  Registrant  was a
            shareholder of the borrower and also a guarantor under the note.

            The  Registrant's  two hotel  properties  are  managed by a publicly
            traded company for which the Board Chairman and another  Director of
            the Registrant are directors.  Fees paid for the management of these
            properties   is  based  upon  a  percentage   of  revenue  and  were
            approximately  $159,000,  $120,000 and  $103,000 for 1996,  1995 and
            1994, respectively.

            In May  1994,  the  Registrant  participated  in a  $2,650,000  loan
            transaction secured by a first mortgage covering a leasehold estate.
            The Registrant  advanced  $265,000 in connection with this loan. The
            remaining  amount was  advanced  by a company in which a Director of
            the Registrant owns a substantial  interest.  The note bore interest
            at 15% per annum,  payable monthly and was fully satisfied  together
            with accrued  interest in May 1995.  In addition,  the  participants
            received a commitment fee of 3% on their advances from the borrower.

            In April 1994,  the  Registrant  participated  in a $5,000,000  loan
            transaction  secured  by a  second  mortgage  covering  a  leasehold
            estate. The Registrant  advanced  $2,253,000 in connection with this
            loan.  The  remaining   amounts  were  advanced  by  the  following:
            Directors  of the  Registrant,  $830,000;  the  wife  of  the  Board
            Chairman,  $1 million;  Officers  of the  Registrant,  $39,000;  and
            $878,000 by  unrelated  parties.  The note bore  interest at 15% per
            annum, payable monthly and was fully satisfied together with accrued
            interest in February 1995. In addition,  the participants received a
            commitment fee of 3% on their advances from the borrower.

            In connection with the purchase of an interest in a real estate loan
            from a Director in 1992, the Registrant  issued a note in the amount
            of $198,000.  The note bore interest at 10% and was fully  satisfied
            in February 1995.

            During  1996 and 1995 the  Registrant  advanced,  in the  aggregate,
            $468,000 and $415,000,  respectively,  to the Chairman of the Board.
            Such advances bore interest at the Registrant's borrowing rate under
            its revolving  credit  facility which was 8.25% and 8.5% at December
            31, 1996 and 1995, respectively. Amounts outstanding at December 31,
            1996 and 1995 of $468,000 and $415,000, respectively,  together with
            accrued  interest  thereon  were  repaid in  January  1997 and 1996,
            respectively.

(14)     INCOME TAXES:

            Deferred  income taxes are  determined  on the  liability  method in
            accordance with Statement of Financial Accounting Standards No. 109,
            "Accounting for Income Taxes" ("SFAS 109"). Under SFAS 109, deferred
            tax assets and  liabilities  are determined  based on the difference
            between  the tax  basis of an asset or  liability  and its  reported
            amount in the  consolidated  financial  statements using enacted tax
            rates.  Future tax benefits  attributable  to these  differences are
            recognized to the extent that  realization  of such benefits is more
            likely than not.



                                      F-21
<PAGE>
            Deferred tax assets  primarily arose from basis  differences of real
            properties  held for rental for  financial  statement and income tax
            purposes.  Based  upon the  Registrant's  historical  and  projected
            levels of pretax income,  management believes it is more likely than
            not that the  Registrant  will realize  such  benefits in the future
            and, accordingly, no valuation reserve has been recorded.

            The components of the net deferred tax asset (liability) at December
            31, 1996 and 1995, are as follows-

<TABLE>
<CAPTION>
                                                                                          1996               1995
                                                                                       -----------       -----------
<S>                                                                                    <C>               <C>        
               Realization allowances related to
                  accounts receivable and inventories                                  $   627,464       $   585,046
               Net unrealized gain on marketable securities                                (56,041)          (28,138)
               Basis differences relating to real
                  property held for rental                                               3,291,925         2,246,128
               Accrued expenses, deductible when paid                                    2,786,802         2,683,819
               Deferred revenue and profit (for tax purposes)                             (163,307)         (221,486)
               Basis differences relating to business acquisitions                      (1,858,912)       (1,858,912)
               Property, plant and equipment                                              (649,087)         (579,619)
               Pensions                                                                   (200,160)            7,959
               Other, net                                                                   70,331            15,399
                                                                                       -----------       -----------

