<PAGE>   1


                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                        
                                   FORM 10-Q

(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 1998

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
                                        
               For the transition period from ________ to________
                         Commission file number 1-13516
                                        
                     UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
                     -------------------------------------
             (Exact name of registrant as specified in its charter)
                                        
          Delaware                                            36-3973627
          --------                                            ----------
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                             Identification No.)


                               3350 North Kedzie
                          Chicago, Illinois 60618-5722
                    ----------------------------------------
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (312) 478-2323
               --------------------------------------------------
              (Registrant's telephone number, including area code)

                                      N/A
              ---------------------------------------------------
     (Former name, former address and former fiscal year, if changed since
                                  last report)


     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes  X   No
                                              ---     ---

               APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

     Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.  Yes     No
                           ---    ---

                     APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of issuer's Common Stock, par value $.01 per share,
outstanding as of August 11, 1998 was 6,769,425 shares.
<PAGE>   2
                                        
                     UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
                                        
                                     INDEX

<TABLE>
<CAPTION>

PART I.  FINANCIAL INFORMATION                                               Page (s)
------------------------------                                               -------
<S>                                                                          <C>
   Item 1. Financial Statements

         Consolidated Balance Sheets
                June 30, 1998 (Unaudited) and December 31, 1997              3

         Consolidated Statements of Operations
                (Unaudited) - for the three and six months ended
                June 30, 1998 and 1997                                       4

         Consolidated Statements of Cash Flows
                (Unaudited) - for the six months ended
                June 30, 1998 and 1997                                       5

         Notes to Condensed Financial Statements (Unaudited)                 6 - 7

   Item 2. Management's Discussion and Analysis of Results of
            Operations and Financial Condition                               7 - 9

PART II.  OTHER INFORMATION

   Item 4 - Submission of Matters to a Vote of Security Holders              10

   Item 6 - Exhibits and Reports on Form 8-K                                 10

   Signatures                                                                10

   EXHIBIT II - Computation of Earnings Per Share                            11
</TABLE>

                                        
                                       2


<PAGE>   3

                     UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                            June 30, 1998  December 31, 1997
                                                            -------------  -----------------
                                                             (Unaudited)
<S>                                                          <C>              <C>
                              Assets
  Current Assets:
     Cash                                                    $     86,219      $     196,010
     Accounts receivable, trade                                14,005,192          9,468,624
     Inventories                                               17,079,374         14,606,190
     Income taxes refundable                                      359,423            355,439
     Deferred income taxes                                      1,108,722          1,327,700
     Prepaid expenses and other current assets                    652,310            750,587
                                                             ------------      -------------
                                                               33,291,240         26,704,550
                                                             ------------      -------------
  Property and Equipment, net                                   8,398,624          8,473,844
                                                             ------------      -------------
  Other Assets:
     Goodwill, net                                                233,156            243,996
     Other assets                                                 702,424            927,331
                                                             ------------      -------------
                                                                  935,580          1,171,327
                                                             ------------      -------------
                                                             $ 42,625,444      $  36,349,721
                                                             ============      =============
            Liabilities and Stockholders' Equity
  Current Liabilities:
     Accounts payable, trade                                 $ 10,595,987      $   5,769,887
     Long-term indebtedness, current portion                      336,533            355,937
     Accrued expenses and other current liabilities             2,578,797          2,636,479
                                                             ------------      -------------
                                                               13,511,317          8,762,303
                                                             ------------      -------------
  Long-term Liabilities:
     Revolving loan indebtedness                               13,260,000         11,975,000
      12.25% subordinated debenture                             4,318,125          4,295,625
     Long-term indebtedness, non-current portion                3,926,832          4,010,563
     Deferred income taxes                                        209,840            215,877
     Due to stockholders                                                0             21,064
                                                             ------------      -------------
                                                               21,714,797         20,518,129
                                                             ------------      -------------
  Stockholders' Equity:
     Preferred stock (authorized 1,000,000 shares,  $.01
      par value, none issued or outstanding)                            0                  0
     Common stock (authorized 15,000,000 shares, $.01 par
      value, 6,769,425 shares issued and outstanding)              67,694             67,694
     Additional paid-in-capital                                 8,217,889          8,217,889
     Retained earnings                                           (655,756)        (1,047,427)
     Foreign currency translation adjustments                    (230,497)          (168,867)
                                                             ------------      -------------
                                                                7,399,330          7,069,289
                                                             ------------      -------------
                                                              $42,625,444      $  36,349,721
                                                             ============      =============
</TABLE>

