U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
--------------------------------------------------------------------------------

                                   FORM 10-QSB


(MARK ONE)

     [X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
          ACT OF 1934

                For the quarterly period ended September 30, 1998

     [  ]  TRANSITION  REPORT  UNDER  SECTION  13 OR 15(d)  OF THE  SECURITIES
          EXCHANGE ACT OF 1934

For the transition period from ______________________ to _______________________

                                     0-20436
                             Commission file number

                       U.S. AUTOMOTIVE MANUFACTURING, INC.
        (Exact Name of Small Business Issuer as Specified in its Charter)

             Delaware                                     65-0309477  
(State or other  jurisdiction of                        (IRS Employer
  incorporation or organization)                       Identification No.)

Route 627, Airport Drive, Tappahannock, VA                   22560
(Address of principal executive offices)                   (Zip Code)

Issuer's telephone number, including area code:  (804) 444-5356  


________________________________________________________________________________
              (Former name, former address and former fiscal year,
                         if changed since last report)

Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 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____

As of November 13, 1998,  the Issuer had  15,724,893  shares  outstanding of its
common stock, $.001 par value.


<PAGE>

                       U.S. AUTOMOTIVE MANUFACTURING, INC.

                                      INDEX
                                                                            Page
                                                                            ----
PART I. FINANCIAL INFORMATION..................................................3

Item 1.      Consolidated Financial Statements

             Consolidated Balance Sheets at September 30, 1998
                (unaudited) and December 31, 1997..............................3

             Consolidated Statements of Operations (unaudited) for the
                three months and nine months ended September 30, 1998 
                 and September 30, 1997........................................4

             Consolidated Statements of Cash Flows (unaudited) for
              the nine months ended September 30, 1998 
                 and September 30, 1997........................................5

             Notes to Consolidated Financial Statements........................6

Item 2.      Management's Discussion and Analysis of Financial
                     Condition and Results of Operations.......................8


PART II.  OTHER INFORMATION...................................................14

Item 1.      Legal Proceedings................................................14

Item 2.      Changes in Securities and Use of Proceeds .......................14

Item 4.      Submission of Matters to a Vote of Security Holders..............14

Item 6.      Exhibits and Reports on Form 8-K.................................14

SIGNATURES....................................................................15


                                       -2-


<PAGE>


                          PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


                       U.S. AUTOMOTIVE MANUFACTURING, INC.
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                              September 30, 1998
                                                                                  (Unaudited)        December 31, 1997
                                                                              ------------------     -----------------
<S>                                                                               <C>                   <C>         
ASSETS
Current Assets:
          Cash                                                                    $    743,076          $  1,001,843
          Accounts receivable (net of allowance for doubtful accounts
                of $91,000 and $136,000, respectively)                               5,292,080             2,800,755
          Inventories                                                               10,924,456             8,739,028
          Prepaid expenses and other                                                   147,101               425,781
                                                                                  ------------          ------------
          Total Current Assets                                                      17,106,713            12,967,407

Property, plant and equipment (net of accumulated depreciation of
          $1,531,000 and $812,900, respectively)                                    10,905,525            10,256,556
Deferred financing costs                                                               243,000                    --
Goodwill, net                                                                        6,034,418             6,273,665
                                                                                  ------------          ------------
TOTAL ASSETS                                                                      $ 34,289,656          $ 29,497,628
                                                                                  ============          ============
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
          Line of credit                                                          $  7,030,396          $  4,815,211
          Current portion of long term debt                                          1,355,755             1,688,942
          Accounts payable                                                           4,471,058             2,735,688
          Accrued liabilities                                                          699,644               830,282
                                                                                  ------------          ------------
          Total Current Liabilities                                                 13,556,864            10,070,123