                                 Net deferred tax asset                                  3,849,015         2,850,196

               Less- Current portion                                                     1,831,768         1,893,205
                                                                                       -----------       -----------

                                 Noncurrent portion                                    $ 2,017,247       $   956,991
                                                                                       ===========       ===========
</TABLE>
            Income  tax  provision   (benefit)  reflected  in  the  accompanying
            consolidated  statements of operations  for the years ended December
            31, 1996, 1995 and 1994, is summarized as follows-

                                  1996              1995             1994
                              ------------    --------------    ---------------

               Current-
                  Federal      $4,083,000        $2,572,000        $2,286,000
                  State         1,928,000         1,337,000         1,131,000
               Deferred        (1,015,000)         (795,000)         (405,000)
                              ------------    --------------    ---------------

                               $4,996,000        $3,114,000        $3,012,000
                              ============    ==============    ===============




                                      F-22
<PAGE>

            A reconciliation of the tax provision computed at statutory rates to
the amounts shown in the accompanying  consolidated statements of operations for
the years ended December 31, 1996, 1995 and 1994 is as follows-
<TABLE>
<CAPTION>
                                                                        1996              1995             1994
                                                                     -----------       -----------       -----------
<S>                                                                  <C>               <C>               <C>        
               Computed Federal income
                  tax provision at statutory rates                   $ 3,683,000       $ 2,272,000       $ 2,255,000
               State income taxes, net of
                  Federal income tax benefit                           1,326,000           903,000           767,000
               Other, net                                                (13,000)          (61,000)          (10,000)
                                                                     -----------       -----------       -----------

                                                                     $ 4,996,000       $ 3,114,000       $ 3,012,000
                                                                     ===========       ===========       ===========
</TABLE>
(15)     OTHER INCOME AND EXPENSE:

            The  components  of other  income and  expense  in the  accompanying
            consolidated  statements of operations  for the years ended December
            31, 1996, 1995 and 1994 are as follows-
<TABLE>
<CAPTION>
                                                                           1996              1995             1994
                                                                       -----------        ----------       ----------
<S>                                                                    <C>                <C>              <C>       
               Gain on sales of real estate assets                     $ 3,919,158        $  865,490       $1,399,495
               Net realized gains on marketable
                  securities                                                     0           229,979        1,203,463
               Income from equity investments (a)                                0             3,676           46,029
               Settlement income (b)                                     1,443,263                 0                0
               Other, net (c)                                             (561,415)          545,711          170,506
                                                                       -----------        ----------       ----------

                                                                       $ 4,801,006        $1,644,856       $2,819,493
                                                                       ===========        ==========       ==========
</TABLE>

            (a)         Income from equity  investments  principally  represents
                        nonrecurring   cash   distributions   received   by  the
                        Registrant in connection  with interests held in certain
                        real  estate  ventures  which were  acquired in the 1991
                        merger  with  BMG.  Such   investments  were  valued  at
                        historical cost at the date of acquisition.

            (b)         In December 1996, the Registrant received  approximately
                        $1.4  million  in  settlements  of all  claims  from  an
                        investment that was principally written off in 1990.

            (c)         In March 1991,  the  Registrant was named as a defendant
                        in a suit by  certain  investors  and  limited  partners
                        seeking  actual,  punitive and treble damages in a total
                        unspecified  amount.   While  management   continued  to
                        believe  that the  allegations  of the action were false
                        and without  merit,  as a result of  escalating  defense
                        costs  and  the   continued   likelihood   of   extended
                        litigation,  the Registrant settled this matter in April
                        1996 for approximately $425,000, after taxes.

(16)     RETIREMENT PLAN:

            The Registrant has a  noncontributory  defined  benefit pension plan
that covers  substantially  all full-time  employees of the engineered  products
segment and the former  employees  of the  Registrant's  discontinued  resilient
vinyl flooring segment.

