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, 1997
                         -------------------------------------------------------
                                       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  5,  1998  was   approximately
$41,138,000.

The number of shares of the Registrant's $.10 par value common stock outstanding
as of March 5, 1998 was 5,248,347.

                       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>
                                     PART I

ITEM 1.       BUSINESS

GENERAL

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

1.       Real Estate Investment and Management.

2.       Manufacture and Sale of Engineered Products.

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

On November 20, 1997, the Registrant  signed a definitive  agreement to sell the
stock of its Dorne & Margolin,  Inc.  ("D&M")  subsidiary  to AIL  Systems  Inc.
("AIL") for $16 million in cash.  On January 2, 1998 the sale was  completed and
will result in a pretax gain of  approximately  $9 million and have an estimated
$.92 per share effect on earnings on an after tax basis in the first  quarter of
1998.  The  net  assets  and  operating  results  of D&M  are  presented  in the
accompanying  consolidated financial statement as a discontinued operation. (See
Note 2 to Consolidated Financial Statements "Disposal of Operating Companies".)

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.

         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.


<PAGE>
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 also manufactures  transformer  products which are marketed under
several brand names including AFP Transformers,  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 39% of the
segment's  sales for 1997.  During  1996  sales to its three  largest  customers
accounted for approximately 40% of the segment's sales.

         SUMMARY FINANCIAL INFORMATION

The following table sets forth the revenues,  operating  income and identifiable
assets of each continuing  business segment of the Registrant for 1997, 1996 and
1995.
<TABLE>
<CAPTION>

                                                                  1997            1996            1995
                                                               ------------    ------------    ------------
                                                                             (in thousands)
REAL ESTATE INVESTMENT AND MANAGEMENT-

<S>                                                               <C>             <C>             <C>    
Rental revenues                                                   $24,042         $23,936         $22,652
                                                               ============    ============    ============

Operating income                                                   $7,718          $6,195          $5,003
                                                               ============    ============    ============

Identifiable assets                                               $95,080         $99,292         $92,328
                                                               ============    ============    ============
ENGINEERED PRODUCTS-

Net sales                                                         $36,204         $42,055         $41,688
                                                               ============    ============    ============

Operating income                                                   $3,419          $3,792          $3,779
                                                               ============    ============    ============

Identifiable assets                                               $11,432         $12,174         $12,955
                                                               ============    ============    ============
</TABLE>

         DISTRIBUTION

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

         PRODUCT METHODS AND SOURCES OF RAW MATERIALS

The Registrant's products are manufactured at its own facilities. The Registrant
purchases raw materials 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 1998.

                                       2

<PAGE>
         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 engineered  products operations are significant to this segment, 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 5, 1998, the Registrant employed approximately 319 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  21  other  companies  in the  sale of
engineered products.  The Registrant stresses product performance and service in
connection with the sale of these 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  engineered  products
segment was  approximately  $2.2  million at December  31, 1997 and 1996.  It is
anticipated that substantially all such 1997 backlog will be filled in 1998. 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.

         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

                                       3
<PAGE>
$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.

At December 31, 1997 and 1996 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,  1997  (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 19 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 5, 1998 the Registrant  owned 224 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, 1997 are as follows (in  thousands,  except
number of property amounts):

                                       4
<PAGE>
<TABLE>
<CAPTION>

                                                                 Gross Carrying                            Number of
                  Description                                         Value           Percentage           Properties
                  -----------                                    ----------------   ----------------    -----------------

<S>                                                                    <C>                <C>                   <C>
         Shopping centers and retail outlets                            $71,223            57.3%                 31
         Commercial properties                                           31,276            25.2%                136
         Day-care centers and offices                                     7,561             6.1%                 12
         Hotel properties                                                 2,916             2.3%                  2
         Other                                                           11,370             9.1%                 44
                                                                 ----------------     ------------           --------
                         Total                                         $124,346           100.0%                225
                                                                 ================     ============           ========
</TABLE>

         SHOPPING CENTERS AND RETAIL OUTLETS

Shopping  centers  and retail  outlets  include 21  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,  one IKEA store and one
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.

         COMMERCIAL PROPERTIES

Commercial  properties consist of properties leased as 93 restaurants,  27 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 93
restaurants,  located throughout the United States, include properties leased as
Boston  Market,  Roy Rogers,  Pizza Hut,  Hardee's,  Wendy's and Kentucky  Fried
Chicken.  Included in  commercial  properties is the 90,000 square foot facility
previously utilized in the Registrant's D&M business. This facility was retained
by the Registrant and transferred to real property held for rental.

         DAY-CARE CENTERS AND OFFICES

The 10 day-care centers and two offices, which are located in New York City, are
leased to the City of New York. The  Registrant has negotiated  with the City of
New York to extend, on a long-term basis, all 12 of these leases.

         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.

                                       5

<PAGE>
The following  summarizes  real  property held for rental by geographic  area at
December 31, 1997 (in thousands, except number of property amounts):
<TABLE>
<CAPTION>

                                                                                            Gross
                                                                     Number of            Carrying
                                                                     Properties             Value
                                                                   ---------------    ------------------
<S>                                                                      <C>                  <C>     
         Northeast                                                       116                   $35,956
         Southeast                                                        41                    24,305
         Midwest                                                          41                    27,314
         Southwest                                                         9                     9,811
         Pacific Coast                                                     7                    21,581
         Pacific Northwest                                                 6                     2,098
         Rocky Mountain                                                    5                     3,281
                                                                     ---------        ------------------
                                                                         225                  $124,346
                                                                     =========        ==================
</TABLE>

         MANUFACTURING FACILITIES

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.  In March 1997,  Mr.
Rosatelli  amended his  complaint  to include  Bank of America  Illinois,  Metex
Corporation,  Kentile Inc.,  A.F.  Petrocelli and another  officer of Kentile as
additional  defendants.  The  Registrant  believes  that  as  a  result  of  Mr.
Rosatelli's  gross  negligence,  recklessness  and/or  willful  disregard of his
duties and responsibilities,  Mr. Rosatelli is not entitled to the recoveries he
seeks. Mr.  Rosatelli's  employment was terminated by the Registrant in May 1996
for cause.  The matter 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

                                       6
<PAGE>
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.

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

1997            First quarter          $12-7/8          $8-3/8
----            Second quarter          20-1/2          12-5/8
                Third quarter           17-5/8          15
                Fourth quarter          29              17-1/8

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

                                       7

<PAGE>
As of  March 5,  1998,  there  were  approximately  527  record  holders  of the
Registrant's  Common Stock. The closing sales price for the Registrant's  Common
Stock on such date was $23 5/8. 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  Credit  Agreement,  it is unlikely  that the
Registrant will pay any cash dividends on its Common Stock in the near future.

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>

                                                 1997             1996            1995            1994            1993
                                             --------------    ------------    ------------    ------------    ------------
                                                                (in thousands except per share amounts)

<S>                                              <C>               <C>             <C>           <C>              <C>     
Total revenues (1)                                $60,246           $65,991         $64,340       $57,499          $48,458
                                             ==============    ============    ============    ============    ============

Income from continuing operations                  $7,465            $6,634          $3,910        $4,158           $3,565
                                             ==============    ============    ============    ============    ============
Income from continuing operations
   per common share basic (2)                       $1.41             $1.21            $.67          $.68             $.58
                                             ==============    ============    ============    ============    ============

Total assets, end of year                        $113,353          $116,761        $110,366      $120,404         $107,345
Total liabilities, end of year                     75,873            87,186          84,137        87,623           77,167
Stockholders' equity, end of year                  37,480            29,575          26,229        32,781           30,178
                                             ==============    ============    ============    ============    ============
</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)      The  earnings  per share  amounts  prior to 1997 have been  restated as
         required to comply with Statement of Financial Accounting Standards No.
         128,  "Earnings Per Share" ("SFAS No. 128"). For further  discussion of
         earnings  per  share  and the  impact  of SFAS No.  128,  see  Notes To
         Consolidated Financial Statements beginning on page F-8.

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

RESULTS OF OPERATIONS 1997 AND 1996

         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 1997 were $60.2  million a
decrease of $5.8  million from total 1996  revenues of $66 million.  Income from
continuing  operations  for the  period  was $7.5  million or $1.41 per share as
compared to income from continuing operations of $6.6 million or $1.21 per share
for 1996.  Income from  discontinued  operations for 1997 was $1 million or $.19
per share

                                       8
<PAGE>

versus a loss of ($797,000) or ($.15) per share in 1996. Net income increased to
$8.5  million or $1.60 per share in 1997 versus $5.8  million or $1.06 per share
in 1996.

        REAL ESTATE OPERATIONS

Rental revenues from real estate  operations  during 1997 increased  $106,000 or
less than 1% over those of the prior year.  Revenues from new property additions
and a one-time  adjustment for percentage rents on certain properties offset the
reduction in revenues resulting from properties sold.

Mortgage  interest  expense for 1997  decreased  by $613,000 as compared to such
expense  incurred  during 1996. This decrease of 17% results from the continuing
amortization  of mortgages  which  approximated  $5.1 million during the current
year, including repayments associated with properties sold.

Depreciation  expense  associated with real properties held for rental decreased
approximately  $521,000 or  approximately  8% from such expense  incurred in the
preceding  year.  This decrease is primarily  attributable to properties sold in
1997 and 1996.

Other  operating  expenses  associated  with the  management of real  properties
decreased  approximately  $283,000 during 1997 versus such expenses  incurred in
1996.  This  decrease  is  primarily   attributable  to  costs  associated  with
properties  sold,  reductions  in legal  expenses  from the prior  year,  and to
certain cost reductions and capital improvements implemented in 1996.

        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 follows-
<TABLE>
<CAPTION>

                                                                   1997            1996
                                                               -------------    ------------
                                                                      (in thousands)

<S>                                                               <C>              <C>    
           Net sales                                              $36,204          $42,055
                                                               =============    ============

           Cost of sales                                          $25,972          $30,891
                                                               =============    ============

           Selling, general and administrative expenses            $6,813           $7,372
                                                               =============    ============

           Income from operations                                  $3,419           $3,792
                                                               =============    ============
</TABLE>

Net sales of the engineered  products segment were $36.2 million,  a decrease of
$5.9 million versus such sales in 1996.  This decrease  resulted  primarily from
increased price competition and declining worldwide automotive sales. This group
is continuing  to pursue new revenue  opportunities  including new  geographical
markets  for its  existing  products  as well as new  applications  for its core
technologies.

