<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-Q/A
                                (AMENDMENT NO. 2)

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

                For the quarterly period ended September 30, 2004

                                       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[ ]

      Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act): Yes [ ] No [X]

The number of shares of issuer's Common Stock, par value $.01 per share,
outstanding as of September 30, 2004 was 12,280,532 shares.

<PAGE>

                      UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.

                                   FORM 10-Q/A
                                (AMENDMENT NO. 2)

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                               Page(s)
                                                                                               -------
<S>                                                                                            <C>
PART I.  FINANCIAL INFORMATION

   Explanatory Note                                                                                 3

   Item 1. Financial Statements

         Consolidated Balance Sheets
                  September 30, 2004 (Unaudited) and December 31, 2003                              4

         Consolidated Statements of Operations
                  (Unaudited) - For the nine months ended
                  September 30, 2004 and 2003                                                       5

         Consolidated Statements of Cash Flows
                  (Unaudited) - For the nine months ended
                  September 30, 2004 and 2003                                                       6

         Notes to Condensed Financial Statements (Unaudited)                                      7-9

   Item 2. Management's Discussion and Analysis of Financial Condition
            and Results of Operations                                                            9-14

   Item 3. Quantitative and Qualitative Disclosure About Market Risk                               14

   Item 4.  Controls and Procedures                                                                15

PART II.  OTHER INFORMATION

   Items 1 thru 5 are not applicable to the Company in this report                                 15

   Item 6 - Exhibits and Reports on Form 8-K                                                       15

   Signatures                                                                                      16

EXHIBIT 31.1 Certificate of Chief Executive Officer                                                17

EXHIBIT 31.2 Certificate of Chief Financial Officer                                                18

EXHIBIT 32 Certificate of Chief Executive Officer and Chief Financial Officer                      19

EXHIBIT 99 Computation of Earnings Per Share                                                       20
</TABLE>

                                       2
<PAGE>

AMENDMENT NO. 2

                                EXPLANATORY NOTE

We are filing this Form 10-Q/A (Amendment No. 2) to reclassify the gain on
valuation of assets purchased in the quarter ended March 31, 2004 (an amount
equal to $9,886,328) from "other expense:/(income)" to an "extraordinary item."
Although the original classification occurred in the quarter ended March 31,
2004, this gain is also reflected in our Consolidated Statements of Operations
for the nine months ended September 30, 2004. This reclassification of the gain
does not change our overall income or our net worth for the nine months ended
September 30, 2004, but does impact the classification of the income for the
nine months ended September 30, 2004. The reclassification also will affect our
earnings per share as reflected herein.

Our Audit Committee has determined to reclassify the gain in response to a
letter ("Letter") we received on December 18, 2004 from our independent
registered public accountants, Blackman Kallick Bartelstein LLP ("Blackman").
The Letter advises us that our presentation of "gain on valuation of assets
purchased" as "other expense:/(income)" in our Consolidated Statements of
Operations for the nine months ended September 30, 2004 is not in conformity
with U.S. generally accepted accounting principles. Blackman advises us that the
proper presentation of the "gain on valuation of assets purchased" is as an
"extraordinary item." Blackman further advises us that we presented the gain as
"other expense:/(income)" in our Consolidated Statements of Operations for the
quarters ended March 31, 2004 and June 30, 2004. Blackman did not serve as our
independent registered public accountant for these quarters. We have determined
to also restate the quarterly reports for these periods.

Additionally, we are filing this Form 10-Q/A (Amendment No. 2) to correct an
error in our Form 10-Q/A (Amendment No. 1) which was filed on December 3, 2004.
We filed a Form 10-Q/A (Amendment No. 1) to delete a statement included in Note
1 in the original Form 10-Q to the effect that Blackman had not completed its
review of the Report on its filing date of November 19, 2004. We filed the Form
10-Q/A (Amendment No. 1) to delete this statement based on our receipt of a
letter from Blackman dated November 30, 2004 (the "November 30 Letter"). The
November 30 Letter stated that Blackman completed its review of the financial
statements for the quarter ended September 30, 2004 in accordance with Statement
on Auditing Standards No. 100, as amended, on the filing date. Pursuant to the
Letter, in addition to the reclassification of the gain described above,
Blackman advises us that the November 30 Letter was in error and that the
November 30 Letter is withdrawn.

As a result of the reclassification, we would have been in violation of our
earnings before interest, taxes, depreciation and amortization (EBITDA) covenant
contained in the revolving line of credit agreement (the "Credit Agreement")
with our principal lender, Congress Financial Corporation (the "Lender");
however, we have obtained a waiver of this covenant violation from the Lender
and have entered into an amendment to the Credit Agreement which, among other
things, revises this EBITDA covenant.

