The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements of United Capital Corp. (the "Company") and related notes thereto.

Results of Operations: Three and Six Months Ended June 30, 2009 and 2008

Total revenues for the three and six months ended June 30, 2009 were $13,698 and $27,434, compared to $18,997 and $37,449 for the three and six months ended June 30, 2008, respectively. As a result of the weakened economy and its consequences on the Company's engineered products and hotel operations segments, operating income decreased $1,168 and $2,600 for the current quarter and six month period, respectively. Net income for the second quarter of 2009 was $1,236 or $.14 per basic share, compared to net income of $2,512 or $.30 per basic share for the same period in 2008. Net income for the first half of 2009 was $2,353 or $.27 per basic share, compared to net income of $5,200 or $.62 per basic share for the six months ended June 30, 2008.

The ongoing weakness in the economy continues to impact the results of the Company's engineered products and hotel operations segments. These factors are expected to continue to impact the Company for the remainder of the year.

Real Estate Operations

The Company's real estate operations consist of the real estate investment and
management and hotel operations segments. The operating results for these
segments are as follows:

                              Three Months Ended June 30, 2009                  Six Months Ended June 30, 2009
                           Real              Hotel                          Real              Hotel
                          Estate           Operations        Total         Estate          Operations         Total
Revenues                $     5,068       $      3,429     $   8,497     $    9,904       $       6,545     $  16,449
Mortgage interest
expense                          37                483           520             97                 955         1,052
Depreciation expense            570                390           960          1,125                 775         1,900
Other operating
expenses                      1,250              2,543         3,793          2,546               5,230         7,776
Income (loss) from
operations              $     3,211       $         13     $   3,224     $    6,136       $        (415 )   $   5,721



                                  Three Months Ended June 30, 2008                  Six Months Ended June 30, 2008
                               Real              Hotel                          Real               Hotel
                              Estate           Operations        Total         Estate           Operations         Total
Revenues                    $     5,137       $      4,240     $   9,377     $    10,020       $       7,910     $  17,930
Mortgage interest expense            56                480           536             115                 935         1,050
Depreciation expense                550                371           921           1,082                 729         1,811
Other operating expenses          1,319              3,074         4,393           2,555               6,035         8,590
Income from operations      $     3,212       $        315     $   3,527     $     6,268       $         211     $   6,479

Real Estate Investment and Management

Revenues from the real estate investment and management segment decreased slightly for the three and six months ended June 30, 2009, compared to the corresponding periods of 2008, with no significant fluctuations. In general, rental revenues from the Company's real estate properties do not fluctuate significantly due to the long-term nature of the Company's leases. However, future rental revenues could be affected by lease renewals, terminations and by the purchase or sale of additional properties.

Mortgage interest expense decreased $19 or 33.9% for the second quarter and $18 or 15.7% for the first half of 2009, compared to the corresponding 2008 periods. These decreases are primarily the result of continuing mortgage amortization, partially offset by an increase in mortgage interest due to a mortgage obtained in connection with the purchase of a commercial property in the second quarter of 2008. At June 30, 2009, the outstanding mortgage balance on the Company's three real estate investment properties which are currently encumbered is below $2,200. Based on scheduled amortizations, mortgage interest expense on existing obligations of the Company's real estate investment and management segment will continue to decline.

Depreciation expense associated with real properties held for rental increased $20 for the quarter and $43 for the six months ended June 30, 2009, compared to the corresponding periods of 2008. These increases are primarily attributable to depreciation expense ($32 and $49 for the three and six month periods, respectively) related to additions to real estate assets over the past twelve months. As a result of the purchase of commercial properties during the prior year and other expenditures for capital improvements incurred during the current and prior year, the Company expects that depreciation expense on the Company's properties for each of the quarters and full year of 2009 should be higher than that reported in the corresponding 2008 periods.

Other operating expenses associated with the management of real properties decreased $69 for the quarter and less than 1% for the six month period ended June 30, 2009, compared to the corresponding periods of 2008. The decrease for the quarterly period primarily relates to a decrease in professional fees ($59) which is related to the timing of lease renewals and other property related transactions. For the six month period, the most significant fluctuations were declines in professional fees ($64) and the cost of utilities ($41), primarily offset by an increase in property maintenance ($107) which is the result of the timing of certain repairs and renovations. Future operating expenses of the Company's real estate properties may vary as a result of property age, location and vacancies.

Hotel Operations

Hotel revenues decreased $811 or 19.1% to $3,429 for the quarter ended June 30, 2009 and $1,365 or 17.3% to $6,545 for the first half of 2009, compared to the corresponding 2008 periods, primarily related to the overall weakness in the U.S. economy which has resulted in a reduction in both consumer and business travel. As a result, the Company expects lodging demand to continue to decline through the remainder of 2009, which will likely result in lower reported revenues from existing properties for the balance of the year.