Cost of sales as a percentage of net sales  decreased  approximately  2% between
1997 and 1996.  This decline is primarily due to continued  management  focus on
cost containment as well as product mix.

Selling, general and administrative expenses ("SG&A") of the engineered products
segment decreased $559,000 or 8% during 1997, as compared to such costs in 1996.
While sales  decreased  approximately  14% in 1997 as  compared to 1996,  the 8%
decline in selling,  general and administrative  expenses reflects  management's
commitment to increasing sales in this segment.

                                       9
<PAGE>

        GENERAL AND ADMINISTRATIVE EXPENSES

General  and  administrative  expenses  not  associated  with the  manufacturing
operations  decreased  approximately  $595,000  during  1997 as compared to such
expenses incurred in the preceding year. This decrease is primarily due to lower
compensation and related expenses.

        OTHER INCOME AND EXPENSE, NET

Other income and expense, net for 1997 decreased approximately $1.5 million from
$4.8 million in 1996 to $3.3 million in 1997. The decrease is principally due to
a  non-recurring  gain of $1.4 million in 1996  resulting from the settlement of
all claims from an  investment  that was  principally  written off in 1990 and a
reduction  in gains  on the  sale of real  estate  properties  of  approximately
$438,000 partially offset by a reduction of other net expenses.

        RESULTS OF OPERATIONS 1996 AND 1995

Total  revenues  generated by the  Registrant  during 1996 were $66 million,  an
increase of $1.7 million from total 1995 revenues of $64.3 million.  Income from
continuing  operations  for the  period  was $6.6  million or $1.21 per share as
compared to income from continuing  operations of $3.9 million or $.67 per share
for 1995. Net loss in 1995 was ($1.9 million) or ($.33) per share as this period
included  losses from the  Registrant's  discontinued  resilient  vinyl flooring
operations, the write-off of its investment in Kentile, Inc. and losses from the
Registrant's  discontinued  Antenna Systems segment.  See Note 2 to Consolidated
Financial Statements, "Disposal of Operating Companies."

        REAL ESTATE OPERATIONS

Rental revenues from real estate  operations  during 1996 increased $1.3 million
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 $9.4 million during 1996, including
repayments associated with properties sold.

Depreciation  expense  associated with real properties held for rental decreased
approximately  $74,000 or  approximately  1% from such expense incurred in 1995.
This decrease is primarily attributable to properties sold in 1996 and 1995.

Other  operating  expenses  associated  with the  management of real  properties
increased  approximately  $1.6 million during 1996 versus such expenses incurred
in 1995. This increase  primarily results from the operating costs of additional
properties  added by the  Registrant  in  1996,  the  reclassification  of prior
manufacturing  facilities to real  property held for rental and operating  costs
associated with existing real estate properties.

        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-

                                       10
<PAGE>

<TABLE>
<CAPTION>
                                                                 1996               1995
                                                             --------------     --------------
                                                                      (in thousands)

<S>                                                             <C>                <C>
           Net sales                                            $42,055            $41,688
                                                             ==============     ==============

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

           Selling, general and administrative expenses          $7,372             $6,672
                                                             ==============     ==============

           Income from operations                                $3,792             $3,779
                                                             ==============     ==============
</TABLE>

Net sales of the engineered  products segment were $42.1 million, an increase of
$367,000  versus  such  sales in  1995.  This  growth  resulted  primarily  from
increased  transformer  sales as sales of knitted wire products were  consistent
with 1995 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.

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  $158,000  during  1996 as compared to such
expenses   incurred   in  1995.   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 during 1995.

        OTHER INCOME AND EXPENSE, NET

Other  income  and  expense,  net for  1996 of  approximately  $4.8  million  is
comprised of  approximately  $3.9 million 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  $550,000 in miscellaneous
other income.

        LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1997, the  Registrant's  current  liabilities  exceeded  current
assets by approximately $4.6 million.  This shortfall in working capital results
from financing the purchase of long-term assets utilizing short-term  borrowings
and from the classification of current mortgage  obligations without the benefit
of a corresponding current asset for such properties.

                                       11

<PAGE>
On January 2, 1998, the Registrant sold its antenna  business for $16 million in
cash,  resulting in a pretax gain of  approximately $9 million or $.92 per share
in the first  quarter of 1998.  Substantially  all of the cash  proceeds of this
transaction  are  available  for  general  corporate   purposes.   Additionally,
effective September 30, 1997, the Registrant amended its January 15, 1997 Credit
Agreement  with two banks to  provide  for both a $7  million  term loan  ("Term
Loan") and a $40 million revolving credit facility ("Revolver") and converted $7
million of amounts  outstanding  under the Revolver to borrowings under the Term
Loan. Under the terms of the Credit  Agreement,  the Registrant will be provided
with eligibility  based upon the sum of (i) 50% of the aggregate  annualized and
normalized year-to-date net operating income of eligible properties, as defined,
capitalized  at 11.5% and (ii) the  lesser of $12  million  or the sum of 75% of
eligible  accounts  receivable  and  50%  of  eligible  inventory,  as  defined.
Eligibility  is also  limited by  amounts  outstanding  under the Term Loan.  At
December 31, 1997 eligibility under the Revolver was $40 million, based upon the
above terms.  The Credit Agreement  contains  certain  financial and restrictive
covenants,  including  minimum  consolidated  equity,  interest  coverage,  debt
service  coverage and capital  expenditures  (other then for real  estate).  The
Credit  Agreement also contains  provisions which allow the lenders to perfect a
security  interest in certain operating and real estate assets in the event of a
default,  as defined under the terms of the Credit  Agreement.  Borrowings under
the  Revolver,  at the  Registrant's  option,  bear interest at the bank's prime
lending rate  ("Prime") or at the London  Interbank  Offered Rate ("LIBOR") plus
1.75% while  borrowings  under the Term Loan bear  interest at 90 day LIBOR plus
1.4%. The Term Loan is payable in quarterly principal  installments of $350,000,
with a final payment on September 30, 2002. The Revolver  expires on January 15,
2000. At December 31, 1997,  approximately  $4.6 million was  outstanding  under
this  facility,  which was  repaid on January 2,  1998.  The  Registrant  was in
compliance with all covenants.

Also, effective September 30, 1997, the Registrant entered into an interest-rate
swap  agreement to  effectively  convert its floating  rate Term Loan to a fixed
rate basis, thus reducing the impact of interest rate changes on future expense.
Under  the  swap  agreement,   the  Registrant   agreed  to  exchange  with  the
counterparty (a commercial bank ) the difference  between the fixed and floating
rate interest  amounts.  The differential to be paid or received on the interest
rate swap is  recognized  over the term of the  agreement  as an  adjustment  to
interest expense.  The fair value of the swap agreement is not recognized in the
financial  statements.  At  December  31,  1997  approximately  $40  million was
available to be borrowed under the Revolver.

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

The  Registrant  has  undertaken  the  completion of  environmental  studies and
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, 1997 and 1996 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, 1997 (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 19 to Consolidated

                                       12
<PAGE>
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,
additional  borrowings  on the Revolver  and the  proceeds  from the sale of the
antenna  business.  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.

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 1997 revenues of the Registrant decreased  approximately $5.8 million from
1996 levels to $60.2  million.  The  reduction  in revenues is  attributable  to
revenue reductions in the engineered  products segment as real estate operations
posted an increase in revenues.  Income from continuing  operations increased to
$7.5 million in 1997 from $6.6 million in 1996 principally due to an increase in
operating profit of the Registrant's  real estate  operations and a reduction in
general corporate expenses,  partially offset by reduced operating profit in the
engineered products segment resulting from the reduction in revenues, as well as
a reduction in other income, net.

The results of the Registrant's  real estate  operations  reflect an increase in
operating  profit  of $1.5  million  on a  revenue  increase  of only  $106,000.
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 decreased 14% in 1997 from
1996 record levels.  These  reductions are  principally  due to continued  price
competition  and  declining  worldwide  automotive  sales.  Sales  in  1998  are
anticipated to approximate 1997 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.

YEAR 2000 CONVERSION

The  Registrant  currently  believes that its essential  processes,  systems and
business functions will be ready for the millennium transition and is taking the
necessary  steps  to  accomplish  this  objective.  The Year  2000  issue is not
anticipated to have a material impact on the Registrant's results of operations,
financial position or its cash flows.

                                       13
<PAGE>
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 1998  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  1998  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 1998 Annual Meeting of Stockholders under the captions "Security  Ownership"
and "Election of Directors" and is incorporated herein by reference.

                                       14

<PAGE>
ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

This  information will be contained in the Proxy Statement of the Registrant for
the 1998 Annual Meeting of Stockholders under the caption "Certain Relationships
and Related Transactions" and is incorporated herein by reference. Also see Note
14,  "Transactions  with Related  Parties," of Notes to  Consolidated  Financial
Statements, contained elsewhere in this report.

                                     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, 1997 and 1996   F-2
         Consolidated Statements of Operations for the Years            F-3
           Ended December 31, 1997, 1996 and 1995                       to F-4
         Consolidated Statements of Stockholders' Equity for            F-5
           the Years Ended December 31, 1997, 1996 and 1995
         Consolidated Statements of Cash Flows for the                  F-6
           Years Ended December 31, 1997, 1996 and 1995                 to F-7
         Notes to Consolidated Financial Statements                     F-8
                                                                        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 to F-32

         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 1997.

                                       15

<PAGE>
(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).

                  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).

                 *10.6   Revolving Credit Agreement dated as of January 15, 1997
and as amended  September  29,  1997 and  January 2,  1998,  with the  financial
parties thereto.

                 *10.7   Stock Purchase Agreement, dated as of November 20, 1997
by and among AIL Systems Inc., United Capital Corp. and Metex Corporation.