                                       3
<PAGE>

                      UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
                                              September 30, 2004   December 31, 2003
                                              ------------------   -----------------
                                                (Unaudited)
<S>                                           <C>                  <C>
                  Assets
Current assets:
Cash                                            $  2,910,023         $    605,211
Accounts receivable - trade, net                  21,293,006            9,724,502
Inventories                                       32,303,957           14,875,045
Deferred income taxes                                240,000              240,000
Prepaid expenses and other current assets            794,772              133,218
                                                ------------         ------------
                                                  57,541,758           25,577,976
                                                ------------         ------------
Property and equipment, net                        4,037,562            3,913,867
                                                ------------         ------------
Other assets:
Goodwill                                             480,498              480,498
Due from employees                                    40,250               40,250
Deferred financing costs, net                      1,613,536            1,932,179
Other assets                                         288,244              605,586
                                                ------------         ------------
                                                   2,422,528            3,058,513
                                                ------------         ------------
                                                $ 64,001,848         $ 32,550,356
                                                ============         ============
   Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, trade                         $ 18,470,756         $  9,814,785
Accrued expenses and other current
liabilities                                        8,257,140            2,417,821
Long-term indebtedness, current portion               16,925               81,430
Convertible note, current portion                  2,819,455              909,091
Subordinated debenture, current portion              786,016               60,000
                                                ------------         ------------
                                                  30,350,292           13,283,127
                                                ------------         ------------
Long-term liabilities:
Revolving line of credit                        $ 24,159,282         $ 11,997,526
Long-term indebtedness, non-current
portion                                               28,301               37,234
Convertible note, non-current portion              2,852,505            3,868,265
Subordinated debenture,  non-current portion               0              773,120
                                                ------------         ------------
                                                  27,040,088           16,676,145
                                                ------------         ------------
Stockholders' equity:
Preferred stock (authorized 2,000,000 shares,          3,014                3,014
$.01 par  value, 201,438 shares
of Series A and 100,000 shares of Series
B issued and outstanding)
Common stock (authorized 50,000,000 shares,          122,805               89,481
$.01 par  value, 12,280,532
shares issued and  outstanding at
September 30, 2004 and 8,948,097 at
December 31, 2003)
Additional paid-in-capital                        19,697,753           16,912,641

Accumulated deficit                              (12,659,533)         (13,885,621)

Accumulated other comprehensive loss                (517,421)            (479,781)

Stock subscription receivable                        (35,150)             (48,650)
                                                ------------         ------------
                                                   6,611,468            2,591,084
                                                ------------         ------------
                                                $ 64,001,848         $ 32,550,356
                                                ============         ============
</TABLE>

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

                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                          Three Months Ended September 30,       Nine Months Ended September 30,
                                                              2004               2003               2004                2003
                                                         ---------------    ---------------    ---------------    ---------------
<S>                                                      <C>                <C>                <C>                <C>
Net sales                                                $   26,674,735     $   14,083,051     $   75,911,058     $   46,938,618
Cost of sales                                                24,478,257         12,176,229         68,867,231         40,648,203
                                                         --------------     --------------     --------------     --------------
Gross profit                                                  2,196,478          1,906,822          7,043,827          6,290,415
Selling, general, and administrative expenses                 4,558,196          2,457,024         13,777,574          7,323,398
                                                         --------------     --------------     --------------     --------------
Income (loss) from operations                                (2,361,718)          (550,202)        (6,733,747)        (1,032,983)
Other expense:/(income)
     Interest expense                                           825,812            284,816          1,936,884            772,904
     Other                                                        2,208            (22,801)           (10,395)           (34,283)
                                                         --------------     --------------     --------------     --------------
                                                                828,020            262,015          1,926,489            738,621
                                                         --------------     --------------     --------------     --------------
Income (loss) before provision for income
taxes and extraordinary item                                 (3,189,738)          (812,217)        (8,660,236)        (1,771,604)
Income tax provision                                                  0                  0                  0                  0
                                                         --------------     --------------     --------------     --------------
Income (loss) before extraordinary item                  $   (3,189,738)    $     (812,217)    $   (8,660,236)    $   (1,771,604)
Extraordinary item
Extraordinary gain (less applicable income
taxes of $0)  ( Note 6)                                               0                  0          9,886,328                  0
                                                         --------------     --------------     --------------     --------------
Net income (loss)                                        $   (3,189,738)    $     (812,217)    $    1,226,092     $   (1,771,604)
                                                         ==============     ==============     ==============     ==============
Comprehensive income (loss) :
Net income (loss)                                        $   (3,189,738)    $     (812,217)    $    1,226,092     $   (1,771,604)
     Other comprehensive income (loss),
     Foreign currency translation adjustments                   (13,517)           (49,549)           (37,640)           308,840
                                                         --------------     --------------     --------------     --------------
Comprehensive income (loss)                              $   (3,203,255)    $     (861,766)    $    1,188,452     $   (1,462,764)
                                                         ==============     ==============     ==============     ==============
Earnings (Loss) per share:
Basic
       (Loss) before extraordinary item                  $        (0.26)    $        (0.10)    $        (0.77)    $        (0.21)
       Extraordinary gain                                          0.00               0.00               0.88               0.00
                                                         --------------     --------------     --------------     --------------
                                                         $        (0.26)    $        (0.10)    $         0.11     $        (0.21)
                                                         ==============     ==============     ==============     ==============
Diluted
       (Loss) before extraordinary item                  $        (0.26)    $        (0.10)    $        (0.59)    $        (0.21)
       Extraordinary gain                                          0.00               0.00               0.67               0.00
                                                         --------------     --------------     --------------     --------------
                                                         $        (0.26)    $        (0.10)    $         0.08     $        (0.21)
                                                         ==============     ==============     ==============     ==============
Weighted average number of common shares outstanding:
Basic                                                        12,238,122          8,437,589         11,197,572          8,296,608
Common stock equivalents resulting from
Conversion of preferred stock                                         0                  0          3,475,297                  0
                                                         --------------     --------------     --------------     --------------
Diluted                                                      12,238,122          8,437,589         14,672,869          8,296,608
                                                         ==============     ==============     ==============     ==============
</TABLE>