Long-term debt, less current maturities                                                181,386               242,414
Redeemable convertible debentures                                                    2,250,000                    --
Line of credit, long term portion                                                    1,050,000                    --
Notes payable to shareholders                                                        4,890,000             4,500,000
                                                                                  ------------          ------------
          Total Liabilities                                                         21,928,250            14,812,537

Stockholders' equity:
Issued and outstanding capital stock, $.001 par value                                   15,725                15,725
Additional paid-in capital                                                          38,885,545            38,885,545
Accumulated deficit                                                                (26,539,864)          (24,216,179)
                                                                                  ------------          ------------
          Total Stockholders' Equity                                                12,361,406            14,685,091
                                                                                  ------------          ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                        $ 34,289,656          $ 29,497,628
                                                                                  ============          ============
</TABLE>


                 The accompanying notes are an integral part of
                    these consolidated financial statements.


                                      -3-

<PAGE>


                       U.S. AUTOMOTIVE MANUFACTURING, INC.
                      Consolidated Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                           Three Months Ended September 30,         Nine Months Ended September 30,
                                                           --------------------------------        --------------------------------
                                                              1998                1997                 1998                1997
                                                           ------------        ------------        ------------        ------------
<S>                                                        <C>                 <C>                 <C>                 <C>         
Net Sales                                                  $  5,590,661        $  1,850,076        $ 14,947,830        $  3,345,379

Cost of Goods Sold                                            4,031,877           1,591,819          11,213,749           2,980,454
                                                           ------------        ------------        ------------        ------------
Gross Profit                                                  1,558,784             258,257           3,734,081             364,925
                                                           ------------        ------------        ------------        ------------
Operating Expenses:
                Selling and delivery                            771,627             287,170           2,103,009             518,751
                General and administrative                    1,077,953           5,653,841           2,983,844           7,898,347
                                                           ------------        ------------        ------------        ------------
Total Operating Expenses                                      1,849,580           5,941,011           5,086,853           8,417,098
                                                           ------------        ------------        ------------        ------------

Operating Loss                                                 (290,796)         (5,682,754)         (1,352,772)         (8,052,173)
Interest Expense                                               (419,810)         (1,675,097)           (970,913)         (3,688,317)
                                                           ------------        ------------        ------------        ------------
Net Loss                                                   $   (710,606)       $ (7,357,851)       $ (2,323,685)       $(11,740,490)
                                                           ============        ============        ============        ============
Net Loss per share, basic and diluted                      $       (.05)       $      (0.66)       $      (0.15)       $      (1.06)
                                                           ============        ============        ============        ============
Weighted average shares outstanding                          15,724,893          11,086,610          15,724,893          11,086,610
                                                           ============        ============        ============        ============
</TABLE>


                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                      -4-

<PAGE>



                       U.S. AUTOMOTIVE MANUFACTURING, INC.
                      Consolidated Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                     Nine Months Ended September 30,
                                                                                    ---------------------------------
                                                                                       1998                  1997
                                                                                    -----------           -----------
<S>                                                                                <C>                   <C>         
CASH FLOW FROM OPERATING ACTIVITIES
Net Loss                                                                           $ (2,323,685)         $(11,740,490)

Adjustments  to reconcile net loss to net cash used in
operating activities:
        Depreciation                                                                    718,141               477,448
        Amortization                                                                    266,247                26,583
        Provision for doubtful accounts                                                 (44,938)              412,035
        Provision for inventory valuation                                              (720,519)            1,345,776
        Provision for property, plant and equipment valuation                              --               1,483,629
        Convertible debentures interest expense                                            --               3,500,000
        (Increase) decrease in:
               Accounts Receivable                                                   (2,446,387)              581,219
               Inventory                                                             (1,464,909)              320,544
               Prepaid Expenses                                                         278,680               102,369
        Increase in:
               Accounts Payable and Accrued Liabilities                               1,604,732                63,634
                                                                                    -----------           -----------
Total Adjustments                                                                    (1,808,953)            8,313,237
                                                                                    -----------           -----------
Net cash used in operating activities                                                (4,132,638)           (3,427,253)
                                                                                    -----------           -----------
CASH FLOW FROM INVESTING ACTIVITIES

