<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, 2001

    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 0-25198

                      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.)

                           11859 South Central Avenue
                              Alsip, Illinois 60803
                              ---------------------
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (708) 293-4050
                                 --------------
              (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 9, 2001 was 7,794,059 shares.

<PAGE>   2

                      UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.

                                      INDEX

PART I. FINANCIAL INFORMATION                                           Page (s)

   Item 1. Financial Statements

         Consolidated Balance Sheets
                  June 30, 2001 (Unaudited) and December 31, 2000          3

         Consolidated Statements of Operations
                  (Unaudited) - for the three months and six months ended
                  June 30, 2001 and 2000                                   4

         Consolidated Statements of Cash Flows
                  (Unaudited) - for the six months ended
                  June 30, 2001 and 2000                                 5-6

         Notes to Condensed Financial Statements (Unaudited)             7-9

   Item 2. Management's Discussion and Analysis of Results of
           Operations and Financial Condition                           9-12

   Item 3.  Quantitative and Qualitative Disclosure About Market Risk     12

PART II.  OTHER INFORMATION

   Item 1 is not applicable to the Company in this report.

   Item 2 - Changes in Securities and Use of Proceeds                     12

   Item 3 - Not applicable to the Company in this Report

   Item 4 - Submission of Matters to a Vote of Security Holders           13

   Item 5 - Not applicable to the Company in this Report

   Item 6 - Exhibits and Reports on Form 8-K                              13

   Signatures                                                             14

    EXHIBIT II - Computation of Earnings Per Share                        15

                                       2
<PAGE>   3

================================================================================

                      UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                        June 30,        December 31,
                                                                          2001              2000
                                                                      ------------    --------------
                                                                       (Unaudited)
<S>                                                                   <C>            <C>
        Assets
Current Assets:
   Cash                                                               $    110,032    $     56,127
   Accounts receivable, trade                                           19,646,193      14,592,188
   Inventories                                                          18,234,913      19,744,571
   Deferred income taxes                                                   578,000         578,000
   Prepaid expenses and other current assets                               933,855         762,843
   Net current assets of discontinued operations                            57,062         213,087
                                                                      ------------    ------------
                                                                        39,560,055      35,946,816
                                                                      ------------    ------------
Property and Equipment - continuing operations, net                      4,958,935       4,996,811
                                                                      ------------    ------------
Property and Equipment - discontinued operations, net                      800,000         800,000
                                                                      ------------    ------------
Other Assets:
   Goodwill, net                                                           503,777         521,690
   Deferred income taxes                                                   307,000         307,000
   Due from stockholders                                                   237,262         237,262
   Other assets                                                            679,723         836,737
                                                                      ------------    ------------
                                                                         1,727,762       1,902,689
                                                                      ------------    ------------
                                                                      $ 47,046,752    $ 43,646,316
                                                                      ============    ============
   Liabilities and Stockholders' Equity
Current Liabilities:
   Accounts payable, trade                                            $ 14,173,375    $ 14,524,409
   Revolving loan indebtedness                                          22,076,582               0
   Long-term indebtedness, current portion                                 811,878         473,405
   Accrued expenses and other current liabilities                        3,231,578       3,850,668
   Estimated loss on disposal of discontinued operations                   860,161         860,161
                                                                      ------------    ------------
                                                                        41,153,574      19,708,643
                                                                      ------------    ------------
Long-term Liabilities:
   Revolving loan indebtedness                                                   0      17,264,111
   Subordinated debenture                                                4,453,125       4,430,625
   Long-term indebtedness, non-current portion                             434,853         856,151
   Deferred income taxes                                                   214,922         217,174
                                                                      ------------    ------------
                                                                         5,102,900      22,768,061
                                                                      ------------    ------------
Minority Interest in Subsidiary                                            100,000         450,000
                                                                      ------------    ------------

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, 7,507,217 shares and 7,243,570
issued and outstanding at June 30, 2001 and December 31, 2000,
respectively)                                                               75,072          72,435
   Additional paid-in-capital                                            9,219,911       8,670,736
   Retained earnings                                                    (7,656,791)     (6,774,614)
   Accumulated other comprehensive losses                                 (947,914)     (1,248,945)
                                                                      ------------    ------------
                                                                           690,278         719,612
                                                                      ------------    ------------
                                                                      $ 47,046,752    $ 43,646,316
                                                                      ============    ============
</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,
                                                        ---------------------------        -------------------------
                                                            2001            2000             2001             2000
                                                            ----            ----             ----             ----
<S>                                                    <C>             <C>              <C>             <C>