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

                                       5
<PAGE>

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

<TABLE>
<CAPTION>
                                                                        Nine Months Ended September 30,
                                                                       --------------------------------
                                                                            2004             2003
                                                                        -------------    -------------
<S>                                                                     <C>              <C>
Cash flows from operating activities:
Net income (loss)                                                       $  1,226,092     $ (1,771,604)
Adjustments to reconcile net income (loss) to net cash
 provided by operating activities:
     Depreciation and amortization                                         1,935,922          885,192
     Provision for bad debts                                                 925,592          245,571
     Extraordinary gain                                                   (9,886,328)               0
      Other, net                                                              13,500          (25,000)
Changes in operating assets and liabilities:
     Accounts receivable, trade                                           (7,034,184)         426,376
     Inventories                                                           7,426,556        3,241,782
     Prepaid expenses and other current assets                              (671,738)        (525,759)
     Accounts payable, trade                                               6,106,577         (149,230)
     Accrued expenses and other current liabilities                           73,380          268,164
                                                                        ------------     ------------
Net cash provided by operating activities                                    115,369        2,595,492
Cash flows for investing activities:
     Payments on notes receivable                                                  0            5,500
     Purchase of certain assets of Kelsey-Hayes Company                  (11,571,008)               0
     Purchase of property and equipment                                     (842,455)        (337,244)
                                                                        ------------     ------------
Net cash used in investing activities                                    (12,413,463)        (331,744)
Cash flows from financing activities:
     Net increase (decrease) in revolving loan indebtedness               12,161,756       (3,514,002)
     Payments on notes payable and subordinated debt                        (134,850)        (329,202)
     Proceeds from convertible debt                                        1,743,700        1,240,000
     Proceeds from excercise of options                                      869,940          167,925
                                                                        ------------     ------------
Net cash (used in) provided by financing activities                       14,640,546       (2,435,279)
Effect of exchange rate changes on cash                                      (37,640)          44,074
                                                                        ------------     ------------
Net increase/(decrease) in cash                                            2,304,812         (127,457)
Cash, beginning of period                                                    605,211          237,600
                                                                        ------------     ------------
Cash, end of period                                                     $  2,910,023     $    110,143
                                                                        ============     ============
Supplemental disclosures of cash flow information:
     Cash paid for interest                                             $    931,237     $    841,695
                                                                        ============     ============
     Cash paid for income taxes                                         $          0     $          0
                                                                        ============     ============
Supplemental disclosure of non-cash financing activities:
     Issuance of warrants in connection with convertible notes          $    167,047     $    305,336
                                                                        ============     ============
     Conversion of convertible notes into common stock                  $  1,565,455     $          0
                                                                        ============     ============
     Issuance of common stock for interest due on convertible  notes    $    105,689     $          0
                                                                        ============     ============
</TABLE>

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

                                       6
<PAGE>

                      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 (USA) are omitted. For additional disclosures, see the Notes to
Consolidated Financial Statements contained in Universal Automotive Industries,
Inc. Annual Report on Form 10-K for the year ended December 31, 2003.

Our significant accounting policies are described in Note 2 to the Consolidated
Financial Statements contained in Universal Automotive Industries, Inc. Annual
Report on Form 10-K for the year ended December 31, 2003. The application of
these policies may require management to make judgments and estimates about the
amounts reflected in the financial statements. Management uses historical
experience and all available information to make these estimates and judgments,
and different amounts could be reported using different assumptions and
estimates.

In the opinion of our management, 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. BASIS OF PRESENTATION

Net Loss Per Share

Warrants and options issued by us are only included in the computation of
weighted average number of shares where their inclusion is not anti-dilutive.
For the three months ended September 30, 2004 and September 30, 2003 and the
nine months ended September 30, 2003, common stock equivalents are not included
in the weighted average number of shares outstanding in determining net loss per
share. For the nine months ended September 30, 2004 the fully diluted earnings
per share is based upon 2,014,380 shares of Series A Preferred and 1,000,000
shares of Series B, on an as converted basis, plus an additional 460,917 shares
of common stock into which said shares of Series A Preferred would convert as of
September 30, 2004 based upon shares of common stock issued and deemed issued
for purposes of the anti-dilution formula, with respect to the Series A
Preferred stock.