                                      F-23
<PAGE>
            The  following  table sets  forth the funded  status of the plan and
            amounts  recognized  in  the  Registrant's   consolidated  financial
            statements as of December 31, 1996 and 1995.  Amounts  presented for
            1995  have  been   reclassified  to  conform  to  the  current  year
            presentation.
<TABLE>
<CAPTION>
                                                                                         1996              1995
                                                                                     ------------       ------------
<S>                                                                                  <C>                <C>         
               Accumulated benefit obligation:
                  Vested                                                             $  8,659,000       $  9,088,000
                  Nonvested                                                               171,000            141,000
                                                                                     ------------       ------------

                                                                                     $  8,830,000       $  9,229,000
                                                                                     ============       ============

               Plan assets at fair value, primarily U. S. bonds,
                  government-backed mortgage obligations
                  and stocks                                                         $ 12,904,000       $ 13,123,000
               Projected benefit obligation                                            (8,983,000)        (9,403,000)
                                                                                     ------------       ------------

               Plan assets in excess of projected benefit obligation                    3,921,000          3,720,000
               Effect of purchase accounting                                             (156,000)          (156,000)
               Unrecognized net gain, net of amortization                              (3,192,000)        (3,353,000)
               Adjustment required to recognize minimum
                  liability                                                                     0           (251,000)
                                                                                     ------------       ------------

               Prepaid (accrued) pension obligation                                  $    573,000       ($    40,000)
                                                                                     ============       ============
</TABLE>
            At December 31, 1995, in accordance  with the Statement of Financial
            Accounting Standard No. 87, "Employers' Accounting for Pensions," an
            additional   minimum   liability  of   approximately   $251,000  was
            recognized  for the sum of the  excess  of the  accumulated  benefit
            obligation  over the fair  value of the  plan  assets  plus  prepaid
            pension contributions. The liability was offset by intangible assets
            to the extent  possible  and the  balance  was charged as a separate
            component of stockholders'  equity, net of tax benefits. At December
            31, 1996, no additional minimum liability was required.

            Net  periodic  pension  (income)  expense  for  1996,  1995 and 1994
            includes the following components-
<TABLE>
<CAPTION>
                                                                                1996           1995           1994
                                                                             ---------      ---------      ---------
<S>                                                                          <C>            <C>            <C>      
               Service cost                                                  $ 230,000      $ 197,000      $ 182,000
               Interest cost                                                   643,000        145,000        132,000
               Actual return on plan assets                                   (883,000)      (199,000)        61,000
               Net amortization and deferral                                  (102,000)        63,000       (222,000)
                                                                             ---------      ---------      ---------

                                 Net periodic pension (income)
                                    expense                                  ($112,000)     $ 206,000      $ 153,000
                                                                             =========      =========      =========
</TABLE>

            In determining the projected  benefit  obligation for 1996 and 1995,
            the weighted  average assumed discount rate was 7.5%, while the rate
            of expected increases in future salary levels was 3.5%. The expected
            long-term rate of return on assets used in determining  net periodic
            pension cost for all years presented was 9%. No  contributions  were
            made during 1996 or 1995.


                                      F-24
<PAGE>
(17)     BUSINESS SEGMENTS:

            At December 31, 1996, the  Registrant  had three business  segments:
            real estate  investment and management,  the manufacture and sale of
            antenna systems and the manufacture and sale of engineered products.
            Information on the Registrant's business segments for 1996, 1995 and
            1994 is as follows-
<TABLE>
<CAPTION>
                                                                               1996           1995            1994
                                                                             ---------      ---------      ---------
                                                                                           (in thousands)
<S>                                                                          <C>            <C>            <C>      
               Net revenues and sales-
                  Real estate investment and management                      $  23,936      $  22,652      $  21,988
                  Antenna systems                                               18,883         20,307         19,495
                  Engineered products                                           42,055         41,687         35,511
                                                                             ---------      ---------      ---------

                                                                             $  84,874      $  84,646      $  76,994
                                                                             =========      =========      =========

               Operating income (loss)-
                  Real estate investment and management                      $   6,342      $   5,129      $   5,009
                  Antenna systems                                               (2,258)        (1,103)        (1,527)
                  Engineered products                                            3,792          3,779          2,477
                                                                             ---------      ---------      ---------