Net Sales                                               $ 19,999,491    $ 19,995,593    $ 36,027,856    $ 37,498,197

Cost of Sales                                             15,868,973      15,615,604      29,033,863      29,429,709
                                                        ------------    ------------    ------------    ------------

Gross Profit                                               4,130,518       4,379,989       6,993,993       8,068,488

Selling, General, and Administrative Expenses              3,197,452       3,500,341       6,378,586       6,588,001
Loss from Discontinued Operation                             187,294               0         342,188               0
                                                        ------------    ------------    ------------    ------------
Income from Operations                                       745,772         879,648         273,219       1,480,487
                                                        ------------    ------------    ------------    ------------
Other (Income) Expense:
   Interest expense                                          635,185         674,176       1,215,188       1,251,630
   Other                                                     (81,663)        (19,186)        (59,792)        (85,111)
                                                        ------------    ------------    ------------    ------------
                                                             553,522         654,990       1,155,396       1,166,519
                                                        ------------    ------------    ------------    ------------

Income (Loss) before Provision (Benefit) for
Income Taxes                                                 192,250         224,658        (882,177)        313,968
Income Tax Provision (Benefit)                               (10,500)        103,600               0         135,900
                                                        ------------    ------------    ------------    ------------

Net Income (Loss)                                       $    202,750    $    121,058    $   (882,177)   $    178,068
                                                        ============    ============    ============    ============


Comprehensive Income (Loss):
     Net Income (Loss)                                  $   202,750     $    121,058    $   (882,177)   $    178,068
     Other Comprehensive Gain (Loss), Foreign
Currency Translation Adjustment                               63,609         (41,169)        301,031         (26,439)
                                                        ------------    ------------    ------------    ------------
Comprehensive Income (Loss)                             $    266,359    $     79,889    $   (581,146)   $    151,629
                                                        ============    ============    ============    ============
Earnings (Loss) Per Share:

Basic                                                   $       0.03    $       0.02    $      (0.12)   $       0.03
                                                        ============    ============    ============    ============
Diluted
                                                        $       0.03    $       0.02    $      (0.12)   $       0.02
                                                        ============    ============    ============    ============

Weighted Average Number of Common Shares
Outstanding:
    Basic                                                  7,473,682       6,914,310       7,384,542       6,876,810
   Common stock equivalents resulting from
warrants and options                                         396,190         599,201               0         815,198
                                                        ------------    ------------    ------------    ------------
  Diluted                                                 7,869,872       7,513,511       7,384,542       7,692,008
                                                        ============    ============    ============    ============
</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,
                                                                                   -------------------------

                                                                                      2001            2000
                                                                                      ----            ----
<S>                                                                               <C>             <C>

Cash Flows from Operating Activities:
   Net Income (Loss)                                                                $  (882,177)   $   178,068


Adjustments to reconcile net income (loss) to net cash used in operating
activities:
    Depreciation and amortization                                                       718,608        616,455
    Provision for bad debts                                                             178,847        200,813
Effect of exchange rate changes                                                         301,031        (26,439)
    Compensation expense for stock options                                               19,800         19,800
    Stock issued for services                                                            80,560              0
    Deferred income taxes and other                                                      45,014        152,732
    Changes in operating assets and liabilities:
      Accounts receivable, trade                                                     (5,232,852)    (6,656,046)
      Inventories                                                                     1,509,658        108,301
      Prepaid expenses and other current assets                                        (110,532)        63,580
      Other assets                                                                            0       (358,859)
      Accounts payable, trade                                                          (251,034)     1,909,660
      Accrued expenses and other current liabilities                                   (477,364)       201,059
                                                                                    -----------    -----------
    Net cash used in operating activities from
      continuing operations                                                          (4,100,441)    (3,590,876)
    Net cash provided by (used in) operating activities from
      discontinued operations                                                            39,612       (205,229)
                                                                                    -----------    -----------
    Net cash used in operating activities                                            (4,060,829)    (3,796,105)
                                                                                    -----------    -----------
Cash Flows for Investing Activities -  purchase of
property and equipment                                                                 (557,858)      (831,026)
                                                                                    -----------    -----------

Cash Flows from Financing Activities:
Net increase in revolving loan indebtedness                                           4,812,471      4,516,406
Proceeds from issuance of preferred stock of subsidiary                                       0        450,000
Principal payments on notes payable                                                    (257,745)      (299,513)
Proceeds from issuance of common stock from exercise of
options and warrants                                                                      1,452        120,500
                                                                                    -----------    -----------
      Net cash provided by financing activities                                       4,556,178      4,787,393
                                                                                    -----------    -----------