Income Taxes

For the quarters and nine months ended September 30, 2004 and 2003, no provision
for income taxes has been provided. We believe that, consistent with accounting
principles generally accepted in the United States, it is more likely that the
tax benefits associated with the balance of loss carryforwards and other
deferred tax assets will not be realized through future taxable earnings or
alternative tax strategies. Accordingly, net deferred tax assets were offset
with a valuation allowance.

                                       7
<PAGE>

3. INVENTORIES

<TABLE>
<CAPTION>
                      SEPTEMBER 30, 2004       DECEMBER 31, 2003
                      ------------------       -----------------
<S>                   <C>                      <C>
Finished goods          $ 38,831,885              $ 12,854,089
Work in process              662,190                   574,730
Raw materials              6,569,519                 2,214,226
Inventory reserves       (13,759,637)                 (768,000)
                        ------------              ------------
                        $ 32,303,957              $ 14,875,045
                        ============              ============
</TABLE>

4. CONGRESS FINANCIAL INDEBTEDNESS

On January 12, 2004, we entered into a revolving line-of-credit agreement with
Congress Financial Corporation ("Congress") replacing our line of credit with
LaSalle National Bank, N.A. The maximum available amount of the revolving
line-of-credit is $35,000,000 based on eligible accounts receivable and
inventory and is fully secured by a first lien on the inventory and our accounts
receivable. The revolving line-of-credit has a term ending January 12, 2007 and
an interest rate of prime plus .50% per annum. The line is subject to an ongoing
option to convert to LIBOR plus 2.75% per annum.

The Congress Credit Agreement contains certain limitations on dividends and
capital expenditures and requires us to satisfy a financial test concerning
earnings before interest, taxes, depreciation and amortization (EBITDA). At
September 30, 2004, we would not have been in compliance with the financial test
concerning earnings before interest, taxes, depreciation and amortization
(EBITDA); however, we have received a waiver of the covenant violation from
Congress.

5. STOCK-BASED COMPENSATION

We have elected to follow APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations in accounting for the stock options
granted to employees and directors. Accordingly, employee and director
compensation expense is recognized only for those options whose price is less
than fair market value at the measurement date. We have adopted the
disclosure-only provisions of SFAS No. 123, Accounting for Stock-Based
Compensation, as amended.

We have computed the pro forma disclosures required under SFAS No. 123, as
amended by SFAS No. 148, for options granted using an option-pricing model
prescribed by SFAS NO. 13. The assumptions used for grants during the periods
ended September 30, 2004 and 2003 include a dividend yield of 0.0% risk-free
interest rates of 2.50%, an option term of immediate to 10 years and a
volatility factor of 78%. Had the compensation costs for these plans been
determined consistent with SFAS No. 123, our net income would have been reduced
by approximately $127,953 to $1,098,139 for the period ended September 30, 2004
and the net loss for the period ended September 30, 2003 would have been
increased by $101,187 to $1,872,791.

6. ACQUISITION OF CERTAIN ASSETS OF KELSEY-HAYES COMPANY

On January 12, 2004 we purchased substantially all the assets of the
Autospecialty division of Kelsey-Hayes Company, a subsidiary of TRW Automotive,
Inc ("Autospecialty"), for a total cost, including transaction fees and
expenses, of approximately $11,925,000 plus the assumption of certain
liabilities as set forth in the Purchase Agreement dated December 23, 2003
between the Company and TRW Automotive, Inc. The purchase price is subject to
certain adjustments based upon the future collection of trade accounts
receivable. Negative goodwill recorded in conjunction with the acquisition
transaction included an approximate $9.9 million extraordinary non-cash gain
reflected in our Statement of Operations for the quarter ended March 31, 2004.

During the period ending September 30, 2004 we incurred costs in connection with
the consolidation and integration of this acquisition including the closing of
two distribution centers, Itasca, Illinois and

                                       8
<PAGE>

Compton, California, and the moving of its inventories to its Alsip, Illinois
and Carson, California distribution facilities respectively. In addition the
Carson, California rotor manufacturing operation was relocated and combined into
our Alsip, Illinois rotor manufacturing facility. A reserve of $700,000 was
established under the purchase method of accounting for these and other
integration and business consolidation expenditures. As of September 30, 2004
approximately $505,000 has been charged against this reserve.

Further details of the acquisition (in thousands of dollars) are as follows:
<TABLE>
<S>                                                                 <C>
Tangible assets acquired                                            $ 31,141
Liabilities assumed                                                   (8,630)
Reserve recorded                                                        (700)
                                                                    --------
                                                                      21,811
Purchase price                                                        11,925
                                                                    --------
Excess of fair value of the net assets received over amount paid    $  9,886
                                                                    ========
</TABLE>

This acquisition has been accounted for using the purchase method of accounting.
Accordingly, the allocation of the cost of the acquired assets and liabilities
has been made on the basis of the estimated fair value. The consolidated
financial statements include the operating results of each business from the
date of acquisition. The financial statements reflect the preliminary allocation
of the purchase price and contained certain subjective reserves. Accordingly, it
is expected that the purchase price allocation will be finalized upon the
realization of the acquired accounts receivable and inventory.

