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 Nine Months Ended September 30, 2009 and 2008

Total revenues for the third quarter of 2009 were $14,734, a decrease of $3,811 or 20.6% from the comparable 2008 period, reflecting the impact the weakened economy has had on the Company's engineered products and hotel operations segments. The decline in total revenues was the main driver in the decrease in operating income which decreased $1,151 for the current quarter. Net income for the three months ended September 30, 2009 was $1,593 or $.18 per basic share compared to a net loss of ($7,033) or ($.83) per basic share for the comparative quarter of 2008.

For the nine month period ended September 30, 2009, total revenues were $42,168, compared to $55,944 for the same period of 2008. Operating income for the first nine months of 2009 was $4,544, a decrease of $3,751 compared to the corresponding 2008 period. Net income for the nine months ended September 30, 2009 was $3,946 or $.44 per basic share compared to a net loss of ($1,833) or ($.22) per basic share for the comparative 2008 period.

The 2008 results include impairment charges of $15,777 and $16,226 for the three and nine month periods, respectively, on the Company's marketable security portfolio resulting from the sudden decline in the stock market and collapse of certain financial institutions in which the Company held an interest. These impairment charges are included as a component of other income and (expense), net in the Condensed Consolidated Statements of Operations.

The continued weakness in the economy has affected profitability 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                           Nine Months Ended
                                   September 30, 2009                           September 30, 2009
                          Real           Hotel                         Real           Hotel
                         Estate        Operations        Total        Estate        Operations        Total
Revenues                $   4,959     $      4,116     $   9,075     $  14,863     $     10,661     $  25,524
Mortgage interest
expense                        36              474           510           133            1,429         1,562
Depreciation expense          578              424         1,002         1,703            1,199         2,902
Other operating
expenses                    1,333            3,292         4,625         3,879            8,522        12,401
Income (loss) from
operations              $   3,012     $        (74 )   $   2,938     $   9,148     $       (489 )   $   8,659



                                       Three Months Ended                           Nine Months Ended
                                       September 30, 2008                           September 30, 2008
                              Real           Hotel                         Real           Hotel
                             Estate        Operations        Total        Estate        Operations        Total
Revenues                    $   4,953     $      4,483     $   9,436     $  14,973     $     12,393     $  27,366
Mortgage interest expense          63              475           538           178            1,410         1,588
Depreciation expense              547              330           877         1,629            1,059         2,688
Other operating expenses        1,457            3,017         4,474         4,012            9,052        13,064
Income from operations      $   2,886     $        661     $   3,547     $   9,154     $        872     $  10,026

Real Estate Investment and Management

Revenues from the real estate investment and management segment varied by less than 1% for the three and nine months ended September 30, 2009, compared to the corresponding periods of 2008. Revenues from the Company's real estate portfolio are generally derived from properties with single tenant, long-term leases. Therefore, rental revenues recognized under GAAP do not fluctuate significantly, but are affected by lease renewals, terminations and the purchase or sale of additional properties.

Mortgage interest expense decreased $27 or 42.9% for the third quarter and $45 or 25.3% for the first nine months 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. Based on scheduled amortizations, mortgage interest expense on existing obligations of the Company's real estate investment and management segment will continue to decline. At September 30, 2009, the outstanding mortgage balance on the Company's three real estate investment properties which are currently encumbered is approximately $2,100.

Depreciation expense associated with real properties held for rental increased $31 for the quarter and $74 for the nine months ended September 30, 2009, compared to the corresponding periods of 2008. These increases are primarily attributable to depreciation expense ($78 and $29 for the three and nine 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 the fourth quarter 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 $124 for the quarter and $133 for the nine month period ended September 30, 2009, compared to the corresponding periods of 2008. The decrease for the quarterly period primarily relates to a decrease in property maintenance ($116) which is the result of the timing of certain repairs and renovations. The decrease for the nine month period primarily relates to decreases in professional fees ($80), related to the timing of lease renewals and other property related transactions, and the cost of utilities ($57). Due to the extent of property age, location and vacancies, certain operating expenses could fluctuate in the future from those previously incurred.

Hotel Operations

Hotel revenues decreased $367 or 8.2% to $4,116 for the quarter ended September 30, 2009 and $1,732 or 14.0% to $10,661 for the first nine months of 2009, compared to the corresponding 2008 periods. These decreases are primarily related to the overall weakness in the U.S. economy which has resulted in a reduction in both consumer and business travel. Partially offsetting these decreases are additional revenues recognized ($302) in the current year periods from the August 2009 acquisition of a hotel located in Miami, Florida (the "Miami Hotel"). The Company does not expect lodging demand to improve through the remainder of the year, and therefore, with the exception of additional revenue from the Miami Hotel, the Company's hotels will likely report lower revenues in the fourth quarter and full year of 2009, compared to the same periods of 2008.