Net Increase (Decrease) in Cash                                                         (62,509)       160,262
Cash, Beginning of Period                                                               216,686         42,401
                                                                                    -----------    -----------
Cash, End of Period                                                                 $   154,177    $   202,663
                                                                                    ===========    ===========

Cash of continuing operations                                                       $   110,032    $   143,586
Cash of discontinued operations (included with
  net current assets of discontinued operations)                                         44,145         59,077
                                                                                    -----------    -----------
                                                                                       $154,177    $   202,663
                                                                                    ===========    ===========
</TABLE>

                                       5
<PAGE>   6



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

                                                       Six Months Ended June 30,
                                                       -------------------------
                                                           2001        2000

Supplemental Disclosures of Cash Flow Information:

   Cash paid for interest                              $1,216,803    $1,265,821
                                                       ----------    ----------
   Cash paid for income taxes                             $ 7,370    $   15,000
                                                       ----------    ----------

Supplemental Disclosure of Noncash Investing and
           Financing Activities:

Debt incurred in connection with acquisition of
            fixed assets                               $   33,194    $        0
                                                       ----------    ----------

Conversion of accounts payable into equity             $  100,000    $        0
                                                       ----------    ----------

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

                                       6
<PAGE>   7

                      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 Universal Automotive Industries,
Inc. (the "Company") Annual Report on Form 10-K for the year ended December 31,
2000.

In the opinion of management of 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
period's results of operations are not necessarily indicative of results which
ultimately may be achieved for the year.

2. INVENTORIES
                                       June 30, 2001
                                       -------------
   Finished goods                       $14,386,134
   Work in process                          434,478
   Raw materials                          3,414,301
                                        ------------
                                        $18,234,913
                                        ------------

3. BASIS OF PRESENTATION

Net Income (Loss) 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, 2001, common stock equivalents
are not included in the weighted average number of shares outstanding in
determining net loss per share.

Income Taxes
The Company's provision for income taxes for the three and six months ended June
30, 2001 differed from the amount computed by applying the statutory tax rate to
income (loss) before income taxes primarily due to an increase in the valuation
allowance for deferred tax benefit.

Reclassification
Certain amounts reported in the 2000 condensed financial statements have been
reclassified to conform to the 2001 presentation without affecting previously
reported net income.

4. DISCONTINUED HUNGARIAN OPERATION
As previously disclosed in Note 10 of the 2000 audited financial statements, the
Company finalized its decision to discontinue its Hungarian operation in
December 1999. As of December 31, 1999, the Company provided for estimated costs
of disposition of $1,500,000 including estimated losses of the discontinued
operation during the disposal period. The disposition was initially expected to
occur by the end of 2000. For the three and six months ended June 30, 2000,
losses from the discontinued operation of $230,000 and $399,000, respectively
were applied against the aforementioned reserve. The Company

                                       7
<PAGE>   8

is actively engaged in attempting to sell the entire Hungarian operation and
believes that it will do so by the end of 2001. Because the Company had not
disposed of the Hungarian operation within one year of the decision to
discontinue such operation, commencing in 2001, accounting principles generally
accepted in the United States require that income or loss from such discontinued
operations be included in the Statement of Earnings as a component of income or
loss. Accordingly, a net loss of $187,000 ($0.03 per share) and $342,000 ($0.05
per share) was charged to expense for the three and six months ended June 30,
2001, respectively.

5. CONVERSION OF LIABILITIES TO EQUITY

The Company has completed a private offering of its common stock to certain of
its key suppliers pursuant to which they have agreed to convert certain of the
accounts payable of the Company owed to them into common stock at a slight
discount to the public market price of its common stock from time to time. To
date, the Company has converted approximately $500,000 of such liabilities to
common stock; $100,000 was converted during the quarter ended June 30, 2001, and
the balance was converted as of July 31, 2001. In addition, the Company
completed an agreement with the former owner of its Walkerton, Virginia friction
plant whereby the owner agreed to accept Company common stock in exchange for
$100,000 of the Company's remaining debt to him. The common shares were issued
as of July 31, 2001.