In conjunction with recording the acquisition using the purchase method of
accounting, the assets acquired and liabilities assumed have different bases for
income tax purposes. It is expected that the extraordinary gain would not be
taxable for income tax purposes until the underlying assets acquired are sold.
The extraordinary gain resulting from the excess of fair value received over the
amount paid substantially contributed to the realized net income for the period
ended September 30, 2004. There was no recorded income tax provision for the
period ended September 30, 2004, nor was a deferred tax liability recorded,
because we have net operating loss carryforwards that are expected to reduce any
taxable income.

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

      Certain statements in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and elsewhere in this quarterly
report on Form 10-Q/A (Amendment No. 2) constitute "forward-looking statements"
within the meaning of the Federal Private Securities Litigation Reform Act of
1995. These forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the Company's actual results,
performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by these forward-looking
statements. Examples of factors which could affect the Company's performance are
set forth elsewhere in this Form 10-Q/A (Amendment No. 2) and in the Company's
annual report on Form 10-K, as filed with the Securities and Exchange Commission
on April 14, 2004 under the heading "Risk Factors."

GENERAL

We are a manufacturer and distributor of brake rotors, drums, disc brake pads,
relined brake shoes, non-asbestos friction lining, clutch and chassis parts and
a complete line of hydraulic parts, including brake calipers. We are one of the
leading full-line brake and undercar parts suppliers to the North American
aftermarket. Our products are sold under our nationally recognized
Autospecialty, Power Stop and Evolution brands as well as customer specific
private labels.

(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 "we anticipate,"
     believe" or "expect" indicate that it is possible that the event
     anticipated, believed or expected may not occur. Should such event not
     occur, then the result, which we expected, also may not occur or may occur
     in a different manner, which may be more or less favorable to us. We do 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>

RESULTS OF OPERATIONS

The financial information reported under this section, "Results of Operations,"
is reported in thousands of dollars.

Three Months Ended September 30, 2004 Compared To Three Months Ended September
30, 2003

<TABLE>
<CAPTION>
                                                   Three Months Ending
                                      ---------------------------------------------------   Change from 2003 to 2004
                                       Sept 30          % of         Sept 30      % of      ------------------------
                                        2004          Revenues         2003      Revenues          $           %
                                      ---------       ---------     ----------   --------   -------------   --------
<S>                                   <C>             <C>           <C>          <C>        <C>            <C>
Revenues
      Brake Parts, Net                $  23,247         87.1%       $  10,897      77.4%       $  12,350      113.3%
      Wholesale Products                  3,428         12.9%           3,186      22.6%             242        7.6%
                                      ---------        -----        ---------     -----        ---------     ------
                                      $  26,675        100.0%       $  14,083     100.0%       $  12,592       89.4%
Cost of sales
      Brake Parts, Net                   21,355         91.9%           9,424      86.5%          11,931      126.6%
      Wholesale Products                  3,123         91.1%           2,753      86.4%             370       13.4%
                                      ---------        -----        ---------     -----        ---------     ------
                                         24,478         91.8%          12,177      86.5%          12,301      101.0%
                                      ---------        -----        ---------     -----        ---------     ------
GROSS PROFIT                              2,197          8.2%           1,906      13.5%             291       15.3%
Selling, general &
administrative expenses                   4,559         17.1%           2,457      17.4%           2,102       85.6%
                                      ---------        -----        ---------     -----        ---------     ------
LOSS FROM OPERATIONS                     (2,362)        -8.9%            (551)     -3.9%          (1,811)     328.7%
Other income  (expense)
      Interest expense                     (826)        -3.1%            (285)     -2.0%            (541)     189.8%
      Other                                  -2          0.0%              23       0.2%             (25)    -108.7%
                                      ---------        -----        ---------     -----        ---------     ------
                                           (828)        -3.1%            (262)     -1.9%            (566)      68.4%
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM                   (3,190)       -12.0%            (813)     -5.8%          (2,377)       NM
Income Taxes                                  -          0.0%               -       0.0%               -        NM
                                      ---------        -----        ---------     -----        ---------     ------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM                    $  (3,190)       -12.0%       $    (813)     -5.8%       $  (2,377)       NM
Extraodinary gain (less
income taxes of $0)                           0            0%               0         0%               0        NM
                                      ---------        -----        ---------     -----        ---------     ------
NET INCOME (LOSS)                     $  (3,190)       -12.0%       $    (813)     -5.8%       $  (2,377)       NM
                                      =========        =====        =========     =====        =========     ======
</TABLE>

                                       10
<PAGE>

Net sales for the three months ended September 30, 2004 increased $12,592 or
89.4 % over the same quarter in 2003 to $26,675. The increased sales were a
result of a new customers obtained in the acquisition of certain assets of The
Kelsey-Hayes Company ("Kelsey-Hayes") of $12,350 coupled with an increase in
wholesale products of $242.