Mortgage interest expense related to the Company's hotel properties decreased slightly for the third quarter and increased $19 for the nine months ended September 30, 2009, compared to the corresponding periods of 2008. The increase for the nine month period is primarily the result of a mortgage obtained on one of the Company's hotels in the prior year. The Company expects that mortgage interest expense on existing obligations related to the Company's hotel properties for the full year of 2009 should be similar to that reported in 2008.

Depreciation expense associated with the Company's hotel operations increased $94 for the three months and $140 for the nine months ended September 30, 2009, compared to the corresponding periods of 2008, primarily attributable to additional depreciation expense ($37 and $96 for the three and nine month periods, respectively) on renovations and improvements added during the past twelve months at two of the Company's hotels. In addition, the Company incurred additional depreciation expense ($32) during the current quarter and nine month period as a result of the acquisition of the Miami Hotel. Depreciation expense on the Company's hotel properties for the full year of 2009 should be higher than that reported in 2008 due to the Miami Hotel acquisition and from the renovations and improvements at two of the Company's hotels.

Other operating expenses related to the management of the Company's hotels increased $275 to $3,292 for the third quarter and decreased $530 to $8,522 for the first nine months of 2009, compared to the corresponding 2008 periods. The Company incurred additional operating expenses ($536) during the current quarter and nine month period due to the acquisition of the Miami Hotel. Operating expenses at the Company's other hotels continue to decrease in both the quarter and nine month period, primarily as a result of the lower revenues, noted above. 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 Company is continuously working to streamline operations, control expenses and maximize cash flow from operations. 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 September 30,             Nine Months Ended September 30,
                                                     2009                     2008                2009                  2008
Net sales                                      $          5,659         $          9,109     $        16,644       $        28,628
Cost of sales                                             4,358                    7,201              13,160                22,382
Selling, general and administrative expenses              1,474                    1,839               4,531                 5,444
Operating (loss) income                        $           (173 )       $             69     $        (1,047 )     $           802

Net sales of the engineered products segment decreased $3,450 or 37.9% for the three months and $11,984 or 41.9% for the nine months ended September 30, 2009, compared with the results of the corresponding periods of 2008. The decrease for the three month period is primarily related to decreased demand in the Company's engineered and transformer product lines which were brought about by a general decrease in capital spending related to the current economic environment. The decrease for the nine month period is primarily related to decreased demand in the Company's automotive, engineered and transformer product lines. The automotive product line, which is down approximately 40% from the prior year-to-date period, has shown improvements in the current quarter as a result of the re-opening of certain plants which experienced extended shut-downs during the first half of 2009. The automotive 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. Although the Company has experienced improvements in its automotive sales from the prior quarter, the Company expects continued declines in net sales of its engineered products segment during the remainder of the year.

Cost of sales as a percentage of net sales decreased 2.0% for the quarter ended September 30, 2009 and increased less than 1.0% in the nine months ended September 30, 2009, compared to the corresponding 2008 periods. These fluctuations are primarily attributable to the reduction in material costs as a percentage of net sales (5.3% and 4.3% for the three and nine month periods, respectively), which reflects reductions in the cost of raw materials and changes in the mix of products sold. These fluctuations are also attributable to the significant reduction in net sales, noted above, which led to lower absorption of incurred manufacturing costs. During each of these periods, labor and overhead costs as a percentage of net sales increased (3.2% and 5.0% for the three and nine month periods, respectively). Although the Company's automotive product line has started to show improvements during the quarter, management is still carefully monitoring its operating costs and only increasing its workforce as needed.

Selling, general and administrative expenses of the engineered products segment decreased $365 or 19.8% for the third quarter and $913 or 16.8% for the nine months ended September 30, 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 ($163 and $481 for the three and nine month period, respectively), freight charges ($47 and $158 for the three and nine month period, respectively) and professional fees ($28 and $145 for the three and nine month period, respectively). These reductions are part of the Company's efforts to streamline operations, control expenses and maximize cash flow in light of the significant decline in sales.