Mortgage interest expense related to the Company's hotel properties increased less than 1% for the second quarter and $20 for the first half of 2009, compared to the corresponding periods of 2008. The increase for the six month period is primarily the result of a mortgage obtained on one of the Company's hotels in the prior year. Although mortgage interest expense on existing obligations related to the Company's hotel properties has increased, the Company expects that, with continued amortization, mortgage interest expense for the full year of 2009 should be less that that reported in 2008.

Depreciation expense associated with the Company's hotel operations increased $19 for the three months and $46 for the six months ended June 30, 2009, compared to the corresponding periods of 2008, primarily attributable to additional depreciation expenses ($41 and $80 for the three and six month periods, respectively) on renovations and improvements added during the past twelve months at two of the Company's hotels. As a result of these renovations and improvements, and additional renovations and improvements currently occurring at one of the hotels, depreciation expense for each of the quarters and the full year of 2009 should be higher than that reported in the corresponding 2008 periods.

Other operating expenses related to the management of the Company's hotels decreased $531 to $2,543 for the second quarter and $805 to $5,230 for the first half of 2009, compared to the corresponding 2008 periods, primarily as a result of the lower revenues, noted above. The Company is continuously working to streamline operations, control expenses and maximize cash flow from operations. The growing weakness in the economy has pressured results in the Company's hotel operations. This condition is expected to continue to impact this segment for the remainder of 2009. The success of these efforts and the depth and duration of the current negative economic environment and its impact on future hotel operations remain uncertain.

Engineered Products

The operating results of the engineered products segment are as follows:

                                                  Three Months Ended            Six Months Ended
                                                       June 30,                     June 30,
                                                  2009           2008          2009          2008
Net sales                                      $    5,201      $   9,620     $  10,985     $  19,519
Cost of sales                                       4,290          7,647         8,802        15,181
Selling, general and administrative expenses        1,466          1,789         3,057         3,605
Operating (loss) income                        $     (555 )    $     184     $    (874 )   $     733

Net sales of the engineered products segment decreased $4,419 or 45.9% for the three months and $8,534 or 43.7% for the six months ended June 30, 2009, compared with the results of the corresponding periods of 2008, primarily related to decreases in demand for the Company's automotive product line which continues to be down approximately 50% from the prior year periods. These declines are the result of a significant reduction in North American automotive production, especially from General Motors, our largest customer, and the general slowdown in the global vehicle market. The filing for bankruptcy of General Motors during the second quarter, which lead to extended plant shut-downs, has had a significant adverse affect on our engineered products segment. Although the automotive companies have started re-opening certain plants, the Company expects continued declines in sales of its automotive product line during the remainder of the year.

Cost of sales as a percentage of net sales increased 3.0% and 2.4% in the three and six months ended June 30, 2009, compared to the corresponding 2008 periods. These increases are primarily attributable to the significant reduction in net sales, noted above, which led to lower absorption of incurred manufacturing costs. Labor and overhead costs as a percentage of net sales increased in both periods (6.6% and 5.9% for the three and six month periods, respectively) while material costs as a percentage of net sales declined (3.9% and 3.8% for the three and six month periods, respectively) reflecting a reduction in the cost of raw materials and changes in the mix of products sold. As a result of the significant decline in sales and ongoing uncertainty, the Company has taken significant steps to reduce its operating costs, including the reduction of 40% of its direct and indirect positions since the beginning of the year.

Selling, general and administrative expenses of the engineered products segment decreased $323 or 18.1% for the second quarter and $548 or 15.2% for the first half of 2009, compared to the corresponding periods of 2008. These decreases are the result of cost containment efforts which include reductions in payroll and payroll related expenses ($207 and $318 for the three and six month period, respectively), professional fees ($55 and $117 for the three and six month period, respectively) and freight charges ($57 and $111 for the three and six month period, respectively). In light of the significant decline in sales, the Company is continuously working to control expenses and maximize cash flow.

General and Administrative Expenses

General and administrative expenses not associated with the manufacturing operations increased $126 for the second quarter and $235 for the first half of 2009, compared to such expenses incurred in the comparable 2008 periods. These increases are primarily attributable to the increase in net periodic pension expense ($123 and $275 for the three and six month period, respectively) which results from the significant decline in the fair value of the Company's pension assets in 2008.