                  *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

                                       16

<PAGE>

                                   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 5, 1998                       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 5, 1998                        By: /S/ A.F. PETROCELLI
        -------------                            -------------------
                                                 A. F. Petrocelli
                                                 Chairman, President and
                                                 Chief Executive Officer

Dated:  MARCH 5, 1998                        By: /S/ HOWARD M. LORBER
        -------------                            --------------------
                                                 Howard M. Lorber
                                                 Director

Dated:  MARCH 5, 1998                        By: /S/ ANTHONY J. MICELI
        -------------                            ---------------------
                                                 Anthony J. Miceli
                                                 Chief Financial Officer,
                                                 Chief Accountant, Secretary and
                                                 Director

Dated:  MARCH 5, 1998                        By: /S/ ARNOLD S. PENNER
        -------------                            --------------------
                                                 Arnold S. Penner
                                                 Director



                                       17

<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, 1997 and
1996,  and the related  consolidated  statements  of  operations,  stockholders'
equity and cash flows for each of the three years in the period  ended  December
31, 1997. 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,  1997  and  1996,  and the  results  of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1997, 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
February 17, 1998

                                      F-1

<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES

          CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1997 AND 1996

                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                             ASSETS                    1997                1996
                                             ------                  --------            --------
<S>                                                                  <C>                 <C>     
CURRENT ASSETS:
   Cash and cash equivalents                                         $  5,250            $  2,579
   Marketable securities                                                  355                 313
   Notes and accounts receivable, net of allowance for doubtful
     accounts of $326 and $377, respectively                           11,319              18,744
   Inventories                                                          3,693               4,352
   Deferred income taxes                                                1,219               1,355
   Net current assets of discontinued operations                        4,492               3,312
   Prepaid expenses and other current assets                              292                 706
                                                                     --------            --------
                Total current assets                                   26,620              31,361
                                                                     --------            --------
PROPERTY, PLANT AND EQUIPMENT, net                                      4,299               4,114

REAL PROPERTY HELD FOR RENTAL, net                                     58,578              65,689

NONCURRENT NOTES RECEIVABLE                                             7,356               5,932

DEFERRED INCOME TAXES                                                   2,966               1,886

NET NONCURRENT ASSETS OF DISCONTINUED OPERATIONS                        2,349               1,983

OTHER ASSETS                                                           11,185               5,796
                                                                     --------            --------
                Total assets                                         $113,353            $116,761
                                                                     ========            ========


                   LIABILITIES AND STOCKHOLDERS' EQUITY                1997                1996
                   ------------------------------------              --------            --------
CURRENT LIABILITIES:
  Current maturities of long-term debt                               $  5,232            $  6,326
  Borrowings under credit facilities                                    6,000              10,031
  Accounts payable and accrued liabilities                             14,129              14,113
  Income taxes payable                                                  5,872               4,237
                                                                     --------            --------
              Total current liabilities                                31,233              34,707
LONG-TERM LIABILITIES:
  Borrowings under credit facilities                                    5,250               9,789
  Long-term debt                                                       26,560              31,670
  Other long-term liabilities                                          12,830              11,020
                                                                     --------            --------
              Total liabilities                                        75,873              87,186
                                                                     --------            --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
  Common stock $.10 par value, authorized 7,500 shares; issued and
    outstanding 5,286 and 5,346 shares, respectively                      528                 534
  Additional paid-in capital                                            6,819               7,416
  Retained earnings                                                    29,997              21,516
  Net unrealized gain on marketable securities, net of tax                136                 109
                                                                     --------            --------
              Total stockholders' equity                               37,480              29,575
                                                                     --------            --------
              Total liabilities and stockholders' equity             $113,353            $116,761
                                                                     ========            ========
</TABLE>

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

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

                      CONSOLIDATED STATEMENTS OF OPERATIONS

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
                                                         1997             1996           1995
                                                     -----------      ------------    -----------

REVENUES:
<S>                                                    <C>               <C>            <C>    
   Net sales                                           $36,204           $42,055        $41,688
   Rental revenues from real estate operations          24,042            23,936         22,652
                                                     -----------      ------------    -----------
                Total revenues                          60,246            65,991         64,340
                                                     -----------      ------------    -----------

COSTS AND EXPENSES:
   Cost of sales                                        25,972            30,891         31,237
   Real estate operations-
     Mortgage interest expense                           3,058             3,671          4,418
     Depreciation expense                                5,838             6,359          6,433
     Other operating expenses                            7,428             7,711          6,122
   General and administrative expenses                   5,038             5,798          6,534
   Selling expenses                                      4,104             4,498          3,896
                                                     -----------      ------------    -----------
                Total costs and expenses                51,438            58,928         58,640
                                                     -----------      ------------    -----------
                Operating income                         8,808             7,063          5,700
                                                     -----------      ------------    -----------

OTHER INCOME (EXPENSE):
   Interest income                                       2,613             1,108            709
   Interest expense                                     (1,408)             (929)          (974)
   Other income and expense, net                         3,262             4,801          1,645
                                                     -----------      ------------    -----------
                Total other income                       4,467             4,980          1,380
                                                     -----------      ------------    -----------

   Income from continuing operations before
     income taxes                                       13,275            12,043          7,080
   Provision for income taxes                            5,810             5,409          3,170
                                                     -----------      ------------    -----------
   Income from continuing operations                     7,465             6,634          3,910
                                                     -----------      ------------    -----------
</TABLE>

                                      F-3

<PAGE>
<TABLE>
<CAPTION>
                                                                     1997                  1996                 1995
                                                                ---------------      -----------------    -----------------

DISCONTINUED OPERATIONS:
<S>                                                                    <C>                     <C>                <C>     
   Operating income (loss), net of tax (provision)
     benefit of ($635), $413 and $836, respectively                    $1,016                  ($797)             ($1,854)
   Provision for disposition, net of tax benefit
     of $2,040                                                              0                      0               (3,960)
                                                                ---------------      -----------------    -----------------

                Income (loss) from discontinued
                  operations                                            1,016                   (797)              (5,814)
                                                                ---------------      -----------------    -----------------

                Net income (loss)                                      $8,481                 $5,837              ($1,904)
                                                                ===============      =================    =================

BASIC EARNINGS PER COMMON SHARE:
   Income from continuing operations                                    $1.41                 $1.21                 $.67
   Discontinued operations                                                .19                  (.15)               (1.00)
                                                                ---------------      -----------------    -----------------

                Net income (loss) per common share                      $1.60                 $1.06                ($.33)
                                                                ===============      =================    =================

DILUTED EARNINGS PER COMMON SHARE:
   Income from continuing operations                                    $1.40                 $1.20                 $.66
   Discontinued operations                                                .19                  (.14)                (.98)
                                                                ---------------      -----------------    -----------------
                Net income (loss) per common share - 
                  assuming dilution                                     $1.59                 $1.06                ($.32)
                                                                ===============      =================    =================
</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, 1997, 1996 AND 1995

                                 (IN THOUSANDS)
<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 -- December 31, 1994             6,051        $ 605      $ 14,531      $ 17,583      $   0      $  62          $ 32,781

   Purchase and retirement
     of common shares                     (446)         (45)       (4,434)            0          0          0            (4,479)
   Proceeds from the
     exercise of stock
     options                                 1            1             3             0          0          0                 4
   Change in net
     unrealized gain on
     marketable securities,
     net of tax                              0            0             0             0          0         (7)               (7)
   Change in minimum
     pension liability,
     net of tax                              0            0             0             0       (166)         0              (166)
   Net loss                                  0            0             0        (1,904)         0          0            (1,904)
                                        ------        -----      --------      --------      -----      -----          --------

BALANCE -- December 31, 1995             5,606          561        10,100        15,679       (166)        55            26,229
                                        ------        -----      --------      --------      -----      -----          --------

   Purchase and retirement
     of common shares                     (425)         (43)       (3,575)            0          0          0            (3,618)
   Proceeds from the
     exercise of stock
     options                               165           16           891             0          0          0               907
   Change in net
     unrealized gain on
     marketable securities,
     net of tax                              0            0             0             0          0         54                54
   Change in minimum
     pension liability,
     net of tax                              0            0             0             0        166          0               166
   Net income                                0            0             0         5,837          0          0             5,837
                                        ------        -----      --------      --------      -----      -----          --------

BALANCE-- December 31, 1996              5,346          534         7,416        21,516          0        109            29,575
                                        ------        -----      --------      --------      -----      -----          --------
                                                                                                                  
   Purchase and retirement
     of common shares                      (67)          (7)         (659)            0          0          0              (666)
   Proceeds from the
     exercise of stock
     options                                 7            1            62             0          0          0                63
   Change in net
     unrealized gain on
     marketable securities,
     net of tax                              0            0             0             0          0         27                27
   Net income                                0            0             0         8,481          0          0             8,481
                                        ------        -----      --------      --------      -----      -----          --------

BALANCE-- December 31, 1997              5,286        $ 528      $  6,819      $ 29,997      $   0      $ 136          $ 37,480
                                        ======        =====      ========      ========      =====      =====          ========
</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, 1997, 1996 AND 1995

                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                    1997            1996            1995
                                                                                -------------    ------------    ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                <C>               <C>              <C>    
   Net income (loss)                                                                $8,481           $5,837          ($1,904)
                                                                                -------------    ------------    ------------

   Adjustments to reconcile net income (loss)
     to net cash provided by operating activities-
       Depreciation and amortization                                                 6,657            7,246            7,413
       Disposal of discontinued operations                                               0                0            1,869
       Equity in net loss of affiliates                                                263                0                0
       Net realized gains on marketable securities                                       0                0             (230)
       Changes in assets and liabilities, net of effects from
         business disposals (A)                                                     11,313           (9,257)           5,641
                                                                                -------------    ------------    ------------

                Total adjustments                                                   18,233           (2,011)          14,693
                                                                                -------------    ------------    ------------