General and Administrative Expenses

General and administrative expenses not associated with the manufacturing operations increased $300 for the third quarter and $535 for the first nine months 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 ($122 and $397 for the three and nine month periods, respectively), which results from the significant decline in the fair value of the Company's pension assets in 2008, and an increase in professional fees ($202 and $302 for the three and nine month periods, respectively), primarily as a result of acquisition costs which are not capitalizable.

Other Income and Expense, Net

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

                                               Three Months Ended             Nine Months Ended
                                                  September 30,                 September 30,
                                              2009             2008           2009          2008
Net realized and unrealized gains on
derivative instruments                     $        -       $      216     $      139     $     438
Net loss on available-for-sale
securities                                          -          (15,671 )         (104 )     (16,088 )
Litigation award from prior condemnation            -              457              -           457
Other, net                                         (9 )             16            (29 )           -
                                           $       (9 )     $  (14,982 )   $        6     $ (15,193 )

Included in the results for the three and nine months ended September 30, 2008 are $15,777 and $16,226, respectively, in impairment charges on the Company's marketable security portfolio resulting from the sudden decline in the stock market and collapse of certain financial institutions in which the Company held an interest which are included in net loss on available-for-sale securities, above.

Included in other income and expense, net for the 2008 periods are amounts received in connection with a litigation award from a property condemned by the City of New York in 2001.

Discontinued Operations

Loss from operations on properties sold and accounted for as discontinued operations was ($9), on a net of tax basis, for the third quarter of 2009, compared to loss from operations on properties sold of ($89), on a net of tax basis, for the corresponding quarter of 2008. For the nine months ended September 30, 2009, the loss from operations on properties sold and accounted for as discontinued operations was ($143), on a net of tax basis, compared to income from operations on properties sold of $14, on a net of tax basis, for the corresponding period in 2008. Net loss on the disposal of real estate assets accounted for as discontinued operations were ($24) and ($414), on a net of tax basis, for the three and nine months ended September 30, 2009, respectively. No properties were sold during the nine months ended September 30, 2008. Prior year amounts have been reclassified to reflect results of operations of real properties sold during 2009 and 2008 as discontinued operations. As of September 30, 2009, the Company did not consider any of its properties to be held for sale.

Liquidity and Capital Resources

Net cash provided by operating activities was $14,003 and $9,686 for the nine months ended September 30, 2009 and 2008, respectively. This increase in operating cash flows results primarily from the receipt of tax refunds ($4,163) and reductions in inventories and notes and accounts receivable, net ($1,616 and $1,339, respectfully), offset by lower operating income before depreciation ($3,591).

Net cash used in investing activities was $28,386 and $23,969 for the nine months ended September 30, 2009 and 2008, respectively. This change primarily results from cash used in a business acquisition, net of cash acquired, in August 2009 ($17,081) and from the purchase of notes receivable ($9,428) during the current year offset by decreases in the purchase of available-for-sale securities ($23,206) and acquisition of/additions to real estate assets ($12,824), less the release of proceeds held in escrow on the sale of real estate in 2008 ($15,000).

Net cash provided by financing activities was $2,423 for the nine months ended September 30, 2009, compared to net cash used in financing activities of $1,505 for the same period of 2008. This change results from a decrease in the purchase and retirement of common stock ($10,772) during the current year, as compared to 2008, offset by a reduction in proceeds from the exercise of stock options ($3,880), an increase in principal payments on mortgage obligations ($1,731), a reduction in the tax benefits related to the exercise of stock options ($733) and proceeds received from a mortgage obtained during 2008 ($500).

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 September 30, 2009, the Company's cash and marketable securities totaled $147.5 million and working capital was $145.9 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.

In July 2009, the Company purchased a non-performing mortgage note encumbering a hotel located in Miami, Florida (the "Miami Hotel"). The Company took title to the Miami Hotel in mid-August and has undertaken operation of the hotel. The Company anticipates investing up to $10,000 in renovations and improvements to this property over the next few quarters.

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 September 30, 2009.

Globally, automakers and their suppliers continue to experience significant difficulties from a weakened economy and tightened credit market. Although the automotive industry has shown improvements in the current quarter as the result of the re-opening of certain plants which experienced extended shut-downs during the first half of 2009, 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 11.3% and 10.7% for the three and nine months ended September 30, 2009 and 7.9% and 8.7% for the three and nine months ended September 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 continued weakness in the economy has pressured results of the Company's engineered products and hotel segments. These factors are expected to continue to impact the Company for the remainder of the year. The Company continues to work to 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 15 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 . . .