    The accompanying notes are an integral part of the financial statements.
                                        

                                       3
<PAGE>   4

                     UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)

<TABLE>
<CAPTION>

                                                      Three Months Ended June 30,      Six Months Ended June 30,
                                                      --------------------------       -------------------------
                                                         1998            1997             1998           1997
                                                      ----------      ----------       ----------     ----------
<S>                                                  <C>             <C>              <C>            <C>
  Net sales                                          $19,473,885     $17,953,416      $33,998,198    $32,004,919
  Cost of sales                                       15,254,026      13,817,094       26,746,372     25,064,641
                                                      ----------      ----------       ----------     ----------
  Gross profit                                         4,219,859       4,136,322        7,251,826      6,940,278
  Selling, general, and administrative expenses        3,171,941       3,189,708        5,630,834      5,708,904
                                                      ----------      ----------       ----------     ----------
  Income from operations                               1,047,918         946,614        1,620,992      1,231,374
                                                      ----------      ----------       ----------     ----------
  Other expense:
     Provision for lawsuit settlement                   (151,000)              0         (151,000)       650,000
     Interest expense                                    544,462         395,321        1,049,337        815,220
     Other                                               121,217        (44,208)           91,584        (33,604)
                                                      ----------      ----------       ----------     ----------
                                                         514,679         351,113          989,921      1,431,616
                                                      ----------      ----------       ----------     ----------
                                                                                          
  Income (loss) before provision for income taxes        533,239         595,501          631,071       (200,242)
  Income tax provision (benefit)                         183,700         266,525          239,400        (35,475)
                                                      ----------      ----------       ----------     ----------
  Net income (loss)                                  $   349,539     $   328,976      $   391,671    $  (164,767)
                                                      ==========      ==========       ==========     ==========
  Comprehensive income (loss)                        $   307,870     $   332,327      $   330,041    $  (181,472)
                                                      ==========      ==========       ==========     ==========
  Earnings per share:
  Basic:
  Net income (loss) per share                        $      0.05     $      0.05      $      0.06    $     (0.02)
                                                      ==========      ==========       ==========     ==========
  Weighted average number of common shares
  outstanding                                          6,769,425       6,738,676        6,769,425      6,734,041
                                                      ==========      ==========       ==========     ==========
  Diluted: 
  Net income (loss) per share                        $      0.05     $      0.05      $      0.06    $     (0.02)
                                                      ==========      ==========       ==========     ==========
  Weighted average number of common shares
  outstanding                                          6,771,205       6,777,207        6,771,859      6,734,041
                                                      ==========      ==========       ==========     ==========
</TABLE>

    The accompanying notes are an integral part of the financial statements
                                        
                                        
                                       4



<PAGE>   5


                     UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                             Six Months Ended June 30,
                                                                          ==================================
                                                                             1998                     1997
                                                                        -----------              -----------
<S>                                                                     <C>                      <C>
  Cash flows from operating activities:
     Net income (loss)                                                  $   391,671              $  (164,767)

  Adjustments to reconcile net income (loss) to net cash 
   provided by (used in) operating activities:                           
     Depreciation and amortization                                          615,751                  612,646
     Provision for lawsuit settlement                                      (151,000)                 650,000
     Effect of exchange rate changes                                        (61,630)                 (16,705)
     Compensation expense for stock options                                       0                   79,048
     Deferred income taxes and other                                        227,941                  (92,304)
     Changes in operating assets and liabilities:                        
        Accounts receivable, trade                                       (4,536,568)              (3,888,740)
        Inventories                                                      (2,473,184)               3,561,620
        Prepaid expenses and other current assets                            94,293                   75,609
        Other assets                                                         63,708                  136,811
        Accounts payable, trade                                           4,826,098                 (143,354)
        Accrued expenses and other current liabilities                       93,317                  337,317
                                                                        -----------              -----------
      Net cash provided by (used in) operating activities                  (909,603)               1,147,181
                                                                        -----------              -----------
  Cash flows used in investing activities:                          
     Purchase of property and equipment                                    (368,489)                (150,175)
                                                                        -----------              -----------
     Net cash used in investing activities                                 (368,489)                (150,175)
                                                                        -----------              -----------
  Cash flows from financing activities:
     Net increase (decrease) in revolving loan indebtedness               1,285,000                 (414,939)
     Proceeds on notes payable                                                    0                   233,448
     Principal (payments) on notes payable                                  (95,635)                (409,230)
     Principal (payments) on subordinated notes                                   0                 (375,000)
     Principal (payments) on loans from shareholders                        (21,064)                 (72,288)
                                                                        -----------              -----------
     Net cash provided by (used in) financing activities                  1,168,301               (1,038,009)
                                                                        -----------              -----------
  Net decrease in cash                                                     (109,791)                 (41,003)
  Cash, beginning of period                                                 196,010                   63,706
                                                                        -----------              -----------
  Cash, end of period                                                   $    86,219              $    22,703
                                                                        ===========              ===========   
  Supplemental disclosures of cash flow information:
     Cash paid for interest                                             $   949,953              $   607,789
                                                                        -----------              -----------
     Cash paid for income taxes                                         $    24,406              $     9,316
                                                                        -----------              -----------
</TABLE>