Gross profit for the three months ended September 30, 2004 is $2,197 or 8.2% of
net sales compared to $1,906 or 13.5% in the same period of 2003, an increase of
$ 291 or 15.3%. The following table details the change in gross profit for the
period.

<TABLE>
<S>                                                              <C>
Gross profit on higher brake parts sales volume                  $  2,343
Reduced underabsorption of fixed manufacturing overheads              266
Higher distribution expenses                                       (2,189)
Reduced gross margins on wholesale product sales                     (129)
                                                                 --------
Net increase in gross profit                                     $    291
                                                                 ========
</TABLE>

Selling, general and administrative expenses of $4,559 (17.1% of net sales) for
the three months ended September 30, 2004 increased by $2,102 when compared to
$2,457 (17.4% of net sales) for the same period in 2003. The 85.6% increase was
a result of increased freight and commission costs on the higher sales levels
and an increase in administrative expenses as the administrative operations of
the Kelsey-Hayes acquisition were integrated into our operations.

Loss from operations for the three months ended September 30, 2004 increased
$1,811 to $2,362 as compared to a loss of $551 for the same period in 2003. This
increased loss relates to increased selling, general and administrative expenses
partially offset by higher gross profit dollars.

Other expense for the three months ended September 30, 2004 increased $566 to
$828 from $262 for the same period of 2003. Of this total, interest expense
increased $541 from the same period in 2003 due to increased borrowing levels on
the revolving line of credit coupled with higher interest rates.

Net loss for the three months ended September 30, 2004 increased $2,377 to
$3,190 as compared to a net loss of $813 for the same period in 2003. The
increased net loss is attributed to increased gross profit of $291 offset by
higher selling, general and administrative expenses of $2,102 and increased
other expense of $566.

                                       11
<PAGE>

Nine Months Ended September 30, 2004 Compared To Nine Months Ended September 30,
2003

<TABLE>
<CAPTION>
                                                            Nine months ending
                                             ------------------------------------------------ Change from 2003 to 2004
                                             September 30   % of     September 30      % of    -----------------------
                                                 2004      Revenues       2003       Revenues       $              %
                                             ----------    --------  -----------     ---------   --------        -----
<S>                                          <C>           <C>       <C>             <C>         <C>             <C>
Revenues

  Brake Parts, Net                             $ 65,449       86.2%     $ 36,261         77.3%   $ 29,188         80.5%
  Wholesale Products                             10,462       13.8%       10,678         22.7%       (216)        -2.0%
                                               --------     ------      --------      -------    --------        -----
                                               $ 75,911      100.0%     $ 46,939        100.0%   $ 28,972         61.7%
  Cost of sales
  Brake Parts, Net                               59,543       91.0%       31,243         86.2%     28,300         90.6%
  Wholesale Products                              9,324       89.1%        9,406         88.1%        (82)        -0.9%
                                               --------     ------      --------      -------    --------        -----
                                                 68,867       90.7%       40,649         86.6%     28,218         69.4%
                                               --------     ------      --------      -------    --------        -----
GROSS PROFIT                                      7,044        9.3%        6,290         13.4%        754         12.0%
  Selling,general &
  administrative expenses                        13,778       18.2%        7,323         15.6%      6,455         88.1%
                                               --------     ------      --------      -------    --------        -----

LOSS FROM OPERATIONS                             (6,734)      -8.9%       (1,033)        -2.2%     (5,701)       551.9%
  Other income  (expense)
  Interest expenses                              (1,937)      -2.6%         (773)        -1.6%     (1,164)       150.6%
  Other                                              11        0.0%           34          0.1%        (23)       -67.6%
                                               --------     ------      --------      -------    --------        -----
                                                 (1,926)      -2.5%         (739)        -1.6%     (1,187)        61.6%
INCOME (LOSS) BEFORE INCOME TAXES AND
 EXTRAORDINARY ITEM                              (8,660)     -11.4%       (1,772)        -3.8%     (6,888)       388.7%

  Income Taxes                                        -        0.0%            -          0.0%          -

                                               --------     ------      --------      -------    --------        -----
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM        $ (8,660)     -11.4%     $ (1,772)        -3.8%   $ (6,888)       388.7%

Extraordinary gain (less income taxes of $0)      9,886       13.0%            -          0.0%      9,886          NM

                                               --------     ------      --------      -------    --------        -----
NET INCOME (LOSS)                              $  1,226        1.6%     $ (1,772)        -3.8%   $  2,998        169.2%
                                               ========     ======      ========      =======    ========        =====
</TABLE>

Net sales for the nine months ended September 30, 2004 increased $28,972 or
61.7% over the same period in 2003 to $75,911. The increased sales were a result
of the new customers obtained in the acquisition of certain assets of The
Kelsey-Hayes Company ("Kelsey-Hayes") of $29,188 offset by a decrease in sales
of wholesale products of $216.

Gross profit for the nine months ended September 30, 2004 is $7,044 or 9.3% of
net sales compared to $6,290 or 13.4% in the same period of 2003, an increase of
$754 or 12.0%. The following table details the change in gross profit for the
period.