                Net cash provided by operating activities                           26,714            3,826           12,789
                                                                                -------------    ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Investments in and advances to affiliates                                        (5,395)               0                0
   Purchase of marketable securities                                                     0             (147)               0
   Proceeds from sale of marketable securities                                           0                0              729
   Acquisition of property, plant and equipment                                       (806)            (735)          (1,634)
   Investing activities of discontinued operations                                    (569)            (261)            (886)
                                                                                -------------    ------------    ------------

                Net cash used in investing activities                               (6,770)          (1,143)          (1,791)
                                                                                -------------    ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Principal payments on mortgage commitments, notes
     and loans                                                                      (6,715)         (13,046)          (8,996)
   Proceeds from mortgage commitments, notes and loans                                   0            1,025            3,150
   Net borrowings under credit facilities                                           (8,570)          12,035            1,785
   Purchase and retirement of common shares                                           (666)          (3,618)          (4,479)
   Proceeds from the exercise of stock options                                          63              907                4
   Financing activities of discontinued operations                                  (1,385)            (582)            (631)
                                                                                -------------    ------------    ------------

                Net cash used in financing activities                              (17,273)          (3,279)          (9,167)
                                                                                -------------    ------------    ------------

                Net increase (decrease) in cash and
                  cash equivalents                                                   2,671             (596)           1,831

CASH AND CASH EQUIVALENTS, BEGINNING OF
   YEAR                                                                              2,579            3,175            1,344
                                                                                -------------    ------------    ------------

CASH AND CASH EQUIVALENTS, END OF YEAR                                              $5,250           $2,579           $3,175
                                                                                =============    ============    ============
</TABLE>

                                      F-6

<PAGE>
<TABLE>
<CAPTION>
                                                                                    1997            1996            1995
                                                                                -------------    ------------    ------------


<S>                                                                                 <C>              <C>              <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
   INFORMATION:
     Cash paid during the year for-
       Interest                                                                     $4,832           $4,734           $5,253
       Taxes                                                                         3,655            2,876            1,874
                                                                                =============    ============    ============

SUPPLEMENTAL SCHEDULE OF NONCASH
   INVESTING AND FINANCING ACTIVITIES:
     Noncash Investing Activities-
       Capital Lease Obligations                                                      $511               $0               $0
                                                                                =============    ============    ============
</TABLE>
             (A)   Changes in assets and liabilities for the
                   years ended  December 31, 1997,  1996 and
                   1995,   net  of  effects  from   business
                   disposals are as follows-

<TABLE>
<CAPTION>
                                                                                    1997            1996            1995
                                                                                -------------    ------------    ------------

<S>                                                                                <C>              <C>              <C>   
         Decrease (increase) in notes and accounts
           receivable, net                                                          $7,425          ($7,597)          ($659)
         Decrease (increase) in inventories                                            659              (77)          1,378
         Decrease (increase) in prepaid expenses and
           other current assets                                                        414             (173)          3,708
         Increase in deferred income taxes                                            (958)          (1,115)         (1,622)
         Decrease (increase) in real property held for
           rental, net                                                               1,275             (228)         (2,872)
         Increase in noncurrent notes receivable                                    (1,424)          (2,308)           (274)
         Decrease (increase) in other assets                                          (257)          (1,464)            192
         Increase (decrease) in accounts payable and
           accrued liabilities                                                          16             (665)          3,922
         Increase (decrease) in income taxes payable                                 1,635              557             (39)
         Increase in other long-term liabilities                                     1,810            3,184              73
         Discontinued operations - noncash charges and working
           capital changes                                                             718              629           1,834
                                                                                -------------    ------------    ------------
                Total                                                              $11,313          ($9,257)         $5,641
                                                                                =============    ============    ============
</TABLE>

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

                                      F-7
<PAGE>
                      UNITED CAPITAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 1997, 1996 AND 1995

                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

(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 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-

       Sales are recorded when products are shipped to the customer.

    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.

                                      F-8

<PAGE>
    MARKETABLE SECURITIES-

       All  marketable  debt and  equity  securities  have  been  classified  as
       available-for-sale and, as a result, are stated 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.

    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.

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

                                                 1997           1996
                                              -----------    ------------

           Raw materials                         $1,959         $2,542
           Work in process                          265            397
           Finished goods                         1,469          1,413
                                              -----------    ------------

                                                 $3,693         $4,352
                                              ===========    ============

    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 20 years
              Machinery and equipment                   3 to 10 years

    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.

                                      F-9

<PAGE>
    RESEARCH AND DEVELOPMENT-

         The Registrant  expenses research,  development and product engineering
         costs as incurred.  Approximately  $77, $112 and $85 of such costs were
         incurred by the Registrant in 1997, 1996 and 1995, respectively.

    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-

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

    PRIOR YEAR FINANCIAL STATEMENTS-

         Certain  amounts  have been  reclassified  in the December 31, 1996 and
         1995 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.

    IMPAIRMENT OF LONG-LIVED ASSETS-

         During 1996, the Registrant  adopted Statement of Financial  Accounting
         Standards 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.

                                      F-10

<PAGE>
    CHANGES IN ACCOUNTING POLICIES-

         In June  1997,  the  FASB  issued  Statement  of  Financial  Accounting
         Standards No. 130, "Reporting  Comprehensive  Income" ("SFAS No. 130"),
         which establishes standards for reporting  comprehensive income and its
         components in annual and interim financial statements.  SFAS No. 130 is
         effective  for  fiscal  years   beginning   after  December  15,  1997.
         Reclassification  of financial  statements for earlier periods provided
         for comparative purposes is required.  The Registrant is in the process
         of determining its preferred format.  The adoption of SFAS No. 130 will
         have no impact on the Registrant's  consolidated results of operations,
         financial position or cash flows.

         In June  1997,  the  FASB  issued  Statement  of  Financial  Accounting
         Standards No. 131,  "Disclosures  about  Segments of an Enterprise  and
         Related Information" ("SFAS No. 131"), which establishes  standards for
         the way that companies report  information about operating  segments in
         annual financial statements and requires that companies report selected
         information  about  operating  segments in interim  financial  reports,
         based on the approach that management utilizes to organize the segments
         within the Registrant for management  reporting and decision making. It
         also establishes  standards for related  disclosures about products and
         services,  geographic  areas,  and  major  customers.  SFAS No.  131 is
         effective for financial  statements  for fiscal years  beginning  after
         December 15, 1997.  Financial  statement  disclosures for prior periods
         are  required  to be  restated.  The  Registrant  is in the  process of
         evaluating  the disclosure  requirements.  The adoption of SFAS No. 131
         will  have  no  impact  on the  Registrant's  consolidated  results  of
         operations, financial position or cash flows.

(2) DISPOSAL OF OPERATING COMPANIES:

       On November 20, 1997,  the  Registrant  signed a definitive  agreement to
       sell the stock of its Dorne & Margolin,  Inc.  ("D&M")  subsidiary to AIL
       Systems Inc. ("AIL") for $16 million in cash. On January 2, 1998 the sale
       was  completed  and will  result  in a pretax  gain of  approximately  $9
       million  in the first  quarter  of 1998.  The net  assets  and  operating
       results of D&M are presented in the accompanying  consolidated  financial
       statements as a discontinued operation. At December 31, 1997, net current
       assets of  discontinued  operations  consist  primarily of inventory  and
       accounts  receivable,  partially  offset by accounts  payable and accrued
       expenses.  Net  noncurrent  assets of  discontinued  operations  consists
       primarily of machinery  and  equipment.  The  Registrant  retained  D&M's
       90,000 square foot manufacturing facility in Bohemia, New York, which has
       been  reclassified  to real property held for rental in the  accompanying
       financial statements.

       In  August  1995,  the  operations  of  the  Registrant's   Kentile  Inc.
       ("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 closely, including the values received
       upon the disposition of the Kentile assets.

                                      F-11

<PAGE>
       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.

       Revenues  applicable to discontinued  operations,  which includes $19,613
       for Kentile in 1995, were $19,985 in 1997, $18,883 in 1996 and $39,920 in
       1995.

(3)  REAL PROPERTY HELD FOR RENTAL:

       The Registrant is the lessor of real estate under operating  leases which
       expire in various years through 2078.

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

                                                  1997             1996
                                               ------------    -------------

         Land                                     $14,075         $12,462
         Buildings                                110,271         114,414
                                               ------------    -------------

                                                  124,346         126,876

         Less- Accumulated depreciation           (65,768)        (61,187)
                                               ------------    -------------

                                                  $58,578         $65,689
                                               ============    =============

       As of December  31, 1997,  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-
           1998                                                    $17,276
           1999                                                     16,209
           2000                                                     14,566
           2001                                                     12,873
           2002                                                     11,226
           Thereafter                                               54,822
                                                               -------------

         Total Minimum Future Rentals                             $126,972
                                                               =============

       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 1997,  1996 and 1995 were
       approximately $1,603, $1,045 and $1,029, respectively.

                                      F-12

<PAGE>
(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-

                                                     1997            1996
                                                 -----------     -----------

         Land                                          $37             $37
         Buildings and improvements                    963             894
         Machinery and equipment                     7,193           6,236
                                                 -----------     -----------

                                                     8,193           7,167

         Less- Accumulated depreciation             (3,894)         (3,053)
                                                 -----------     -----------

                                                    $4,299          $4,114
                                                 ===========     ===========

(5)  MARKETABLE SECURITIES:

       The aggregate market value of marketable securities, which are all equity
       securities and available-for-sale, was $355 and $313 at December 31, 1997
       and 1996,  respectively,  while gross unrealized  holding gains were $136
       and $109 on a net of tax basis, respectively.