6. MINORITY INTEREST IN SUBSIDIARY

At December 31, 2000, the Company owned seventy-four percent (74%) of the
outstanding capital stock of its eParts eXchange, Inc. ("EPX") subsidiary, which
is engaged in internet-based sales of automotive parts. The Company has entered
into exchange agreements with the minority holders of preferred stock in EPX,
exchanging its common stock for EPX preferred stock based upon a $2.00 per share
value of the Company's common stock in exchange for the preferred stock valued
at the original paid-in capital for the preferred stock. $350,000 in stock value
was issued in the first quarter 2001; the remaining $100,000 of stock value will
be issued in the third quarter of 2001.

7. CAPITAL INVESTMENT

The Company has received a non-binding letter of intent from Wanxiang America
Corporation whereby Wanxiang will invest $2,800,000 and we agreed to issue a
total of 140,000 Preferred Shares at a price of $20 per Preferred Share. The
Preferred Shares are convertible into Common Shares at a rate of ten common
shares for each Preferred Share. Based upon subsequent negotiations, this
arrangement has been modified so that the Preferred Shares are convertible into
2,014,380 shares of common stock, subject to weighted average anti-dilution
adjustment to the extent of new issuances of stock below $1.39 per share (the
effective per share offering price). In addition: (i) one-year warrants to
purchase 800,000 shares of common stock at $2.00 per share plus 800,000 shares
of common stock at 90% of the average market price over a 90-day period are
issuable; together with (ii) "default" warrants to purchase up to 2,500,000
shares of common stock at the greater of book value per share or 600% of EBITDA,
in the event the Company defaults on certain obligations. As of the date of this
Form 10-Q, the definitive documents have not been executed, and there can be no
assurance this transaction will be consummated.

                                       8
<PAGE>   9

8. LASALLE INDEBTEDNESS

At June 30, 2001, the Company was not in compliance with its financial covenants
under its Credit Agreement with LaSalle Bank, NA. On August 8, 2001, LaSalle
informed the Company that it will waive such violation subject to the Company
increasing its stockholders equity by $1 million. As of August 14, 2001, the
Company had raised $600,000 and is in negotiations to raise additional capital
(see Note 7 to Notes to Condensed Financial Statements). LaSalle also informed
the Company that it will extend the expiration date of the Credit Agreement one
year to May 1, 2003 subject to the completion of certain events. The Company has
classified the LaSalle indebtedness as a current liability until the Company
secures additional capital and completes the events required by LaSalle.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION (1)

GENERAL

     We are a manufacturer and distributor of brake rotors, drums, disc brake
pads, relined brake shoes, non-asbestos friction lining, and a complete line of
hydraulic parts. We believe that we are the leading supplier of "value line"
brake parts (brake parts sold at prices significantly below those of certain
leading national brand name brake parts) to mass-market retailers, traditional
warehouse distributors and specialty undercar distributors in North America.

RESULTS OF OPERATIONS

Three Months Ended June 30, 2001 Compared To Three Months Ended June 30, 2000

     Net sales for the three months ended June 30, 2001 were $19,999,000, an
amount that is virtually even with sales of the same quarter in 2000. Sales
growth has been hampered by weakness throughout the automotive aftermarket and,
to some extent, pricing compression as competitors vie to gain market share.

     Gross profits for the three months ended June 30, 2001 were $4,131,000 or
20.7% of net sales compared to $4,494,000 or 22.5% in the same period of 2000
(excluding $114,000 of one-time costs related to the realignment of our
manufacturing facilities incurred in the first quarter of 2000). The decrease in
gross profit is attributable to pricing concessions granted to maintain volume
due to competitive pressures in the face of a soft automotive aftermarket.

--------
(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.


                                       9
<PAGE>   10

     Selling, general and administrative ("SG&A") expenses for the three months
ended June 30, 2001 decreased by $202,000 or 5.9% to $3,197,000 from $3,399,000
for the same period in 2000 (excluding $101,000 of costs related to the start-up
of the Company's e-commerce initiative incurred in the second quarter of 2000).
The decrease was due primarily to reduced personnel and other internal costs.

     Included in income from operations for second quarter of 2001 is the loss
of $187,000 from the discontinued Hungarian foundry (see Note 4 of Notes to
Condensed Financial Statements).

     Other expense for the three months ended June 30, 2001 decreased by
$101,000 to $554,000 from $655,000 for the same period of 2000. Interest expense
in the second quarter ended June 30, 2001 was $39,000 less than the same period
of 2000 due to overall lower interest rates.