        Acquisition of QAC                                                                 --              (2,893,543)
        Capital expenditures                                                         (1,367,110)             (411,904)
                                                                                    -----------           -----------
Net cash used in investing activities                                                (1,367,110)           (3,305,447)
                                                                                    -----------           -----------
CASH FLOW FROM FINANCING ACTIVITIES

        Deferred financing costs                                                       (270,000)                 --
        Proceeds from convertible debentures                                          2,250,000            10,500,000
        Net (repayments) borrowings on notes payable                                  3,260,981            (2,058,879)
                                                                                    -----------           -----------
Net cash provided by financing activities                                             5,240,981             8,441,121
                                                                                    -----------           -----------
NET INCREASE (DECREASE) IN CASH                                                        (258,767)            1,708,421

Cash, beginning of period                                                             1,001,843               956,548
                                                                                    -----------           -----------
Cash, end of period                                                                $    743,076          $  2,664,969
                                                                                    ===========           ===========
</TABLE>


                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                      -5-


<PAGE>


                       U.S AUTOMOTIVE MANUFACTURING, INC.

                   Notes to Consolidated Financial Statements
                               September 30, 1998
                                   (Unaudited)



NOTE 1:  BUSINESS OPERATIONS AND ORGANIZATION

U.S. Automotive Manufacturing,  Inc. (formerly RT Industries,  Inc.), a Delaware
corporation  incorporated  on January 16, 1992,  together with its  wholly-owned
subsidiaries  Quality  Automotive  Company and U.S.  Automotive  Friction,  Inc.
(collectively,  the  "Company")  is engaged  in the  manufacture,  assembly  and
distribution  of new and  rebuilt  automotive  friction  products.  The  Company
maintains manufacturing and  warehouse/distribution  facilities in Tappahannock,
Virginia and Sanford,  Florida (the  "Facilities"),  which Facilities are either
owned or leased by the Company.

The Company manufactures a full line of friction automotive products,  including
brake lining,  integrally molded and riveted brake pads and remanufactured brake
shoes.  The Company markets  various grades of friction  lining,  asbestos,  non
asbestos organic and semi-metallic formulas,  suitable for use by the automotive
and light truck  after-markets.  The Company's  products are marketed  under the
Brakes  Worth   Stopping   For,(R)   Silent   Solution,(R)   Max  Life,(R)  Dual
Friction,(TM)   Ultra  Brake,(TM)  Gold  Max,(TM)  and  Quality   Automotive(TM)
tradenames and various private label packaging.  In 1997, the Company's products
were  also  sold  under  the  Roinco,(TM)   Ultra  Brake(TM)  and  Max  Life(TM)
tradenames.

Brake pads,  brake shoes or a combination of both are  incorporated in all makes
and models of American and imported  automobiles.  All imported and the majority
of late model domestic  automobiles  are equipped with  integrally  molded brake
pads.  The  Company  generally  produces  the  replacement  brake under the same
process used to manufacture the vehicle's original equipment.

The Company sells its friction  products to other automotive  manufacturers  and
the automotive  after-market.  The automotive after-market encompasses the parts
and service  sold to the vehicle  owners for repair or  replacement  of original
equipment  parts.  The Company  believes that the market for  replacement  parts
generally consists of vehicles which are three to twelve years old. Sales of the
Company's  products  are made to mass  merchandisers,  automotive  distributors,
chain  stores and other brake  manufacturers.  The  Company  does not market its
products directly to retail customers.