       There were no sales of marketable  securities  in 1997 or 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 year ended December
       31, 1995 are as follows-

                                                           1995
                                                         ---------

         Proceeds                                           $729
                                                         =========

         Realized gains                                     $230
                                                         =========

         Realized losses                                      $0
                                                         =========

(6)  NOTES RECEIVABLE:

       Notes receivable consist of the following at December 31-
                                                     1997            1996
                                                 -----------     -----------

         High yield mortgage loans (a)              $3,226         $13,499
         Mortgage note receivable (b)                3,355               0
         Mortgage note receivable (c)                3,249           3,249
         Mortgage participation (d)                  1,147               0
         Mortgage notes receivable (e)                 633             665
         Due from related party (Note 14)              398             468
         Other                                         255             299
                                                 -----------     -----------

                                                    12,263          18,180
         Less- Current portion included in notes
           and accounts receivable                   4,907          12,248
                                                 -----------     -----------

                                                    $7,356          $5,932
                                                 ===========     ===========

                                      F-13
<PAGE>
         (a)    In 1997,  the  Registrant  participated  in  several  high yield
                mortgage loans which in certain  instances,  may include related
                party participants (see Note 14). At December 31, 1997 there are
                four  notes  outstanding  with  balances  ranging  from  $250 to
                $1,851,  with varying terms maturing from March 1998 to December
                1998.  The notes are secured by a first or second  mortgage lien
                on property  which is generally  fully leased with a substantial
                value-to-loan   ratio.   Management   believes  that  sufficient
                collateral  exists to  satisfy  the  obligations.  The notes are
                interest  bearing and in most cases,  the Registrant  receives a
                commitment  fee of 4%. The  effective  yields on these notes are
                approximately  18%.  High yield  mortgage  loans at December 31,
                1996 consisted of nine notes (see Note 14). Seven of these notes
                were fully satisfied in 1997 and two were extended to 1998.

         (b)    In September  1997,  the  Registrant  purchased a non performing
                mortgage  secured by an office  building in Great Neck, New York
                for  $3.4   million.   The  mortgage  note  had  a  face  amount
                outstanding of approximately  $4.8 million and bears interest at
                approximately 10% per annum.  Management  believes that the fair
                value of the property exceeds the purchase price of the mortgage
                note. The Registrant has commenced  foreclosure  proceedings and
                expects to take title to the  property  unless the  mortgage  is
                fully satisfied.

         (c)    In  February  1994,  the  Registrant   acquired  the  underlying
                mortgage secured by Kentile Floors Inc.'s 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.  Management believes that the fair value of the property
                exceeds the carrying value of the mortgage note.

         (d)    In October  1997,  the  Registrant,  together with two unrelated
                participants,  purchased an 8.5% interest ("the  Participation")
                in a portfolio  of mortgage  loans  secured by first liens on 17
                multi-tenanted  residential  properties.  At  the  time  of  the
                acquisition  the portfolio had outstanding  approximately  $24.4
                million in principal and stated  interest rates ranging  between
                6.82% and 9.4%. The Participation, in which the Registrant holds
                a 78% interest,  was purchased for $2 million and is subordinate
                to the  interest  of a bank who is the  holder of the  remaining
                balance of the portfolio,  which had been recently acquired at a
                4% discount to face value. In exchange for a 50% interest in the
                discount, upon collection, the holders of the Participation have
                agreed,  in the  event of  default,  to  indemnify  the bank for
                payments that come due on the underlying  mortgages,  as well as
                costs incurred in the event of foreclosure,  up to a limit of $5
                million.  The  underlying  mortgages,  which had an  outstanding
                balance of approximately $18.1 million at December 31, 1997, are
                scheduled to mature at varying dates  through  November 1998 and
                are all expected to be satisfied  through  refinancings  by such
                time.

         (e)    As partial consideration in the sale of several properties,  the
                Registrant  received  mortgage notes in the aggregate  amount of
                $1.88  million.  The notes,  which are secured by the properties
                sold,  bore  interest in 1997 and 1996 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.

                                      F-14

<PAGE>
                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 $799 and $849 at December 31,
                1997 and  1996,  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>

                                                                 1997            1996
                                                               ----------    -------------
<S>                                                              <C>             <C>   
         Anticipated insurance recoveries (a)                    $2,893          $2,893
         Deposits                                                   638             851
         Pension (Note 17)                                          722             572
         Cash surrender value of life insurance policies, net       245             236
         Patents, net of accumulated amortization                   140             157
         Investments in and advances to affiliates (b)            1,510           1,307
         Lease financing (c)                                      4,907               0
         Other                                                      422             486
                                                               ----------    -------------
                                                                 11,477           6,502
         Less- Amounts included in prepaid expenses and
                  other current assets                              292             706
                                                               ----------    -------------
                           Total other assets                   $11,185          $5,796
                                                               ==========    =============
</TABLE>

         (a)    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   19,
                "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 the
                Registrant's  share of losses incurred through December 31, 1997
                was  approximately  $340,  which  have been  recorded  under the
                equity  method of  accounting  in other  income and expense (See
                Notes 14 and 16).

         (c)    Lease  financing  consists  of  a  50%  interest  in  Net  Lease
                Management  Partners,  L.L.C., whose  principal  assets  are two
                leveraged  leases with Kmart  Corporation.  Income on  leveraged
                leases is recognized by a method which  produces a constant rate
                of return on the outstanding  investment in the lease net of the
                related  deferred  tax  liability  in the  years  in  which  the
                investment is positive.  The components of the net investment in
                the leveraged leases at December 31 consists of the following-

                                      F-15

<PAGE>

                                                   1997
                                                ------------

            Rentals receivable                    $97,630
            Residual values                        10,000
            Non recourse debt service             (75,470)
            Unearned income                       (27,253)
                                                ----------
                                                    4,907
            Less-  Deferred taxes arising
            from leveraged leases                     268
                                                ==========
                                                   $4,639
                                                ==========

(8)  ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:

       Accounts  payable and accrued  liabilities  consist of the  following  at
       December 31-

                                                   1997            1996
                                                ----------      ------------

       Accounts payable                            $3,768           $4,296
       Accrued wages and benefits                   2,056            1,993
       Liabilities for discontinued operations      2,792            2,816
       Other accrued expenses                       5,513            5,008
                                                ----------      ------------

                                                  $14,129          $14,113
                                                ==========      ============

(9) LONG-TERM DEBT:

       Long-term debt consists of the following at December 31-

                                                  1997             1996
                                                --------        ----------

       First mortgages on real property (a)     $29,332            $34,366
       Second mortgages on real property (b)        273                316
       Loan payable to bank (c)                   1,733              2,363
       Capital lease obligation                     454                  0
       Loan payable to bank at 6.2%                   0                741
       Loan payable to bank at 6.3%                   0                208
       Other                                          0                  2
                                                ---------       -----------
                                                 31,792             37,996

       Less- Current maturities                   5,232              6,326
                                                ---------       -----------

                                                $26,560            $31,670
                                                =========       ===========

         (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
                1998 through February 2010.

                                      F-16

<PAGE>
         (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  August  1995,   the  Registrant   converted   $3.15  million
                outstanding under its then existing 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.   The  Registrant  was  in
                compliance with all covenants.

         The approximate  aggregate  maturities of these obligations at December
         31, 1997 are as follows-
<TABLE>
<CAPTION>
                                                            Long-Term            Capital Lease
                                                              Debt                Obligation
                                                           ---------------    --------------------

<S>        <C>                                                  <C>                    <C> 
           1998                                                 $5,141                 $124
           1999                                                  4,625                  124
           2000                                                  4,552                  124
           2001                                                  3,939                  124
           2002                                                  3,360                   40
         Thereafter                                              9,721                    0
                                                            -----------            ----------

         Total minimum payments                                $31,338                  536
                                                            ===========
         Less-  Amount representing interest                                             82
                                                                                   ----------

         Total present value of minimum lease payments                                  454

         Less-  Current portion                                                          91
                                                                                   ----------

         Total noncurrent portion                                                      $363
                                                                                   ==========
</TABLE>

(10)   CREDIT FACILITIES:

         Effective  September 30, 1997, the  Registrant  amended its January 15,
         1997 Credit  Agreement  with two banks to provide for both a $7 million
         term loan ("Term  Loan") and a $40 million  revolving  credit  facility
         ("Revolver") and converted $7 million of amounts  outstanding under the
         Revolver  to  borrowings  under the Term  Loan.  Under the terms of the
         Credit  Agreement,  the  Registrant  will be provided with  eligibility
         based  upon  the  sum  of  (i)  50% of  the  aggregate  annualized  and
         normalized year-to-date net operating income of eligible properties, as
         defined, capitalized at 11.5% and (ii) the lesser of $12 million or the
         sum  of  75% of  eligible  accounts  receivable  and  50%  of  eligible
         inventory,   as  defined.   Eligibility  is  also  limited  by  amounts
         outstanding  under the Term Loan. At December 31, 1997 the Registrant's
         eligibility  under the Revolver  was $40 million,  based upon the above
         terms. The Credit Agreement  contains certain financial and restrictive
         covenants,  including minimum consolidated  equity,  interest coverage,
         debt  service  coverage and capital  expenditures  (other than for real
         estate).  The Credit Agreement also contains provisions which allow the
         lenders to perfect a security  interest in certain  operating  and real
         estate assets in the event of a default,  as defined under the terms of
         the  Credit   Agreement.   Borrowings   under  the  Revolver,   at  the
         registrant's  option,  bear  interest at the bank's prime  lending rate
         ("Prime") or at the London Interbank  Offered Rate ("LIBOR") plus 1.75%
         while borrowings under the Term Loan bear interest at 90 day LIBOR plus
         1.4%. The Term Loan is payable in quarterly  principal  installments of
         $350 with final payment on

                                      F-17

<PAGE>
         September  30,  2002.  The  Revolver  expires on January 15,  2000.  At
         December 31, 1997  approximately $4.6 million was outstanding under the
         Revolver at Prime (8.5%) and $6,650 was  outstanding  on the Term Loan.
         Maturities  under  the Term  Loan are  $1.4  million  per year for 1998
         through 2001 and $1,050 in 2002. The Registrant was in compliance  with
         all covenants.  All amounts outstanding under the Revolver were paid in
         January 1998.

         Effective   September  30,  1997,  the   Registrant   entered  into  an
         interest-rate  swap agreement to effectively  convert its floating rate
         Term Loan to a fixed rate basis,  thus  reducing the impact of interest
         rate  changes  on  future  expense.  Under  the  swap  agreement,   the
         Registrant agreed to exchange with the counterparty (a commercial bank)
         the  difference  between the fixed and floating rate interest  amounts.
         The  differential  to be paid or received on the interest  rate swap is
         recognized  over the term of the agreement as an adjustment to interest
         expense.