                                                                                 7,876          7,805          5,959

               General corporate expenses                                       (1,924)        (2,332)        (1,613)
               Other income, net                                                 4,881          1,210          2,287
                                                                             ---------      ---------      ---------

                              Income from continuing
                                 operations before income taxes              $  10,833      $   6,683      $   6,633
                                                                             =========      =========      =========

               Identifiable assets-
                  Real estate investment and management                      $  98,044      $  88,954      $  92,479
                  Antenna systems                                               11,603         15,291         15,580
                  Engineered products                                           12,174         12,955         14,365
                  Discontinued operations                                            0              0          5,290
                                                                             ---------      ---------      ---------

                                                                             $ 121,821      $ 117,200      $ 127,714
                                                                             =========      =========      =========
</TABLE>

            Through the Registrant's antenna systems segment, approximately 11%,
            16% and 17% of consolidated  revenues were derived from sales to the
            United States  Government or its contractors in 1996, 1995 and 1994,
            respectively.

            Sales by the Registrant's  engineered products segment to automobile
            original  equipment  manufacturers  accounted for approximately 25%,
            23%  and  23%  of  1996,  1995  and  1994   consolidated   revenues,
            respectively.

            Included in the  identifiable  assets of the real estate  investment
            and  management   segment  for  1996  and  1995  are   approximately
            $13,449,000  and  $2,997,000,  respectively,  of high yield mortgage
            notes  receivable  (see Note 6).  Income  generated  by these  notes
            receivable is included in interest income.


                                      F-25
<PAGE>
 (18)    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  become  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.

            As a result of the  foregoing,  the  Registrant  has not  recorded a
            charge to operations for the environmental remediation, noted above,
            in the consolidated  financial  statements,  as anticipated proceeds
            from insurance  recoveries are expected to offset such  liabilities.
            The  Registrant  has  reached  settlements  with  several  insurance
            carriers in this matter.

            At  December  31,  1996  and  1995,  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  December  31,  1996 (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
            assurances, however, that the Registrant will prevail in its efforts
            to obtain amounts at or in excess of the estimated recoveries.


                                      F-26
<PAGE>

            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.  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.

                                      F-27
<PAGE>
                                                                     SCHEDULE II

                      UNITED CAPITAL CORP. AND SUBSIDIARIES

                         ALLOWANCE FOR DOUBTFUL ACCOUNTS


<TABLE>
<CAPTION>

                                                                                          Write-offs
                                                                                            Net of
                                                                                          Recoveries
                                           Balance                 Charged                of Accounts                 Balance
                                             at                       to                  Previously                     at
                                          Beginning               Costs and                 Written                    End of
                                          of Period                Expenses                   Off                      Period
                                        -----------------     -------------------     --------------------      --------------------
<S>                                         <C>                      <C>                     <C>                      <C>     
Allowance for doubtful accounts:

      Year ended December 31, 1996          $471,406                 $48,100                 $18,100                  $501,406

      Year ended December 31, 1995           542,545                  54,133                 125,272                   471,406

      Year ended December 31, 1994           285,545                 257,000                       0                   542,545

</TABLE>

       The accompanying notes to consolidated financial statements are an
                        integral part of these schedules.


                                      F-28
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES                               SCHEDULE III

           REAL PROPERTY HELD FOR RENTAL AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
                                          Mortgage    Initial Cost To Registrant Costs Capitalized
                                           Loans      --------------------------    Subsequent to
                                          Payable                    Building and   Acquisition/   
           Description                    (Gross)         Land       Improvements   Improvements   
           -----------                 ------------   ------------   ------------   ------------   
<S>                                    <C>            <C>            <C>            <C>            
Shopping Centers and Retail Outlets-
   Culver, CA                          $  5,008,567   $    841,811   $  7,576,296   $          0   
   Northbrook, IL                         5,489,242        897,246      8,075,215              0   
   Miscellaneous Investments             20,040,015      5,766,432     50,723,169        929,339   
                                       ------------   ------------   ------------   ------------   

                                         30,537,824      7,505,489     66,374,680        929,339   
                                       ------------   ------------   ------------   ------------   