Other Income and Expense, Net

The components of other income and (expense), net in the Condensed Consolidated
Statements of Income are as follows:

                                               Three Months Ended              Six Months Ended
                                                    June 30,                       June 30,
                                              2009             2008           2009           2008
Net realized and unrealized gains on
derivative instruments                     $      134       $      192     $      139      $     222
Net loss on available-for-sale
securities                                          -             (417 )         (104 )         (417 )
Other, net                                        (10 )             (9 )          (20 )          (16 )
                                           $      124       $     (234 )   $       15      $    (211 )

Discontinued Operations

Losses from operations on properties held for sale and accounted for as discontinued operations were $57 and $134, on a net of tax basis, for the three and six months ended June 30, 2009, compared to income from operations on properties sold or held for sale of $65 and $103, net of tax, for the respective periods in 2008. Such amounts have been reclassified to reflect results of operations of real properties held for sale as of June 30, 2009 or sold during 2008 as discontinued operations. As of June 30, 2009, the Company classified two properties as held for sale. During the six months ended June 30, 2009, the Company recognized a non-cash impairment charge amounting to $390, on a net of tax basis, on the carrying value of one of these properties. No properties were sold during the six months ended June 30, 2009.

Liquidity and Capital Resources

Net cash provided by operating activities was $11,149 and $5,231 for the six months ended June 30, 2009 and 2008, respectively. This increase in operating cash flows results primarily from the receipt of tax refunds ($4,163) and reductions in notes and accounts receivable, net and inventories ($2,447 and $,1484, respectfully), offset by lower operating income before depreciation ($2,548) and interest and dividend income ($1,153) in the current year period than realized in the prior year.

Net cash used in investing activities was $10,010 and $22,238 for the six months ended June 30, 2009 and 2008, respectively. This change primarily results from decreases in the purchase of available-for-sale securities ($20,963) and acquisition of/additions to real estate assets ($12,554), less the release of proceeds held in escrow on the sale of real estate in 2008 ($15,000) and from the purchase of a note receivable in 2009 ($5,428).

Net cash provided by financing activities was $3,491 for the six months ended June 30, 2009, compared to net cash used in financing activities of $1,236 for the same period of 2008. This change results from a decrease in the purchase and retirement of common stock ($12,628) during the current year, as compared to 2008, offset by a reduction in proceeds from the exercise of stock options ($4,865), an increase in principal payments on mortgage obligations ($1,735) and a reduction in the tax benefits related to the exercise of stock options ($1,301).

Previous purchases of the Company's common stock have reduced the Company's additional paid-in capital to zero and have also reduced retained earnings by amounts in excess of par value. Any future purchases in excess of par value will also reduce retained earnings. Repurchases of the Company's common stock may be made from time to time in the open market at prevailing market prices and may be made in privately negotiated transactions, subject to available resources. Future proceeds from the issuance of common stock in excess of par value will be credited to retained earnings until such time that previously recorded reductions have been recovered.

At June 30, 2009, the Company's cash and marketable securities totaled $159.4 million and working capital was $160.7 million compared to cash and marketable securities of $147.3 million and working capital of $153.9 million at December 31, 2008. While there has been a decline in the value of certain real estate properties in the United States, the recession could cause real estate prices to drop even further. Management has limited acquisitions to those select properties that meet the Company's stringent financial requirements. Management believes that opportunities to acquire additional properties at favorable prices may soon be available and the Company's available working capital provides a considerable advantage to fund acquisitions and grow its portfolio, if and when attractive long-term opportunities become available. The tightened credit market however, could limit the Company's ability to leverage future acquisitions.

On July 14, 2009, the Company purchased a non-performing mortgage note for approximately $17,000 encumbering a hotel located in Miami, Florida. On July 30, 2009, the Company was the successful bidder at the foreclosure auction and expects to take title to the property at the expiration of the redemption period in mid-August. The Company will undertake operation of the hotel at that time and intends to invest additional capital for renovations and improvements over the next twelve months.

The equity method of accounting is used for investments in 20% to 50% owned joint ventures in which the Company has the ability to exercise significant influence, but not control. These investments are recorded initially at cost and subsequently adjusted for equity in earnings and cash contributions and distributions. The debt of the joint venture in which the Company currently has an ownership interest is a non-recourse obligation and is collateralized by the entity's real property. The Company believes that the value of the underlying property and its operating cash flows are sufficient to satisfy its obligations. The Company is not obligated for the debts of the joint venture, but could decide to satisfy them in order to protect its investment. In such event, the Company's capital resources and financial condition would be reduced and, in certain instances, the carrying value of the Company's investment and its results of operations would be negatively impacted.