NOTE 2:  UNAUDITED INTERIM STATEMENTS

The accompanying unaudited consolidated financial statements of the Company have
been prepared in accordance  with the  instructions  to Form 10 - QSB and do not
include all of the  information  and  footnotes  required by generally  accepted
accounting  principles  for  complete  financial  statements.  In the opinion of
management, all adjustments (which consist only of normal recurring adjustments)
necessary  for  a  fair  presentation   have  been  included.   All  significant
intercompany  transactions and balances have been eliminated.  Operating results
for the nine months ended September 30, 1998, are not necessarily  indicative of
the  results  to be  expected  for the year  ending  December  31,  1998.  These
financial  statements and notes should be read in conjunction with the financial
statements  and notes thereto  included in the  Company's  annual report on Form
10-KSB for the year ended December 31, 1997.


                                       -6-


<PAGE>


NOTE 3:  SIGNIFICANT ACCOUNTING POLICIES

The Company adopted Financial  Accounting Standards Board ("FASB") Statement No.
130, "Reporting Comprehensive Income," on January 1, 1998. For the third quarter
of 1998 and 1997, total comprehensive loss equalled the net loss.

NOTE 4:  MERGER WITH QUALITY AUTOMOTIVE COMPANY

On August 29, 1997,  Quality Automotive Company was merged (the "Merger") into a
wholly owned  subsidiary  of the Company,  which  subsidiary,  as the  surviving
entity,  changed its name to "Quality Automotive Company" ("Quality")  following
the Merger and currently conducts business under such name.

The  unaudited  pro  forma  information  for the  three  and nine  months  ended
September  30,  1997,  set forth below  gives  effect to the Merger as if it had
occurred  on  January  1,  1997.  The pro forma  information  is  presented  for
informational  purposes only and is not necessarily indicative of the results of
operations   that  actually  would  have  been  achieved  had  the  Merger  been
consummated  on January 1, 1997,  nor are they  indicative of future  results of
operations.

<TABLE>
<CAPTION>
                                               Three Months Ended              Nine Months Ended      
                                               September 30, 1997              September 30, 1997     
                                               ------------------              ------------------     
<S>                                               <C>                             <C>                 
Net Sales                                         $  3,792,826                    $ 11,912,810        
Net Loss                                            (7,781,978)                    (12,903,843)       
Net Loss per share (basic and diluted)            $      (0.61)                   $      (1.01)       

</TABLE>

NOTE 5: INVENTORY

     Major  inventory  components as of September 30, 1998 and December 31, 1997
were as follows:

                                    
                     September 30, 1998                December 31, 1997
                     ------------------                ----------------- 
Raw materials           $ 4,584,343                      $ 4,053,517  
                                                                      
Work in Progress            188,267                          176,519  
                                                                      
Finished goods            6,151,846                        4,508,992  
                        -----------                      -----------  
                                                                      
                        $10,924,456                      $ 8,739,028  
                        ===========                      ===========  
                                                       

                                       -7-


<PAGE>


ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     The  Private  Securities  Litigation  Reform  Act of 1995  provides a "safe
harbor" for forward-looking  statements.  Certain  information  included in this
Report contains statements that are forward-looking, such as statements relating
to plans for future activities.  Such  forward-looking  statements involve known
and unknown  risks,  uncertainties  and other factors which may cause the actual
results,  performance or achievements of the Company to be materially  different
from any future  results,  performance or  achievements  expressed or implied by
such  forward-looking  statements.  Such  factors  include,  among  others,  the
following:  the Company's recent losses; the Company's need to obtain additional
financing and the ability to obtain such  financing;  outstanding  indebtedness;
the  ability  to hire  and  retain  key  personnel;  successful  completion  and
integration  of  prior  and any  future  acquisitions;  relationships  with  and
dependence on third-party equipment  manufacturers and suppliers;  uncertainties
relating to business  and  economic  conditions  in markets in which the Company
operates; uncertainties relating to government and regulatory policies and other
political risks; uncertainties relating to customer plans and commitments;  cost
of  and  availability  of  component   materials  and  inventories;   effect  of
governmental export and import policies;  the highly competitive  environment in
which the Company operates; potential entry of new, well-capitalized competitors
into  the  Company's  markets;  and  the  uncertainty  regarding  the  Company's
continued ability, through sales growth, to absorb the increasing costs incurred
and  expected to be incurred in  connection  with its business  activities.  The
words  "believe",  "expect",  "anticipate",  "intend"  and  "plan"  and  similar
expressions identify  forward-looking  statements.  Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date the statement was made.