<TABLE>
<S>                                                                               <C>
Gross profit on higher brake parts sales volume                                   $       6,000
Reduced underabsorption of fixed manufacturing overheads                                    338
Higher distribution expenses                                                             (5,449)
Reduced gross margins on wholesale product sales                                           (135)
                                                                                  -------------
Net increase in gross profit                                                      $         754
                                                                                  =============
</TABLE>

Selling, general and administrative expenses of $13,788 or 18.2% of net sales
for the nine months ended September 30, 2004 increased by $6,455 when compared
to $7,323 or 15.6% of net sales for the same period in 2003. This increase was a
result of costs associated with operations of the acquired Kelsey-

                                       12
<PAGE>

Hayes Company assets, increased freight costs on the higher sales levels and the
amortization of certain expenses related to the issuance of warrants in 2003.

Loss from operations for the nine months ended September 30, 2004 increased
$5,701 to $6,734 as compared to a loss of $1,033 in the same period of 2003.
This increased loss relates to increased selling, general and administrative
expenses of $6,455 offset by increased gross profit of $754.

Other expense for the nine months ended September 30, 2004 increased $1,187 to
$1,926 as compared to $739 in the same period 2003. This increase is primarily a
result of increased interest expense of $1,164 and other expense net of $23.

Extraordinary gain for the nine months ended September 30, 2004 of $9,886
represents the excess of the fair value of the assets of the Autospecialty
division of the Kelsey-Hayes Company, a subsidiary of TRW Automotive, Inc over
the cost paid for these assets.

Net income for the nine months ended September 30, 2004 was $1,226 compared to a
net loss of $1,772 for the same period 2003, an increase of $2,998. This
increase is attributed to the extraordinary gain of $9,886 offset by decreased
operating income of $5,701 and an increase in interest expense and other income
of $1,187.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided from operating activities for the nine months ended September
30, 2004 was $115,369 which was primarily due to (a) net income of $1,226,091,
(b) a reduction in inventories of $7,426,556, (c) non-cash items consisting of
depreciation, amortization and provision for bad debts of $2,861,514, (d)
increase in accounts payable of $6,106,577, (e) increase in accrued expenses of
$73,381 and (f) a decrease on other, net of $13,500 offset by (g) the non-cash
extraordinary gain $9,886,328, (h) an increase in accounts receivable of
$7,034,184 and (i) an increase in prepaid expenses and other assets of $671,738.

Net cash used in investing activities was $12,413,463 which is attributable
primarily to the purchase of certain assets of The Kelsey-Hayes Company for
$11,571,008 and leasehold improvements incurred in connection with the
relocation of the rotor manufacturing facilities from Carson, CA into the Alsip,
IL facility.

Net cash provided by financing activities was $14,640,546, consisting primarily
of an increase to the revolving line of credit of $12,161,756, net proceeds from
the issuance of convertible notes of $1,743,700, exercise of warrants and
options of $869,940 offset by principal payments on notes payable and
subordinated debt of $134,850. In addition, in connection with the purchase of
certain assets of The Kelsey-Hayes Company, we collected certain purchased
accounts receivable, subject to a contractual obligation to pay over a portion
of such collections aggregating $1,750,000 as of September 30, 2004, which
proceeds have not been paid over (but are included in our accrued expenses), due
to an indemnification claim we have made under the contract whereby we have
claimed losses in excess of such amount related to certain defective inventory
and the resultant losses in business related to such inventory.

The Congress agreement contains certain limitations on dividends and capital
expenditures and requires us to satisfy a financial test concerning earnings
before interest, taxes, depreciation and amortization (EBITDA). At September
30, 2004, we would not have been in compliance with the financial test
concerning EBITDA; however, we obtained a waiver of this covenant violation.

We expect to continue to finance our operations through cash flow generated from
operations, borrowings under our bank lines of credit and obtaining credit from
our suppliers, and possibly additional unsecured lines of credit.

                                       13
<PAGE>

Future contractual obligations of the Company are as follows:

<TABLE>
<CAPTION>
                                       PAYMENTS DUE BY PERIOD AS OF 09/30/04
                                       -------------------------------------
CONTRACTUAL                                               NEXT                                     AFTER
OBLIGATIONS                           TOTAL            12 MONTHS             1-3 YEARS            4 YEARS
-----------                           -----            ---------             ---------            -------
<S>                                 <C>                 <C>                 <C>                 <C>
Revolving loan                      $24,159,282         $        0          $24,159,282                  0
Subordinated debt                       786,016            786,016                    0                  0
Convertible Debt                      5,671,960          2,819,455            2,852,505                  0
Capital leases                           45,226             16,925               28,301                  0
Operating leases                      9,131,958          2,784,713            4,695,245          1,652,000
                                    -----------         ----------          -----------         ----------
Total                               $39,794,442         $6,407,109          $31,735,333         $1,652,000
                                    ===========         ==========          ===========         ==========
</TABLE>

SIGNIFICANT ACCOUNTING POLICIES

Our significant accounting policies are described in Note 2 to the Consolidated
Financial Statements contained in our Annual Report on Form 10-K for the year
ended December 31, 2003. The application of these policies may require
management to make judgments and estimates about the amounts reflected in the
financial statements. Management uses historical experience and all available
information to make these estimates and judgments, and different amounts could
be reported using different assumptions and estimates.