The cash needs of the Company have been satisfied from funds generated by current operations. It is expected that future operational cash needs will also be satisfied from existing cash balances, marketable securities, ongoing operations or borrowings. The primary source of capital to fund additional real estate acquisitions and to make additional high-yield mortgage loans may come from existing funds, the sale, financing and refinancing of the Company'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 Company may acquire real properties in exchange for the issuance of the Company's equity securities. The Company 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. The Company currently has no agreements, commitments or understandings with respect to the acquisition of real properties or other companies in exchange for its equity or debt securities.

Funds of the Company in excess of that needed for working capital, purchasing real estate and arranging financing for real estate acquisitions are invested by the Company in corporate equity securities, corporate notes, certificates of deposit, government securities and other financial instruments. Although these excess funds are invested in investment grade securities, they are subject to significant fluctuations in fair value due to the volatility of the stock market and changes in general economic conditions. Changes in U.S. interest rates affect the interest earned on the Company's cash and cash equivalent balances and other interest bearing investments. Given the level of cash and other interest bearing investments held by the Company, declines in U.S. interest rates have adversely impacted the Company's earnings in 2009.

In strategies designed to hedge overall market risk, the Company may sell common stock short and participate in put and/or call options. These instruments do not qualify for hedge accounting and therefore changes in such derivatives fair value are recognized in earnings. These derivatives, as of December 31, 2008, were recorded as a component of accounts payable and accrued liabilities in the Condensed Consolidated Balance Sheet. The Company held no such derivatives at June 30, 2009.

Globally, automakers and their suppliers continue to experience significant difficulties from a weakened economy and tightened credit market. The automotive industry also experienced extended production shut-downs as a result of bankruptcy filings by both General Motors, the largest customer of the engineered products segment, and Chrysler during the quarter. Continued adverse developments in the automotive industry, including but not limited to continued share declines in demand, customer bankruptcies and increased demands on the Company for pricing decreases, have had, and will continue to have, a significant adverse affect on our engineered products segment.

The Company manufactures its products in the United States and Mexico and sells its products in those markets as well as in Europe, South America and Asia. As a result, the Company's operating results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which the Company distributes its products. Most of the Company's sales are denominated in U.S. dollars. Net sales of the Company's engineered products segment denominated in Euros were 12.5% and 10.3% for the three and six months ended June 30, 2009 and 8.8% and 9.1% for the three and six months ended June 30, 2008, respectively. As such, a portion of the Company's receivables are exposed to fluctuations with the U.S. dollar. However, the Company does not believe this risk to be material to its overall financial position as the Company's historical results have not been significantly impacted by foreign exchange gains or losses. Accordingly, the Company has not entered into forward exchange contracts to hedge this exposure. If such exposure increased in the future, the Company may reexamine this practice to minimize the associated risks.

The growing weakness in the economy, exacerbated by recent credit market turmoil, together with higher year-over-year energy, freight and other costs, has pressured results of the Company's engineered products and hotel segments. These factors are expected to continue to impact the Company throughout the year. The Company is working to further streamline operations, control expenses and maximize cash flow from operations. While the depth and duration of the current negative economic environment and its impact on the Company are uncertain, management believes the Company's strong balance sheet together with the significant cash flow generated from its core real estate portfolio, should allow the company to weather this downturn.

The Company has undertaken the completion of environmental studies and/or remedial action at the Company's two New Jersey facilities and has recorded a liability for the estimated investigation, remediation and administrative costs associated therewith. See Note 13 of Notes to Condensed Consolidated Financial Statements for further discussion of this matter.

The Company is subject to various other litigation, legal, regulatory and tax matters that arise in the ordinary course of business activities. When management believes it is probable that liabilities have been incurred and such amounts are reasonably estimable, the Company provides for amounts that include judgments and penalties that may be assessed. These liabilities are usually included in accounts payable and accrued liabilities or other long-term liabilities in the Condensed Consolidated Financial Statements, depending on the anticipated payment date. Based on the facts presently available, the Company does not believe that the disposition of matters that are pending or asserted will have a material adverse effect on the Company's consolidated financial position or results of operations. However, new or additional facts or an adverse judgment by a court, arbitrator or a settlement could adversely impact the Company's results of operations in any given period.

Critical Accounting Policies and Management Estimates

The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to use judgment in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Certain of the estimates and assumptions required to be made relate to matters that are inherently uncertain as they pertain to future events. While management believes that the estimates and assumptions used were the most appropriate, actual results could differ significantly from those estimates under different assumptions and conditions.

Refer to the Company's 2008 Annual Report on Form 10-K for a discussion of the Company's critical accounting policies, which include revenue recognition and accounts receivable, marketable securities, inventories, real estate, discontinued operations, long-lived assets and pension plans. There were no material changes to the Company's critical accounting policies during the six months ended June 30, 2009.