         At December 31, 1996,  $19.8 million was  outstanding  at Prime (8.25%)
         under  the  Registrant's   then  existing   unsecured  line  of  credit
         arrangement  with a bank.  On January  15, 1997  borrowings  under this
         facility were converted to borrowings under the Revolver portion of the
         Credit Agreement  discussed above. At December 31, 1996, the Registrant
         classified  approximately $9.8 million of borrowings under the Revolver
         portion of the Credit Agreement, discussed above, as long-term debt.

(11)   FAIR VALUE OF FINANCIAL INSTRUMENTS:

         The Registrant 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 Registrant's existing debt arrangements.
           The fair value of  long-term  debt at December  31, 1997 and 1996 was
           approximately  $32.2  and  $38.2  million  respectively,   while  the
           carrying value was $31.8 and $37.9 million for the same periods.

           The fair value of interest rate swaps (used for hedging  purposes) is
           the estimated  amount that the bank would receive or pay to terminate
           the swap  agreements  at the  reporting  date,  taking  into  account
           current interest rates and the current  creditworthiness  of the swap
           counterparties.  At December 31, 1997, the fair value of the swap was
           estimated at ($63).

                                      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,  1997,  there  were  262,130  and  216,751  options
           outstanding under the Joint Plan and Incentive Plan, respectively. At
           December 31, 1996,  118,367 and 51,061 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 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 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, 1997,
           1996 and 1995, and changes during the years then ended are summarized
           below-

                                                                   Weighted-
                                                                    Average
                                                   Shares        Exercise Price
                                                  -----------    ---------------


           Outstanding at December 31, 1994         349,110           $7.53

              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

              Granted                               319,381          $17.31
              Exercised                              (6,700)          $9.48
              Forfeited                              (3,228)         $10.88
                                                  =========
           Outstanding at December 31, 1997         478,881          $14.68
                                                  =========

                                      F-19

<PAGE>

         The following table summarizes  information  about options  outstanding
         and exercisable at December 31, 1997-
<TABLE>
<CAPTION>
                                Options Outstanding                                             Options Exercisable
-------------------------------------------------------------------------------------    ----------------------------------
                                                 Weighted
                                                  Average               Weighted                               Weighted
                                                 Remaining              Average                                 Average
  Range of Exercise             Number           Contractual            Exercise             Number            Exercise
        Price                Outstanding            Life                 Price             Exercisable           Price
----------------------     -----------------    -----------------   -----------------    ----------------    --------------

<S>                              <C>              <C>                     <C>                 <C>                <C>
  $5.00 - $7.25                   49,500          4.18 years               $5.91               49,500             $5.91
  $10.875 - $11.00               110,000          5.96 years              $11.00              110,000            $11.00
  $17.00 - $18.75                319,381          9.47 years              $17.31                    0                $0
                              -------------                                              ----------------
  $5.00 - $18.75                 478,881          8.11 years              $14.68              159,500             $9.42
                              =============                                              ================
</TABLE>

         The  Registrant  applies  APB  No.  25 in  accounting  for  stock-based
         compensation   plans.  If  stock-based   compensation  costs  had  been
         recognized  based on the estimated fair values at the dates of grant of
         options  awarded  during  1997,  as required by  Statement of Financial
         Accounting Standard No. 123,  "Accounting for Stock-Based  Compensation
         to Employees"  ("SFAS No. 123")  proforma net income and net income per
         share (basic) would have been approximately  $8,091 or $1.53 per share,
         respectively.  Proforma  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. There were no options granted in 1995. The SFAS
         No. 123 method of  accounting  has not been applied to periods prior to
         January 1, 1995 and the resulting proforma compensation expense may not
         be  indicative  of proforma  expense in future  years.  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 1997 and 1996;  risk free interest rates of
         6.27% and 5.84%,  respectively;  no dividend  yield;  weighted  average
         expected  option  lives  of 5  years  and 3  years,  respectively,  and
         expected volatility of 39% and 40%, respectively.

(13)   EARNINGS PER SHARE:

         The  following  table sets forth the  computation  of basic and diluted
         earnings per share-
<TABLE>
<CAPTION>
                                                                      1997              1996              1995
                                                                   -----------       ------------      ------------
           Numerator-
<S>                                                                   <C>                <C>              <C>   
             Income from continuing operations                        $7,465             $6,634           $3,910
                                                                   -----------       ------------      ------------

           Denominator-
             Denominator for basic earnings per
                share--weighted-average shares                         5,288              5,497            5,816
           Effect of dilutive securities-
             Employee stock options                                       51                 10               77
                                                                   -----------       ------------      ------------
           Denominator for diluted earnings per
              share-adjusted weighted-average shares
              and assumed conversions                                  5,339              5,507            5,893
                                                                   -----------       ------------      ------------
</TABLE>

                                      F-20

<PAGE>
<TABLE>
<CAPTION>
                                                                      1997              1996              1995
                                                                   -----------       ------------      ------------

<S>                                                                    <C>                <C>               <C> 
           Basic earnings per share                                    $1.41              $1.21             $.67
                                                                   ===========       ============      ============

           Diluted earnings per share                                  $1.40              $1.20             $.66
                                                                   ===========       ============      ============
</TABLE>

(14)   TRANSACTIONS WITH RELATED PARTIES:

         The  Registrant  has  a  50%  interest  in  an  unconsolidated  limited
         liability corporation,  whose principal assets are two leveraged leases
         with Kmart. A group that includes the wife of the Board  Chairman,  two
         Directors of the  Registrant  and the wife of one of the Directors have
         an 8% interest in this entity (see Note 7).

         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, 1997, the  Registrant has invested  approximately
         $1,168 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  $683 in connection with this note.
         The remaining amounts were advanced by the following: a Director of the
         Registrant,  $250;  the wife of the  Board  Chairman,  $1  million;  an
         officer of the Registrant  $100; 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 the participants also received a commitment fee of 4%. This
         note matured in  September  1997 and was  extended in  accordance  with
         original  terms of the note,  for one year,  in  consideration  of a 4%
         commitment fee.

         In 1996  and  1997,  in  order to  effectively  manage  the cost to the
         Registrant of the remediation efforts at Metex Corporation's  ("Metex")
         two New Jersey facilities (see Note 19), the Registrant sold, in total,
         approximately  a 4% interest for $40 in a  subsidiary  that manages the
         Registrant's  environmental  remediation  efforts  to  an  Officer  and
         Director of the Registrant and other employees,  as well as an interest
         to the  Registrant's  environmental  consulting  company.  These shares
         contain   certain   restrictions   on  transfer   and,   under  certain
         circumstances, are redeemable at the net book value of the subsidiary.

         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; 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
         $143, $159 and $120 for 1997, 1996 and 1995, respectively.

                                      F-21

<PAGE>
         During 1997 and 1996 the Registrant  advanced,  in the aggregate,  $398
         and $468,  respectively,  to the Board  Chairman  and $375 in 1997 to a
         Director and Officer of the Registrant.  Such advances bore interest at
         the  Registrant's  borrowing rate under its revolving  credit  facility
         which was 8.5% and 8.25% at December  31, 1997 and 1996,  respectively.
         Amounts  outstanding  at  December  31, 1997 and 1996 of $398 and $468,
         respectively,  together  with accrued  interest  thereon were repaid in
         January 1998 and 1997, respectively.

(15)   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.

         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, follows-
<TABLE>
<CAPTION>
                                                                   1997            1996
                                                                ------------    -----------
<S>                                                                <C>             <C>   
           Realization allowances related to
              accounts receivable and inventories                    $259            $217
           Net unrealized gain on marketable securities               (70)            (56)
           Basis differences relating to real
              property held for rental                              3,990           3,292
           Environmental accrual                                    2,380           2,380
           Insurance proceeds                                      (2,380)         (2,380)
           Accrued expenses, deductible when paid                   2,476           2,587
           Deferred revenue and profit (for tax purposes)             112            (163)
           Basis differences relating to business acquisitions     (1,859)         (1,859)
           Leveraged lease                                           (268)              0
           Property, plant and equipment                             (606)           (610)
           Pensions                                                   (49)           (200)
           Other, net                                                 200              33
                                                                ------------    -----------

                         Net deferred tax asset                     4,185           3,241

           Less- Current portion                                    1,219           1,355
                                                                ------------    -----------
                         Noncurrent portion                        $2,966          $1,886
                                                                ============    ===========
</TABLE>

                                      F-22

<PAGE>

         Income  tax   provision   (benefit)   reflected  in  the   accompanying
         consolidated  statements of operations for the years ended December 31,
         follows-
<TABLE>
<CAPTION>
                                                           1997           1996           1995
                                                       ----------     -----------    ------------
<S>                                                      <C>             <C>            <C>   
           Current-
              Federal                                    $4,823          $4,589         $2,791
              State                                       1,860           1,838          1,224
           Deferred                                        (873)         (1,018)          (845)
                                                       ----------     -----------    ------------

                                                         $5,810          $5,409         $3,170
                                                       ==========     ===========    ============
</TABLE>

         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, follows-
<TABLE>
<CAPTION>
                                                          1997           1996           1995
                                                       ----------     -----------    ------------
<S>                                                      <C>             <C>            <C>   
         Computed Federal income
           tax provision at statutory rates              $4,513          $4,094         $2,407
         State income taxes, net of
           Federal income tax benefit                     1,272           1,266            829
         Other, net                                          25              49            (66)
                                                       ----------     -----------    ------------

                                                         $5,810          $5,409         $3,170
                                                       ==========     ===========    ============
</TABLE>

(16)   OTHER INCOME AND EXPENSE, NET:

         The  components  of other income and expense,  net in the  accompanying
         consolidated  statements of operations for the years ended December 31,
         follows-
<TABLE>
<CAPTION>

                                                          1997           1996           1995
                                                       -----------    -----------    ------------
<S>                                                      <C>             <C>            <C> 
           Gain on sales of real estate assets           $3,481          $3,919         $  865
           Net realized gains on marketable
              securities                                      0               0            230
           (Loss) income from equity investments (a)       (263)              0              4
           Settlement income (b)                              0           1,443              0
           Other, net (c)                                    44            (561)           546
                                                       -----------    -----------    ------------
                                                         $3,262          $4,801         $1,645
                                                       ===========    ===========    ============
</TABLE>

         (a)    Loss  from  equity   investments   principally   represents  the
                Registrant's share of losses incurred by Indian Creek Hotel, LLP
                (See   Note  7),   partially   offset   by   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  Equities  Corp.  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.