     Net income for the quarter ended June 30, 2001 was $203,000 compared to net
income of $121,000 for the same period in 2000. This increase in profitability
is due to factors set forth before, particularly reduced gross profit margin
that was more than offset by reduced selling, general, and administrative
expenses, and reduced interest expense offset by inclusion of the loss from
discontinued operations in 2001 earnings of $187,000 ($0.03 per share).


Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000

     Net sales for the six months ended June 30, 2001 was $36,028,000, a
decrease of $1,470,000 or 3.9% from the same 2000 period. This decrease was
consistent with the downturn experienced in the automotive aftermarket that was
especially egregious in the first quarter of 2001 that was 8.4% less that the
first quarter of 2000. The 2000 six-month period included opening inventory
roll-out sales to Pep Boys, Inc., a new customer in the first quarter of 2000,
that were not repeated in 2001. The Company also responded to competitors'
pricing actions during the period as they try to maintain sales volumes in the
face of a soft aftermarket.

     Gross profits for the six months ended June 30, 2001 decreased $1,427,000
or 16.9% to $6,994,000 from $8,421,000 for the same six-month period in 2000
(excluding $353,000 of one-time costs related to the realignment of the
Company's friction manufacturing facilities incurred in the period ended June
30, 2000). Before the effect of the one-time costs in 2000, the gross profit
margin percentage for the six-month period was 19.4% compared to 22.5% for the
same 2000 percentage. This decrease was due to more competitive pricing, and
first quarter underabsorption of manufacturing costs associated with the
relocation of the rotor machining facility from Texas to Missouri, as the Texas
facility was wound down and the Missouri facility was ramped up.

     Six months ended June 30, 2001 selling, general and administrative expenses
were $6,379,000, a decrease of $108,000 or 1.7% from $6,487,000 for the same
period in 2000 (excluding $101,000 of costs related to the start-up of the
Company's e-commerce business incurred in the six-month period ended June 30,
2000). The decrease was due primarily to reduced personnel and other internal
costs offset by increased freight costs of shipments to customers especially in
the first quarter of 2001.

     Included in income from operations for six-month period ended June 30, 2001
is the loss of $342,000 from the discontinued Hungarian foundry (see Note 4 of
Notes to Condensed Financial Statements).

                                       10
<PAGE>   11


     Other Expense for the six months ended June 30, 2001 decreased by $12,000
to $1,155,000 from $1,167,000 for the same period of 2000.

     For the six-month period ended June 30, 2001, net loss was $882,000
compared to net income of $178,000 for the six months ended June 30, 2000. The
principal reasons for decreased profitability were the factors described before,
especially decreased sales and margin, the first quarter underabsorbed overhead
costs associated with the start-up of the Missouri rotor machining facility, and
inclusion of the loss from discontinued operations in 2001 earnings of $342,000
($0.05 per share).


LIQUIDITY AND CAPITAL RESOURCES

     Net cash used in operating activities from continuing operations for the
six months ended June 30, 2001 was $4,100,000 compared to net cash used in
operating activities from continuing operations of $3,591,000 for the same
period of 2000. Cash was required to finance growth in accounts receivable of
$5,233,000 that was only partially satisfied through earnings after non-cash
items ($462,000) and a decrease in inventory ($1,510,000).

     Net cash used in investing activities was $558,000, which is attributable
to acquisition of various tooling, manufacturing equipment, and computer
equipment, particularly in connection with the Company's relocation of its rotor
machining facility from Laredo, Texas to Cuba, Missouri, and upgrade of its
friction manufacturing facilities.

     Net cash provided by financing activities was $4,556,000, consisting
primarily of borrowings under the Company's revolving credit agreement net of
normal payments of $258,000 on the Company's term debt and capital leases.

     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. The Company has received a non-binding letter of
intent from Wanxiang America Corporation whereby Wanxiang will invest $2,800,000
and we agreed to issue a total of 140,000 Preferred Shares at a price of $20 per
Preferred Share. Based upon subsequent negotiations, this arrangement has been
modified so that the Preferred Shares are convertible into 2,014,380 shares of
common stock, subject to weighted average anti-dilution adjustment to the extent
of new issuances of stock below $1.39 per share (the effective per share
offering price). In addition: (i) one-year warrants to purchase 800,000 shares
of common stock at $2.00 per share plus 800,000 shares of common stock at 90% of
the average market price over a 90-day period are issuable; together with (ii)
"default" warrants to purchase up to 2,500,000 shares of common stock at the
greater of book value per share or 600% of EBITDA, in the event the Company
defaults on certain obligations. As of the date of this Form 10-Q, the
definitive documents have not been executed, and there can be no assurance this
transaction will be consummated. If a purchase agreement is consummated, there
is a substantial likelihood that the conversion ratio of the shares of preferred
stock to common stock will result in Wanxiang America's right to own in excess
of 20% of the issued and outstanding capital stock of the Company. The
conversion of preferred shares to 2,014,380 shares of common stock (assuming at
closing the stock price and on date of conversion is $2.00 per share) would
represent 20.5% of the outstanding common shares (at June 30, 2001) plus the
shares issuable to Wanxiang America, and if the 1,600,000 stock purchase
warrants are exercised, this