    The accompanying notes are an integral part of the financial statements.

                                                                                
                                       5
<PAGE>   6

                     UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
                    NOTES TO CONDENSED FINANCIAL STATEMENTS
                                  (UNAUDITED)

1.   UNAUDITED INTERIM FINANCIAL STATEMENTS
Interim condensed financial statements are prepared pursuant to the requirements
for reporting on Form 10-Q. Accordingly, certain disclosures accompanying annual
financial statements prepared in accordance with generally accepted accounting
principles are omitted. For additional disclosures, see the Notes to
Consolidated Financial Statements contained in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.

In the opinion of management of Universal Automotive Industries, Inc. (the
"Company"), all adjustments, consisting solely of normal recurring adjustments,
necessary for the fair presentation of the financial statements for these
interim periods have been included. The current periods' results of operations
are not necessarily indicative of results which ultimately may be achieved for
the year.

2.   INVENTORIES
                                         June 30, 1998
                                         -------------
     Finished goods                       $14,743,767
     Work in process                          596,100
     Raw materials                          1,739,507
                                         ------------
                                          $17,079,374
                                         ============
3.   BASIS OF PRESENTATION
Income Taxes
The variation of the Company's effective tax rate from the federal statutory tax
rate is principally due to losses in the Company's Hungarian subsidiary for
which no tax benefits are available.

Net Income Per Share
Warrants and options issued by the Company are only included in the computation
of weighted average number of shares, where their inclusion is not
anti-dilutive. For the six months ended June 30, 1997, common stock equivalents
are not included in the weighted average number of shares outstanding in
determining net loss per share because their inclusion would be anti-dilutive.

4.   LEGAL PROCEEDINGS
During 1995, a lawsuit was filed against the Company in the United States
Bankruptcy Court by the Trustee of the bankrupt estate of First National Parts
Exchange, Inc. ("the Estate") with which the Company had transacted both
purchases and sales of certain automotive parts in 1992 and 1993. A total of
$5,100,000 in damages was sought. The Company recorded a provision of $650,000
in the first quarter of 1997 to reflect a settlement agreement with the Trustee.
The settlement agreement lapsed as of July 31, 1997. Trial was held, and was
concluded in January, 1998. On July 10, 1998, the U. S. Bankruptcy Court ruled
that the vast majority of the Trustee's claims were invalid. The Company's
liability for the two claims held as valid is approximately $499,000. The
Company, therefore, recorded a favorable adjustment to the provision for loss of
$151,000 (pretax). The period for appeal has not yet run, and there can be no
assurances that the Trustee will not seek to appeal the verdict. The Company is
presently considering whether to appeal the two areas where valid claims were
determined.

                                        
                                       6
                                       
<PAGE>   7

5.   SUBORDINATED DEBENTURE
In connection with the sale of a $4,500,000 subordinated debenture on July 14,
1997, the Company issued a warrant to purchase 450,000 shares of the Company's
common stock at an exercise price equal to 80% of the average closing bid price
of the Company's common stock for the 20 days preceding July 14, 1998, (the
first anniversary of the debenture closing date). This warrant, therefore, is
exercisable at approximately $0.87 per share from July 14, 1998 to July 14,
2003. The debenture holder is also scheduled to receive an additional warrant to
purchase 225,000 shares on August 14, 1998 at an exercise price equal to 80% of
the average closing bid price of the Company's common stock for the twenty days
preceding the warrant issue date.


                MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
                    OF OPERATION AND FINANCIAL CONDITION(1)

RESULTS OF OPERATIONS

Three Months Ended June 30, 1998 Compared To Three Months Ended June 30, 1997

     Sales increased approximately $1.5 million or 8.5% over the same quarter in
1997 to $19,473,885. This increase is primarily due to gains in sales of brake
parts, especially friction products. Sales increases were also experienced to a
smaller extent in the Company's non-brake warehouse "commodities" and Hungarian
gray iron foundry.

     Gross profits for the three months ended June 30, 1998 were $4,219,859 or
21.7% of net sales compared to $4,136,322 or 23.0% in the same period of 1997.
Such increase in gross profit was principally due to increased sales offset by
slightly lower gross profit percentages due to a more unfavorable sales mix
between brake and non-brake business.

     Selling, general and administrative expenses for the three months ended
June 30, 1998 decreased slightly by $17,767 from $3,189,708 (17.8% of net sales)
for the second quarter of 1997 to $3,171,941 (16.3% of net sales). Selling,
general and administrative expenses as a percentage of sales decreased
principally because of the absence of abnormal bad debt charges incurred in the
second quarter of 1997 and because the sales mix has a heavier proportion of
non-brake sales in the second quarter of 1998 which requires less selling,
general and administrative expense compared to brake sales.


________________________________________________________________________________
(1) Some of the statements included in Management's Discussion and Analysis of
Financial Condition and Results of Operations, may be considered to be "forward
looking statements" since such statements relate to matters which have not yet
occurred. For example, phrases such as "the Company anticipates," "believes" or
"expects" indicate that it is possible that the event anticipated, believed or
expected may not occur. Should such event not occur, then the result which the
Company expected also may not occur or occur in a different manner, which may be
more or less favorable to the Company. The Company does not undertake any
obligation to publicly release the result of any revisions to these forward
looking statements that may be made to reflect any future event or
circumstances.

                                        
                                       7
<PAGE>   8


     Other expense for the three months ended June 30, 1998 increased to
$514,679 from $351,113 for the same period of 1997. The increase is attributable
to (a) an increase in interest expense due primarily to a higher level of
borrowing at June 30, 1998 compared to June 30, 1997, (b) a higher interest rate
with respect to the subordinated debenture issued in July, 1997, as compared to
the financing it replaced, (c) increase in foreign exchange losses due to
unfavorable fluctuations in the Canadian dollar, and (d) recording of a
favorable adjustment of $151,000 to the previously recorded provision for
lawsuit settlement (see Note 4 to the Condensed Financial Statements).

     Net income for the three months ended June 30, 1998 was $349,539 compared
to net income of $328,976 for the same period in 1997. This increase in net
income is attributed to higher sales, flat selling, general and administrative
expenses and increased interest expense offset by increased gross profits and a
favorable adjustment to the provision for lawsuit settlement (see Note 4 to the
Condensed Financial Statements).


Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997

     Net sales for the six months ended June 30, 1998 increased by $1,993,279 or
6.2% to $33,998,198. The sales increase is attributable to increased sales of
brake products, primarily friction products. Sales of non brake warehouse
"commodity" business and the Hungarian gray iron foundry were also slightly
higher than the same period in 1997.

     Gross profits for the six months ended June 30, 1998 increased $311,548 or
4.5% to $7,251,826. The percent of gross profit for the six month period was
21.3% compared to 21.7% for the same 1997 period. The increase in gross profits
is due to increased sales for this six month period.

     Selling, general and administrative expenses for the six months ended June
30, 1998 decreased $78,070 or 1.4% to $5,630,834 from $5,708,904 for the same
period in 1997. Such decrease was due primarily to an absence of abnormal bad
debt charges as were recorded in the 1997 six month to date period and because
of a slight shift in the sales mix to non brake sales which requires less
selling, general and administrative expense compared to brake sales.

     Other Expense for the six months ended June 30, 1998 decreased by $441,695
to $989,921 from $1,431,616 for the same period of 1997. The decrease is
attributable to a provision for lawsuit settlement of $650,000 (pretax) recorded
in the first quarter of 1997 and a reduction in the provision in the second
quarter of 1998 as described in Note 4 to the Condensed Financial Statements
offset by (a) an increase in interest expense due primarily to a higher level of
borrowing at June 30, 1998 compared to June 30, 1997 (b) a higher interest rate
with respect to the subordinated debenture issued in July, 1997, as compared to
the financing it replaced, and (c) an increase in foreign exchange losses due to
unfavorable fluctuations in the Canadian dollar.