General

     During the quarter ended September 30, 1998, the Company  continued to make
progress  toward its goal of  achieving  profitability.  Since its Merger in the
third  quarter  of 1997,  management's  immediate  goal  has been to  materially
increase  revenues while  realigning  the Company's  customer base toward larger
volume  purchasers.  During 1997, no single customer accounted for more than 10%
of the  Company's  business.  For 1998,  the  Company  expects to report a sales
increase  of  approximately  200% on a reported  basis  (approximately  33% on a
pro-forma basis),  with at least two customers providing more than 10% of sales.
Consistent with such expectations,  revenues for the quarter ended September 30,
1998 were up over 200% from the  comparable  quarter  ended  September 30, 1997.
Over the last ten years,  the  average  seasonal  difference  between  third and
second quarter revenue at Quality Automotive Company  ("Quality") was a decrease
of 15%. For the comparable  quarters during 1998 the decrease was only 6%, which
was due to  continued  revenue  growth  within the third  quarter.  The  Company
continues to secure significant  additional  business.  The Company has recently
been informed that,  beginning in 1999, its existing supply  relationship with a
major customer will be expanded as a result of acquisitions  recently  concluded
by such  customer.  The Company has also recently bid on additional  significant
national  business.  Based on business  relationships  currently  in place,  the
Company  anticipates  annualized  1999  revenues  will exceed  1998  revenues by
approximately  50%.  Management's  goal to increase  revenues  specifically with
larger volume  customers is rooted in its  projections of its economies of scale
of  production.  It is the  intention of  management  to continue to broaden the
Company's  business  base over  time  with  large  volume  purchasers  to reduce
dependence  on any one  customer  or  group of  customers  while  enjoying  such
economies of scale.

     Material growth has not been attained without  short-term  disruptions.  As
previously noted, the explosive volume increase has necessitated the purchase of
new machinery and equipment and the hiring and training of significant number of
new employees,  resulting in significant  increases in operating  expenses.  The
ramp-up of production has come at a high front end cost.

     At  March  31,  1998 the  Company  employed  249  full-time  and  temporary
employees.  At June 30th the comparable number was 287. At August 1st the number
increased to 345 and at September  30, 1998 the Company  employed 371  full-time
and  temporary  employees  (a 49% increase in staff versus an increase of 63% in
quarterly  revenues).  During the third  quarter  the  Company's  total  payroll
increased by approximately $435,000,  inclusive of overtime pay of approximately
$400,000.  As training is  completed  and staff  becomes  more  seasoned,  it is
expected that overtime will decrease significantly.

                                       -8-


<PAGE>


     Another item  adversely  effecting  profitability  for the third quarter of
1998  was the  roll  out of  three  new  specialty  programs  for one of our new
customers.   Specialty   programs   by  their   nature   preclude   the  use  of
"off-the-shelf"  product, in favor of a "produced-to-order  product".  With over
2000 SKU's produced by the Company, production efficiencies can only be realized
by longer runs produced to inventory.  Any start-up specialty program extracts a
heavy up front  cost and  management  only  authorizes  such  programs  where it
believes that the long term benefit of the client  relationship  far exceeds the
short term costs.  Moreover,  management  further  believes  that the short term
inefficiencies of these programs are substantially behind the Company.

     Lastly,  overall  production at the Company's  Florida plant remains behind
scheduled  targets.  The Company has  assigned  one of its key  personnel to the
Florida plant to assist  regional  management to obtain  satisfactory  levels of
production and efficiency. It is expected that such task will be accomplished by
year-end.