RISK FACTORS

CONVERTIBLE NOTE FINANCING. We have entered into a series of unsecured
convertible notes with Global Capital Funding Group, L.P. and affiliates
(Global) in the original principal amounts of $1,550,000 on July 3, 2003,
$1,200,000 on November 26, 2003 and $300,000 on January 15, 2004. In addition,
we entered into two secured convertible notes with Laurus Master Fund, Ltd
(Laurus) in the original principal amounts of $2,500,000 on October 31, 2003 and
$2,000,000 on January 9, 2004, the terms of which are all described in greater
detail the Company's Annual Report on Form 10-K filed with the SEC on April 14,
2004.

All of the convertible notes provide the holder a voluntary right to convert
principal and interest that is due under certain circumstances into common
stock. The loan agreements for the various convertible notes obligate the
Company to file a registration statement registering the shares into which the
various notes could possibly be converted (which it has done) and to maintain
the effectiveness of such registration statement for the applicable periods
under which the notes have conversion rights. This includes the obligation to
remain current with respect to its required filings under the Securities
Exchange Act of 1934. Failure to meet these covenants would constitute an event
of default under the applicable loan agreements and provide the respective
lenders the right to seek to accelerate the loans and assess additional interest
and penalties. In addition, all of the notes have cross default provisions, and
the notes with Laurus are secured by a first lien on the Company's fixed assets.
Accordingly, the Company has an obligation to continue to maintain the
effectiveness of the registration statement it has filed for the shares
underlying such notes. While the Company believes it has met these requirements
to date and will continue to meet these requirements, should it be determined
that it has failed or in the future fails to meet the necessary requirements,
this could result in acceleration of the convertible loans and, due to the cross
default provisions, all other loans of the Company including the Company's
primary credit facility with Congress Financial Corporation. Additionally, to
the extent that the loans are secured, the lenders could exercise their rights
to foreclose on the collateral securing the loans. If it were determined that
the Company was in default on its loans and the lenders were successful in
foreclosing on the loans, then the Company would be required to find alternate
financing to repay the loans. If the Company could not obtain such alternate
financing, the Company would not have sufficient cash and assets to continue
operations.

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 previously utilized

                                       14
<PAGE>

only limited derivative financial instruments and did not use them for trading
purposes and have never used derivative commodity instruments. At September 30,
2004, 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
Congress Financial Corporation adjusts with the changes in the market rate of
interest, we believe that the fair value is equivalent to the carrying value.

We believe the interest rate of eight percent (8.0%) on the subordinated
debenture held by Finova Mezzanine Capital, Inc. is approximately equal to the
current rate available for similar debt. Accordingly, the fair value of this
debenture approximates its carrying value.

ITEM 4.  CONTROLS AND PROCEDURES

We maintain a system of controls and procedures designed to provide reasonable
assurance as to the material reliability of the financial statements and other
disclosures included in this Report as well as to safeguard assets from
unauthorized use or disposition. However, no cost effective systems of internal
controls will preclude all errors and irregularities, and management is
necessarily required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.

As of the date of this Report, our Chief Executive Officer and Chief Financial
Officer have evaluated the effectiveness of the design and operation of our
disclosure controls and procedures. Based on and as of the date of such
evaluation, these officers have concluded that as a result of the occurrence of
the events described herein under "Explanatory Note" including the
reclassification of the gain and the circumstances relating to the filing of the
Form 10-Q, our disclosure controls and procedures may not have been effective
with respect to such items, and the reclassification of the gain may reflect a
material weakness in our internal controls over financial reporting. These
matters have been disclosed to our Audit Committee and independent registered
public accountant. We are implementing corrective measures to correct these
weaknesses to prevent errors from occurring in future periods.

PART II  OTHER INFORMATION

ITEMS 1 THRU 5 ARE NOT APPLICABLE TO THE COMPANY IN THIS REPORT.

ITEM 6 - EXHIBITS

(a)   Exhibits

<TABLE>
<CAPTION>
Exhibit Number                                   Description of Document
--------------                                   -----------------------
<S>                   <C>

     31.1             Certifications of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

     31.2             Certifications of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

      32              Certifications  Pursuant to 18 U.S.C.  Section 1350, as Adopted Pursuant to Section 906 of the  Sarbanes-Oxley
                      Act of 2002

      99              Computation of Earnings Per Share
</TABLE>

                                       15
<PAGE>

                                  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
                            ----------------------------------------------------
Date: December 23, 2004     Arvin Scott, Chief Executive Officer, President
                            (Principal Executive Officer)

                            /s/ ROBERT W. ZIMMER
                            ----------------------------------------------------
                            Robert W. Zimmer, Chief Financial Officer
                            (Principal Financial Officer)

                                       16