Commercial Properties-
   Miscellaneous Investments              2,460,869      3,061,917     27,166,869              0   
Day Care Centers and Offices-
   Miscellaneous Investments                605,893        642,895      5,786,058      1,132,683   
Hotel Properties-
   Miscellaneous Investments                 77,615              0      2,867,703         48,092   
Other-
   Miscellaneous Investments              1,000,340      1,195,781      7,473,489        583,305   
                                       ------------   ------------   ------------   ------------   

                                       $ 34,682,541   $ 12,406,082   $109,668,799   $  2,693,419   
                                       ============   ============   ============   ============   

</TABLE>
<TABLE>
<CAPTION>
                                                                                                                    Life on Which
                                                                                                                    Depreciation
                                               Gross Amount at Which                                                  in Latest
                                             Carried at Close of Period                                              Statement of
                                       ---------------------------------------   Accumulated                        Operations is
                                                    Building and      Total     Depreciation    Date of     Date      Computed
           Description                   Land       Improvements     (a) (c)        (b)      Construction Acquired     (Years)
           -----------                 -----------  ------------  ------------  ------------ ------------ --------  ------------
<S>                                    <C>          <C>           <C>           <C>              <C>        <C>          <C>
Shopping Centers and Retail Outlets-
   Culver, CA                          $   841,811  $  7,576,296  $  8,418,107  $  4,213,256     N/A        1986         18
   Northbrook, IL                          897,246     8,075,215     8,972,461     4,331,579     N/A        1987         18
   Miscellaneous Investments             5,766,432    51,652,508    57,418,940    28,127,667     N/A        1986-96      10-39
                                       -----------  ------------  ------------  ------------

                                         7,505,489    67,304,019    74,809,508    36,672,502
                                       -----------  ------------  ------------  ------------

Commercial Properties-
   Miscellaneous Investments             3,061,917    27,166,869    30,228,786    14,478,197     N/A        1986-94      12-39
Day Care Centers and Offices-
   Miscellaneous Investments               642,895     6,918,741     7,561,636     5,707,192     N/A        1986-91      7-39
Hotel Properties-
   Miscellaneous Investments                     0     2,915,795     2,915,795     2,868,755     N/A        1986-96      10-39
Other-
   Miscellaneous Investments             1,195,781     8,056,794     9,252,575     1,198,763     N/A        1986-96      10-39
                                       -----------  ------------  ------------  ------------

                                       $12,406,082  $112,362,218  $124,768,300  $ 60,925,409
                                       ===========  ============  ============  ============
</TABLE>
Notes:

(a)  Reconciliations  of the carrying value of real property held for rental for
the three years ended December 31, 1996 are as follows-
<TABLE>
<CAPTION>
                                                                                 1996                1995                   1994
                                                                            -------------        -------------         -------------

<S>                                                                         <C>                  <C>                   <C>          
Real property held for rental at beginning of period                        $ 125,983,221        $ 126,640,338         $ 119,650,430
Additions during the period-
   Acquisitions and improvements                                                3,523,466            2,679,878             6,643,880
   Transfers from property, plant and equipment                                 2,195,352                    0             1,420,927
   Transfer to noncurrent notes receivable                                              0           (2,682,563)                    0
                                                                            -------------        -------------         -------------

                                                                              131,702,039          126,637,653           127,715,237
Deductions during period-
   Cost of real estate sold                                                     6,933,739              654,432             1,074,899
                                                                            -------------        -------------         -------------

                                                                            $ 124,768,300        $ 125,983,221         $ 126,640,338
                                                                            =============        =============         =============
</TABLE>
(b)  Reconciliations  of  accumulated  depreciation  for the three  years  ended
December 31, 1996 are as follows-

<TABLE>
<CAPTION>
                                                                                 1996                1995                   1994
                                                                            -------------        -------------         -------------

<S>                                                                         <C>                  <C>                   <C>          
Accumulated depreciation at beginning of period                              $ 57,919,719         $ 51,569,038          $ 45,257,746
Additions during the period-
   Provision for depreciation                                                   6,523,058            6,717,161             6,660,537
   Transfers from property, plant and equipment                                   158,928                    0               134,065
   Transfer to noncurrent notes receivable                                              0              (29,065)                    0
                                                                             ------------         ------------          ------------

                                                                               64,601,705           58,257,134            52,052,348
Deductions during period-
   Accumulated depreciation of real estate sold                                 3,676,296              337,415               483,310
                                                                             ------------         ------------          ------------

                                                                             $ 60,925,409         $ 57,919,719          $ 51,569,038
                                                                             ============         ============          ============
</TABLE>
(c) The  aggregate  cost  for  Federal  income  tax  purposes  is  approximately
$178,000,000


The accompanying notes to consolidated financial statements are an integral part
                              of these schedules.