                                      F-23

<PAGE>
         (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, after taxes.

(17)   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.

         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-
<TABLE>
<CAPTION>

                                                                     1997             1996
                                                                  ------------    --------------

<S>                                                                   <C>               <C>   
           Accumulated benefit obligation:
              Vested                                                  $8,696            $8,659
              Nonvested                                                  187               171
                                                                  ------------    --------------
                                                                      $8,883            $8,830
                                                                  ============    ==============
           Plan assets at fair value, primarily U. S. bonds,
              government-backed mortgage obligations and stocks      $12,643           $12,904
           Projected benefit obligation                               (9,052)           (8,983)
                                                                  ------------    --------------

           Plan assets in excess of projected benefit obligation       3,591             3,921
           Effect of purchase accounting                                (156)             (156)
           Unrecognized net gain, net of amortization                 (2,713)           (3,193)
                                                                  ------------    --------------

           Prepaid pension obligation                                   $722              $572
                                                                  ============    ==============
</TABLE>

         Net periodic  pension  (income) expense for the years ended December 31
         includes the following components-
<TABLE>
<CAPTION>
                                                            1997           1996          1995
                                                          ----------    -----------    ---------
<S>                                                         <C>             <C>           <C>  
           Service cost                                       $325          $230          $197
           Interest cost                                       626           643           145
           Actual return on plan assets                     (1,013)         (883)         (199)
           Net amortization and deferral                       (87)         (102)           63
                                                          ----------    -----------    ---------
                  Net periodic pension (income) expense      ($149)        ($112)         $206
                                                          ==========    ===========    =========
</TABLE>

         In determining the projected benefit  obligation for 1997 and 1996, 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 1997 or 1996.

                                      F-24

<PAGE>
(18)   BUSINESS SEGMENTS:

         At December 31, 1997, the Registrant  had two business  segments:  real
         estate  investment  and  management  and the  manufacture  and  sale of
         engineered products.  Information on the Registrant's business segments
         for the years ended December 31 follows-
<TABLE>
<CAPTION>

                                                                         1997             1996              1995
                                                                     -------------    --------------    -------------
<S>                                                                      <C>              <C>               <C>    
           Net revenues and sales-
              Real estate investment and management                      $24,042          $23,936           $22,652
              Engineered products                                         36,204           42,055            41,688
                                                                     -------------    --------------    -------------
                                                                         $60,246          $65,991           $64,340
                                                                     =============    ==============    =============
           Operating income (loss)-
              Real estate investment and management                       $7,718           $6,195            $5,003
              Engineered products                                          3,419            3,792             3,779
                                                                     -------------    --------------    -------------
                                                                          11,137            9,987             8,782
           General corporate expenses                                     (2,329)          (2,924)           (3,082)
           Other income, net                                               4,467            4,980             1,380
                                                                     -------------    --------------    -------------
                      Income from continuing
                         operations before income taxes                  $13,275          $12,043            $7,080
                                                                     =============    ==============    =============
           Identifiable assets-
              Real estate investment and management                      $95,080          $99,292           $92,328
              Engineered products                                         11,432           12,174            12,955
              Discontinued operations                                      6,841            5,295             5,083
                                                                     -------------    --------------    -------------
                                                                        $113,353         $116,761          $110,366
                                                                     =============    ==============    =============
</TABLE>

         Sales by the  Registrant's  engineered  products  segment to automobile
         original equipment  manufacturers  accounted for approximately 31%, 32%
         and 31% of 1997, 1996 and 1995 consolidated revenues, respectively.

         Included in the identifiable  assets of the real estate  investment and
         management  segment  for 1997,  1996 and 1995 are  approximately  $5.1,
         $13.5 and $3.0  million,  respectively,  of high yield  mortgage  notes
         receivable (see Note 6). Income  generated by these notes receivable is
         included in interest income.  Also included in the identifiable  assets
         of the real estate investment and management segment for 1997, 1996 and
         1995 are  approximately  $1.8,  $1.8 and  $1.9  million,  respectively,
         related  to the  former  manufacturing  facility  of  the  Registrant's
         antenna  segment which has been  reclassified to real property held for
         rental. Operating expenses associated with this facility have also been
         reclassified to this segment, but were not material to any of the years
         presented.

(19)   CONTINGENCIES:

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

                                      F-25

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

         Environmental  studies at the second facility indicate that remediation
         may  be   necessary.   Based  upon  the  facts   presently   available,
         environmental  experts have advised the Registrant  that under the most
         probable  remediation  scenario,  the estimated  cost to remediate this
         site is anticipated to require $2.3 million in initial costs, including
         capital  equipment  expenditures,  and  $258 in  annual  operating  and
         maintenance costs over a 10-year period. The Registrant may revise such
         estimates in the future due to the  uncertainty  regarding  the nature,
         timing and extent of any  remediation  efforts  that may be required at
         this site, should an appropriate regulatory agency deem such efforts to
         be necessary.

         The foregoing estimates may also be revised by the Registrant as new or
         additional  information in these matters 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.

         At December 31, 1997 and 1996,  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, 1997
         (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.

         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.

                                      F-26

<PAGE>
         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

                                 (IN THOUSANDS)

<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
                                        ----------------     -------------     -----------------    ------------

Allowance for doubtful accounts:

<S>                                            <C>                 <C>                <C>                <C> 
   Year ended December 31, 1997                $377                $0                 $51                $326

   Year ended December 31, 1996                 332                46                   1                 377

   Year ended December 31, 1995                 373                54                  95                 332
</TABLE>


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


                                      F-28
<PAGE>
                                                                    SCHEDULE III
                      UNITED CAPITAL CORP. AND SUBSIDIARIES
           REAL PROPERTY HELD FOR RENTAL AND ACCUMULATED DEPRECIATION
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                          Mortgage              Initial Cost To Registrant           Costs Capitalized
                                            Loans          --------------------------------------      Subsequent to
                                           Payable                               Building and           Acquisition/
                 Description               (Gross)              Land             Improvements           Improvements
                 -----------              -------------    ---------------    -------------------    -----------------
Shopping Centers and Retail Outlets-
<S>                                        <C>                <C>                  <C>                    <C>
   Culver, CA                               $4,630               $842                $7,576                   $0
   Northbrook, IL                            5,112                898                 8,075                    0
   Miscellaneous Investments                16,365              5,377                47,516                  938
                                          ----------    ---------------    -------------------    -------------------
                                            26,107              7,117                63,167                  938
                                          ----------    ---------------    -------------------    -------------------
Commercial Properties-
   Miscellaneous Investments                 2,102              2,997                27,666                  613
Day Care Centers and Offices-
   Miscellaneous Investments                   512                643                 5,786                1,133
Hotel Properties-
   Miscellaneous Investments                     0                  0                 2,868                   48
Other-
   Miscellaneous Investments                   884              3,318                 7,473                  579
                                          ----------    ---------------    -------------------    -------------------
                                           $29,605            $14,075              $106,960               $3,311
                                          ==========    ===============    ===================    ===================
</TABLE>
<TABLE>
<CAPTION>
                                              Gross Amount at Which Carried at Close of Period
                                              ------------------------------------------------
                                                                                                           Accumulated
                                                                 Building and             Total            Depreciation
                 Description                    Land             Improvements            (a) (c)                (b)
                 -----------               ---------------    -------------------    ----------------    --------------
<S>                                           <C>                  <C>                  <C>                   <C>
Shopping Centers and Retail Outlets-
   Culver, CA                                    $842                $7,576               $8,418               $4,623
   Northbrook, IL                                 898                 8,075                8,973                4,776
   Miscellaneous Investments                    5,377                48,454               53,831               30,433
                                        ---------------    -------------------    ----------------    ------------------
                                                7,117                64,105               71,222               39,832
                                        ---------------    -------------------    ----------------    ------------------
Commercial Properties-
   Miscellaneous Investments                    2,997                28,279               31,276               15,714
Day Care Centers and Offices-
   Miscellaneous Investments                      643                 6,919                7,562                5,918
Hotel Properties-
   Miscellaneous Investments                        0                 2,916                2,916                2,868
Other-
   Miscellaneous Investments                    3,318                 8,052               11,370                1,436
                                        -------------      ----------------       --------------      ---------------
                                              $14,075              $110,271             $124,346              $65,768
                                        =============      ================       ==============      ===============
</TABLE>
<TABLE>
<CAPTION>
                                                                               Life on Which
                                                                               Depreciation
                                                                                 in Latest
                                                                               Statement of
                                                                               Operations is
                                            Date of             Date             Computed
                 Description             Construction         Acquired            (Years)
                 -----------            ----------------    --------------    ----------------
<S>                                        <C>              <C>                 <C>
Shopping Centers and Retail Outlets-
   Culver, CA                              N/A              1986                18
   Northbrook, IL                          N/A              1987                18
   Miscellaneous Investments               N/A              1986-97             10-39
Commercial Properties-
   Miscellaneous Investments               N/A              1986-97             12-39
Day Care Centers and Offices-
   Miscellaneous Investments               N/A              1986-91              7-39
Hotel Properties-
   Miscellaneous Investments               N/A              1986-96             10-39
Other-
   Miscellaneous Investments               N/A              1986-97             10-39
</TABLE>
Notes:

(a)  Reconciliations  of the carrying value of real property held for rental for
     the three years ended December 31, 1997 are as follows-
<TABLE>
<CAPTION>
                                                                                            1997           1996           1995
                                                                                       -------------    ----------    ----------
<S>                                                                                       <C>            <C>           <C>
       Real property held for rental at beginning of period                               $126,876       $128,135      $128,283
       Additions during the period-
         Acquisitions and improvements                                                       2,276          3,480         3,189
         Transfers from property, plant and equipment                                            0          2,195             0
         Transfer to noncurrent notes receivable                                                 0              0        (2,683)
                                                                                       -------------    ----------    ----------
                                                                                           129,152        133,810       128,789
       Deductions during period-
         Cost of real estate sold                                                            4,806          6,934           654
                                                                                       -------------    ----------    ----------
                                                                                          $124,346       $126,876      $128,135
                                                                                       =============    ==========    ==========
</TABLE>
<PAGE>
(b)  Reconciliations  of  accumulated  depreciation  for the three  years  ended
December 31, 1997 are as follows-
<TABLE>
<CAPTION>
                                                                                            1997          1996          1995
                                                                                       -------------    ----------    ---------
<S>                                                                                        <C>            <C>         <C>
       Accumulated depreciation at beginning of period                                     $61,187        $58,122     $51,718
       Additions during the period-
         Provision for depreciation                                                          5,836          6,588       6,770
         Transfers from property, plant and equipment                                            0            159           0
         Transfer to noncurrent notes receivable                                                 0              0         (29)
                                                                                       -------------    ----------    ---------
                                                                                            67,023         64,869      58,459
       Deductions during period-
         Accumulated depreciation of real estate sold                                        1,255          3,682         337
                                                                                       -------------    ----------    ---------
                                                                                           $65,768        $61,187     $58,122
                                                                                       =============    ==========    =========
</TABLE>
(c) The aggregate cost for Federal income tax purposes is approximately $175,000

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, 1997

                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                       Description                               Interest Rate                     Final Maturity Date
                       -----------                               -------------                     -------------------

<S>                                                           <C>                           <C>
Mortgage loans secured by Commercial Property-
   Deer Park, NY                                                      14%                              March 1998
Other - Two loans - Face amounts $325 or less                 Varies from 9% - 10%          From August 2000 - December 2008


Mortgage loans secured by Hotels-                             Varies from 10% - 11%                   November 2001
   Montgomery, AL

Beaumont, TX                                                   Varies from 8%-11%                     February 2002

Construction Loans secured by Commercial Property-
   Mt. Laurel, NJ                                                     14%                              August 1998

Mortgage loans secured by Residential Property-
   Miami Beach, FL                                                    14%                             November 1998
   Bronx, NY                                                         7.44%                              June 1998
   Brooklyn, NY                                                      7.25%                              June 1998
   Brooklyn, NY                                                      7.64%                             April 1998
   Other - Four loans - Face amounts $45 to $75               Varies from 7% - 9%            From April 1998 - November 1998
   Other - Four loans - Face amounts $90 to $140              Varies from 7% - 9%            From April 1998 - November 1998

Mortgage loans secured by Mortgage Notes
   Long Beach, NY                                                     14%                             December 1998
</TABLE>

<TABLE>
<CAPTION>
                       Description                                               Periodic Payment Terms
                       -----------                                               ----------------------

<S>                                                            <C>
Mortgage loans secured by Commercial Property-
   Deer Park, NY                                               Interest due monthly; with principal due at maturity
Other - Two loans - Face amounts $325 or less                  Principal and interest due monthly

Mortgage loans secured by Hotels-                              Principal and interest due monthly, additionally,
   Montgomery, AL                                              there is a principal payment of $153 due in November 1998

                                                               Principal and interest due monthly, additionally, there
Beaumont, TX                                                   is a principal payment $773 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-
   Miami Beach, FL                                             Interest due monthly, with principal due at maturity
   Bronx, NY                                                   Interest due monthly, with principal due at maturity
   Brooklyn, NY                                                Interest due monthly, with principal due at maturity
   Brooklyn, NY                                                Interest due monthly, with principal due at maturity
   Other - Four loans - Face amounts $45 to $75                Interest due monthly, with principal due at maturity
   Other - Four loans - Face amounts $90 to $140               Interest due monthly, with principal due at maturity

Mortgage loans secured by Mortgage Notes
   Long Beach, NY                                              Interest due monthly, with principal due at maturity
</TABLE>

<TABLE>
<CAPTION>
                                                                                                               Principal Amount
                                                                                                               of Loans Subject
                                                                                            Carrying            to Delinquent
                                                          Prior          Face Amount          Amount of            Principal or
                       Description                        Liens          of Mortgages       Mortgages (b)            Interest
                       -----------                    ------------    ---------------    ----------------    ------------------

<S>                                                       <C>                  <C>                <C>                 <C>
Mortgage loans secured by Commercial Property-
   Deer Park, NY                                          $3,550               $300               $250                $0
Other - Two loans - Face amounts $325 or less                  0                370                 62                 0
                                                      ------------    ---------------    ---------------          ---------
                                                           3,550                670                312                 0
                                                      ------------    ---------------    ---------------          ---------
Mortgage loans secured by Hotels-
   Montgomery, AL                                              0                610                207                 0

Beaumont, TX                                                   0                900                365                 0
                                                      ------------    ---------------    ---------------          ---------
                                                               0              1,510                572                 0
                                                      ------------    ---------------    ---------------          --------
Construction Loans secured by Commercial Property-
   Mt. Laurel, NJ                                          4,500              1,851              1,851                 0
                                                      ------------    ---------------    ---------------          --------

Mortgage loans secured by Residential Property-
   Miami Beach, FL                                        15,500                525                525                 0
   Bronx, NY                                                   0                163                157                 0
   Brooklyn, NY                                                0                182                175                 0
   Brooklyn, NY                                                0                168                161                 0
   Other - Four loans - Face amounts $45 to $75                0                257                247                 0
   Other - Four loans - Face amounts $90 to $140               0                426                406                 0
                                                      ------------    ---------------    ---------------          --------

                                                          15,500              1,721              1,671                 0

Mortgage loans secured by Mortgage Notes
   Long Beach, NY                                              0                600                600                 0
                                                      ------------    ---------------    ---------------          --------
                                                         $23,550             $6,352             $5,006   (a)(c)       $0
                                                      ============    ===============    ===============          ========
</TABLE>

NOTES:

(a) A  reconciliation  of  mortgage  loans on real  estate  for the year  ended
     December 31, 1997-

       Balance at beginning of period                  $14,164
       Additions during period-
         New mortgage loans                              3,681
       Deductions during period-
         Collection of principal                       (12,839)
                                                      ----------

       Balance at end of period                         $5,006
                                                      ==========

(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, 1997:

     Mortgage note receivable in connection with sale of property in:

       Montgomery, Alabama                               $227
       Beaumont, Texas                                    447
       Waterbury, Connecticut                             101
       Augusta, Georgia                                    24
                                                     ----------

                                                         $799
                                                     ==========

(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
                                                              -------------    -------------    -------------    -------------

FOR THE YEAR 1997:
<S>                                                              <C>              <C>              <C>              <C>    
   Revenues                                                      $15,200          $16,092          $14,379          $14,575
                                                              =============    =============    =============    =============

   Costs and expenses                                            $13,640          $13,274          $12,523          $12,001
                                                              =============    =============    =============    =============

   Other income                                                   $2,789             $523             $233             $922
                                                              =============    =============    =============    =============

   Income from continuing operations                              $2,386           $1,886           $1,071           $2,122
                                                              =============    =============    =============    =============

   Income from discontinued operations,
     net of tax                                                     $249             $104             $448             $215
                                                              =============    =============    =============    =============

Net income                                                        $2,635           $1,990           $1,519           $2,337
                                                              =============    =============    =============    =============

Per share data:
BASIC EARNINGS PER COMMON SHARE:
   Income from continuing operations                                $.45            $.36              $.20             $.40

   Discontinued operations, net of tax                              $.05            $.02              $.09             $.04
                                                              -------------    -------------    -------------    -------------

   Net income per common share                                      $.50            $.38              $.29             $.44
                                                              =============    =============    =============    =============

DILUTED EARNINGS PER COMMON SHARE:
   Income from continuing operations                                $.45            $.35              $.20             $.39

   Discontinued operations, net of tax                              $.05            $.02              $.08             $.04
                                                              -------------    -------------    -------------    -------------

   Net income per common share assuming
     dilution                                                       $.50            $.37              $.28             $.43
                                                              =============    =============    =============    =============

FOR THE YEAR 1996:
   Revenues                                                      $16,967         $16,893           $16,818          $15,313
                                                              =============    =============    =============    =============

   Costs and expenses                                            $15,647         $15,723           $14,852          $12,706
                                                              =============    =============    =============    =============

   Other income                                                     $463          $2,564              $430           $1,523
                                                              =============    =============    =============    =============

   Income from continuing operations                              $1,028          $2,221            $1,408           $1,977
                                                              =============    =============    =============    =============
</TABLE>

                                      F-31

<PAGE>
<TABLE>
<CAPTION>
                                                                 First            Second           Third            Fourth
                                                                Quarter          Quarter          Quarter          Quarter
                                                              -------------    -------------    -------------    -------------

<S>                                                                 <C>            <C>                <C>            <C>   
   Income (loss) from discontinued operations,
     net of tax                                                     ($82)           ($321)            ($421)            $27
                                                              =============    =============    =============    =============

   Net income                                                       $946           $1,900             $987           $2,004
                                                              =============    =============    =============    =============

Per share data:
BASIC EARNINGS PER COMMON SHARE:
   Income from continuing operations                                $.18            $.40              $.26             $.37
   Discontinued operations, net of tax                             ($.01)          ($.06)            ($.08)            $.00
                                                              -------------    -------------    -------------    -------------

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

DILUTED EARNINGS PER COMMON SHARE:
   Income from continuing operations                                $.18            $.40              $.26             $.37
   Discontinued operations, net of tax                             ($.01)          ($.06)            ($.08)            $.00
                                                              -------------    -------------    -------------    -------------

   Net income per common share --
   assuming dilution                                                $.17            $.34              $.18             $.37
                                                              =============    =============    =============    =============
</TABLE>

Notes to quarterly financial data

(1)  The 1996 and first three  quarters of 1997  earnings per share amounts have
     been restated to comply with  Statement of Financial  Accounting  Standards
     No. 128, "Earnings per Share".

                                      F-32