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would increase beneficial ownership to 31.7%, after giving effect to the stock
provided from the stock purchase warrants. The stockholders holding a majority
of the Company's common stock have adopted a resolution approving the proposed
transaction and have adopted a further resolution that authorizes us, with the
approval of our board of directors to enter into other agreements with Wanxiang
or other purchasers for other issuances of capital stock during 2001. See also
Note 8 of Notes to Condensed Financial Statements related to the LaSalle Bank
indebtedness.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     We believe that we do not have significant exposure to market risk
associated with derivative financial instruments, other financial instruments,
or derivative commodity instruments. We had previously utilized only limited
derivative financial instruments and did not use them for trading purposes and
have never used derivative commodity instruments. At June 30, 2001, there were
no such derivative instruments. The fair value of financial instruments, other
than debt instruments, closely approximates their carrying value. Because the
interest rate of the revolving loan and the term loan with LaSalle National Bank
adjusts with the changes in the market rate of interest, we believe that the
fair value is equivalent to the carrying value. We believe that the interest
rate of 12.25% on the subordinated debenture is approximately equal to the
current rate available for similar debt. Accordingly, the fair value of this
debenture approximates its carrying value.

PART II OTHER INFORMATION

ITEM 1 IS NOT APPLICABLE TO THE COMPANY IN THIS REPORT.

ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS

During the quarter ended June 30, 2001, we sold shares of our Common Stock (the
"Shares") in transactions not registered under the Securities Act of 1933, as
amended (the "Securities Act"). During the quarter, we issued 20,000 shares
valued at $41,800 to one person pursuant to a marketing agreement whereby that
person agrees to source product from the Company. During the quarter, we issued
47,847 shares pursuant to an agreement with a supplier who agreed to receive
common stock in exchange for cancellation of $100,000 of accounts payable owed
to the supplier by the Company (see Note 5 of the Notes to Condensed Financial
Statements). We did not use the services of any finders or securities
broker-dealers in connection with the issuance of these shares. We believe that
all Shares issued in these transactions are exempt from registration under the
Securities Act by virtue of Section 4(2) of the Securities Act and/or Regulation
D promulgated thereunder.

ITEM 3 IS NOT APPLICABLE TO THE COMPANY IN THIS REPORT.

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

         On June 6, 2001, Universal Automotive Industries, Inc. held its annual
meeting of shareholders. Present at this meeting, in person and by proxy, were
shareholders representing 6,740,497 of the 7,438,870 issued and outstanding
shares of Common Stock at the date of record (90.6% of the total number of
shares of Common Stock outstanding and entitled to vote). The following items
were voted upon at the meeting:

      A) The following Directors were elected to the Board:

          Name                  Votes For     Votes Against       Votes Withheld
          ----                  ---------     -------------       --------------
          Arvin Scott           6,732,397           0                 8,100
          Yehuda Tzur           6,732,397           0                 8,100
          Sami Israel           6,732,397           0                 8,100
          C. Catherine Jaros    6,729,897           0                10,600
          Sheldon Robinson      6,732,397           0                 8,100
          Sol S. Weiner         6,732,397           0                 8,100
          Dennis L. Kessler     6,732,397           0                 8,100

      B) The firm of Altschuler, Melvoin and Glasser LLP was reappointed as the
         Company's independent auditors for 2001. Holders of Common Stock
         holding 6,733,897 cast their votes in favor, 6,000 votes were cast
         against, and 600 shares abstained from voting.

      C) An amendment to the Universal Automotive Industries, Inc. Share Option
         Plan was approved to increase the number of shares available for
         issuance to 1,400,000 from 700,000. Holders of Common Stock holding
         4,330,551 cast their votes in favor of the amendment, 41,056 votes were
         cast against, and 2,368,890 shares abstained from voting.



ITEM 5 IS NOT APPLICABLE TO THE COMPANY IN THIS REPORT.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a) Exhibit II - Computation of Earnings Per Share


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                                   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 20, 2001

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