     Net income for the six months ended June 30, 1998 was $391,671 compared to
a net loss of $164,767 for the same period in 1997. This increase in net income
is due to increased sales, approximately flat selling, general and
administrative expenses and a net lower other expense as described above.

                                        
                                       8
<PAGE>   9

LIQUIDITY AND CAPITAL RESOURCES

     Net cash used in operating activities for the six months ended June 30,
1998 was $909,603. This was due primarily to cash generated from operations
($1.02 million) which, coupled with cash generated through an increase in
accounts payable ($4.8 million), nearly offset cash required to finance growth
in accounts receivable ($4.5 million) and to increase inventories ($2.5 million)
to a level the Company considers necessary.

     Net cash used in investing activities was $368,489, which is attributable
primarily to acquisition of various items of tooling and manufacturing
equipment. Net cash provided by financing activities was $1,168,301, consisting
primarily of borrowings under the Company's revolving credit agreement.

     The Company expects to continue to finance its operations through cash flow
generated from operations, borrowings under the Company's bank lines of credit
and credit from its suppliers.


"YEAR 2000" COMPLIANCE

      The Company has reviewed the computer systems and the related software in
use throughout its operations that could be affected by the Year 2000 issue. The
Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Thus, time sensitive
software may recognize a date using the digits "00" as the year 1900 rather than
the year 2000. This could result in system failure or miscalculations. The
Company uses software under license from various vendors. The Company learned
that the software in use is either fully "Year 2000" compliant or, in one
instance, will be fully "Year 2000" compliant in a upgrade version to be
installed by the end of 1998. The Company believes that the cost of installation
and testing will not have a material effect on its financial position or results
of operations.


                                       9


<PAGE>   10

PART II  OTHER INFORMATION

Item 4 - Submission of Matters to a Vote of Security Holders

On June 9, 1998, Universal Automotive Industries, Inc. held its annual meeting
of shareholders. Present at this meeting, in person and by proxy, were
shareholders representing 5,838,000 of the 6,769,425 issued and outstanding
shares of Common Stock at the date of record (86.2% of the total number of
shares of Common Stock outstanding and entitled to vote). The following items
were voted upon at the meeting:

<TABLE>
<CAPTION>

a) The following Directors were elected to the Board:
----------------------------------------------------------------------------
  Name                        Votes For       Votes Against Votes Withheld
----------------------------------------------------------------------------
<S>                           <C>                   <C>           <C>
  Arvin Scott                 5,828,650             0            9,350
----------------------------------------------------------------------------
  Yehuda Tzur                 5,828,650             0            9,350
----------------------------------------------------------------------------
  Sami Israel                 5,828,650             0            9,350
----------------------------------------------------------------------------
  Eric Goodman                5,828,650             0            9,350
----------------------------------------------------------------------------
  Sheldon Robinson            5,828,650             0            9,350
----------------------------------------------------------------------------
  Sol S. Weiner               5,828,650             0            9,350
----------------------------------------------------------------------------
  Dennis L. Kessler           5,828,650             0            9,350
----------------------------------------------------------------------------
</TABLE>

b) The firm of Altschuler, Melvoin and Glasser LLP was reappointed as the
Company's independent auditors for 1998. Holders of Common Stock holding
5,823,300 votes were cast in favor, 5,500 votes were cast against, and 9,200
shares abstained from voting.

Item 6 - Exhibits and Reports on Form 8-K

a) Exhibit 10 - Amended and Restated Share Option Plan

b) Exhibit 11 - Computation of Earnings Per Share

c) Exhibit 27 - Financial Data Schedule


                                   SIGNATURES
                                        
     Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                       UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.


                                           /s/ ARVIN SCOTT
                                           -------------------------------
                                           Arvin Scott, Chief Executive 
                                            Officer, President
                                            (Principal Executive Officer)

                                           /s/ JEROME J. HISS
                                           -------------------------------
                                           Jerome J. Hiss, Chief Financial 
                                            Officer (Principal Financial Officer
                                            and Principal Accounting Officer)

                                           Date: August 13, 1998


                                       10