                                      F-29
<PAGE>
                                                                     SCHEDULE IV
                      UNITED CAPITAL CORP. AND SUBSIDIARIES

                          MORTGAGE LOANS ON REAL ESTATE

                                DECEMBER 31, 1996
<TABLE>
<CAPTION>
                                 Description                Interest Rate               Final Maturity Date             
                                 -----------                -------------               -------------------             
                                                                                                                        
<S>                                                     <C>                      <C>                  
Mortgage loans secured by Commercial Property-
   Staten Island, NY                                             14%                        August 1997                 
   New York, NY                                                  18%                         May 1997                   
   Other                                                 Varies from 9% - 14%     From August 1997-December 2008        
                                                                                                                        

                                                                                                                        
                                                                                                                        
Mortgage loans secured by Hotels-
   Ontario, Canada                                               14%                       October 1998                 
   McAfee, NJ                                                    14%               From January 1997-April 1997         
   Other                                                Varies from 10% - 11%    From November 2001-February 2002       
                                                                                                                        
                                                                                                                        
                                                                                                                        

                                                                                                                        
                                                                                                                        
Construction Loans secured by Commercial Property-
   Mt. Laurel, NJ                                                14%                        August 1997                 
                                                                                                                        

Mortgage loans secured by Residential Property-
   Pond Ridge, NY                                                10%                      September 1997                
   Other                                                         15%                         June 1997                  
                                                                                                                        
</TABLE>
<TABLE>
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                 Description                        Periodic Payment Terms                              
                                 -----------                        ----------------------
                                                                                                                        
<S>                                                   <C>
Mortgage loans secured by Commercial Property-
   Staten Island, NY                                  Interest due monthly; with principal due at maturity              
   New York, NY                                       Interest due monthly; with principal due at maturity              
   Other                                              Principal and interest due monthly                                
                                                                                                                        

                                                                                                                        
                                                                                                                        
Mortgage loans secured by Hotels-
   Ontario, Canada                                    Interest due monthly; with principal due at maturity              
   McAfee, NJ                                         Interest due monthly; with principal due at maturity              
   Other                                              Principal and interest due monthly; in addition,
                                                      there is a principal payment of $150,000 due in
                                                      November 1998 and $773,000 due in February 2002               
                                                                                                                        

                                                                                                                        
                                                                                                                        
Construction Loans secured by Commercial Property-
   Mt. Laurel, NJ                                     Interest due monthly, with principal due at maturity              
                                                                                                                        

Mortgage loans secured by Residential Property-
   Pond Ridge, NY                                     Interest due monthly, with principal due at maturity              
   Other                                              Interest due monthly, with principal due at maturity              
                                                                                                                        
</TABLE>
<TABLE>
                                                                                                             Principal Amount
                                                                                             Carrying        of Loans Subject
                                                       Prior             Face Amount of      Amount of    to Delinquent Principal
                                 Description           Liens              Mortgages         Mortgages (b)       or Interest
                                 -----------           -----              ---------         -------------       -----------
<S>                                                     <C>               <C>               <C>               <C>
Mortgage loans secured by Commercial Property-
   Staten Island, NY                                    $14,660,000       $ 2,500,000       $ 2,500,000             $0
   New York, NY                                                   0         6,500,000         6,500,000              0
   Other                                                  3,550,000           670,000           377,895              0
                                                        -----------       -----------       -----------             --

                                                         18,210,000         9,670,000         9,377,895              0
                                                        -----------       -----------       -----------             --
Mortgage loans secured by Hotels-
   Ontario, Canada                                                0         1,800,000         1,800,000              0
   McAfee, NJ                                             4,000,000           935,000           935,000              0
   Other                                                          0         1,510,000           587,511              0
                                                        -----------       -----------       -----------             --

                                                          4,000,000         4,245,000         3,322,511              0
                                                        -----------       -----------       -----------             --
Construction Loans secured by Commercial Property-
   Mt. Laurel, NJ                                         4,500,000           843,773           843,773              0
                                                        -----------       -----------       -----------             --

Mortgage loans secured by Residential Property-
   Pond Ridge, NY                                                 0           570,000           570,000              0
   Other                                                          0            50,000            50,000              0
                                                        -----------       -----------       -----------             --

                                                                  0           620,000           620,000              0
                                                        -----------       -----------       -----------             --

                                                        $26,710,000       $15,378,773       $14,164,179             $0
                                                        ===========       ===========       ===========             ==

</TABLE>
NOTES:

(a) A  reconciliation  of  mortgage  loans on real  estate  for the  year  ended
December 31, 1996 is as follows-

            Balance at beginning of period             $  3,692,530
            Additions during period-
               New mortgage loans                        13,498,773
            Deductions during period-
               Collection of principal                   (3,027,124)
                                                       ------------

            Balance at end of period                   $ 14,164,179
                                                       ============

(b) In accordance with generally  accepted  accounting  principles certain gains
from the sale of real property are being recognized under the installment method
and,  accordingly,  notes receivable have been reduced by the following deferred
gains at December 31, 1996:

         Mortgage note receivable in connection with sale of property in-

            Montgomery, Alabama                             $240,015
            Beaumont, Texas                                  450,651
            Waterbury, Connecticut                           132,890
            Augusta, Georgia                                  25,715
                                                            --------

                                                            $849,271
                                                            ========

(c) The carrying value for Federal income tax purposes is substantially equal to
the carrying amount for book purposes.

The accompanying notes to consolidated financial statements are an integral part
                              of these schedules.


                                      F-30
<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES


                            QUARTERLY FINANCIAL DATA

                                   (unaudited)

                  (dollars in thousands except per share data)


<TABLE>
<CAPTION>
                                                                            First           Second           Third           Fourth
                                                                            Quarter         Quarter         Quarter          Quarter
                                                                            -------         -------         -------          -------
<S>                                                                         <C>             <C>             <C>              <C>    
FOR THE YEAR 1996:
   Revenues                                                                 $21,562         $20,965         $21,248          $21,099
                                                                            =======         =======         =======          =======

   Costs and expenses                                                       $20,382         $20,355         $19,754          $18,431
                                                                            =======         =======         =======          =======

   Other income                                                             $   441         $ 2,533         $   404          $ 1,503
                                                                            =======         =======         =======          =======

   Net income                                                               $   946         $ 1,901         $   986          $ 2,004
                                                                            =======         =======         =======          =======

   Per share data:
      Net income per common share                                           $   .17         $   .34         $   .18          $   .37
                                                                            =======         =======         =======          =======

FOR THE YEAR 1995:
   Revenues                                                                 $21,347         $22,144         $19,308          $21,847
                                                                            =======         =======         =======          =======

   Costs and expenses                                                       $19,613         $19,625         $18,687          $21,248
                                                                            =======         =======         =======          =======

   Other income (expenses)                                                  $   934         $   130         $   134          $    12
                                                                            =======         =======         =======          =======

   Income from continuing operations                                        $ 1,562         $ 1,430         $   494          $    83
                                                                            =======         =======         =======          =======

   Loss from discontinued operations, net of tax                            ($  735)        ($  342)        ($4,396)         $     0
                                                                            =======         =======         =======          =======

   Net income (loss)                                                        $   827         $ 1,088         ($3,902)         $    83
                                                                            =======         =======         =======          =======

   Per share data:
      Income from continuing operations                                     $   .26         $   .24         $   .08          $   .01
      Loss from discontinued operations,
         net of tax                                                            (.12)           (.06)           (.77)              .0
                                                                            -------         -------         -------          -------

   Net income (loss) per common share                                       $   .14         $   .18         ($  .69)         $   .01
                                                                            =======         =======         =======          =======
</TABLE>

                                      F-31