     The  Company's  efforts  to  maintain  high  customer   satisfaction  while
controlling costs have been impeded by the on-going transition to a new computer
system  at  Quality  Automotive  ("Quality").  In late  1996,  Quality  signed a
contract to convert its computer  system to a new  manufacturing  and  financial
software system available from a recognized  leader in its field. At that time a
consulting  firm  recommended by the software firm was retained to assist in the
transition  to the new system.  In February  1998,  the new system went on-line.
Since that time,  however,  the Company has been plagued with systems  problems.
The Company took full inventory counts on March 31, 1998 and June 30, 1998. As a
result of reporting  problems,  management has  implemented a program  whereby a
full  physical  inventory  has been  taken  every  other  month - with a partial
inventory being taken on off months. Aside from the internal costs involved with
dealing with these  problems,  the Company,  to date has paid over  $500,000 for
consulting  services.  The  lack of  timely  accurate  reporting  has  inhibited
management's ability to contain the Company's costs.

     The computer  reporting  problems have also resulted in untimely reports to
the Company's lender.  The lender has been advised that the Company has embarked
on a program  with the  software  company and the  consultants  to resolve  such
problems by year end. The Lender has been supportive of the Company's continuing
efforts to resolve  these  problems.  Although  management  is  dedicated to the
resolution  of these  problems,  there  can be no  assurance  that the  computer
problems will be resolved within such time frame.

     During the quarter ended  September  30, 1998,  the Company's two principal
market makers ceased doing  business.  This has resulted in the Company's  stock
price falling to levels  severely below book value.  At such levels,  management
does not believe  that the Company can raise funds on an equity basis upon terms
that are reasonable and not significantly  below market prices. 

     Although the Company believes it is well-positioned from a sales standpoint
to continue to materially increase its business, the Company is short on capital
at this time. In addition, the Company's inability to raise equity based funding
upon  reasonable  terms,  together  with its  computer  related  problems,  have
severely limited the Company's near-term  possibilities for obtaining additional
capital.  The  Company  continues  to explore  all means of  raising  additional
capital,  including  the  issuance of  additional  debt and equity  instruments.
Recently,  the Company has had discussions with its lender about entering into a
new  revolving  credit  and  term  loan  agreement,   drawing  upon  substantial
unencumbered  capital assets held by the Company as an additional  lending base.
In the  interim,  the lender  has  granted a  temporary  increase  in  Quality's
existing  revolving  credit up to a maximum of $8 million.  While  management is
confident  that the Company can meet these  challenges in the short term,  there
can however be no assurance that the Company can obtain additional funding.

     Lastly,  because the Company's stock has remained below the $1.00 per share
listing  criteria,  The NASDAQ Stock Market has notified the Company that if its
stock does not trade  above  $1.00 per share for a period of at least 10 trading
days during any 10-day period ending November 26, 1998, the Company's securities
will be subject to  delisting.  Prior to such date,  the  Company  may request a
hearing which, if granted, could delay any potential decision to delist until at
least the date of such  hearing.  Because  management  believes that the Company
cannot, in the time allotted,  interest one or more securities firms in making a
professional market

                                       -9-


<PAGE>


in the  Company's  securities,  management is currently  considering  soliciting
shareholder  approval for an anticipated  15:1 reverse split of its common stock
in an effort to satisfy Nasdaq's minimum stock price component. Approval of such
an action would  substantially  reduce  outstanding  shares and increase the per
share price to a level which should allow for  continued  listing.  No assurance
can be given, however, that such action will be taken by the board; or if taken,
that the  shareholders  will  approve  such  action.  Further,  should the Board
recommend  such action and the requisite  shareholder  approval is received,  no
assurance  can be given that the shares  shall  continue to trade  above  NASDAQ
listing  criteria or that the Company  would  continue  to meet  Nasdaq's  other
criteria for continued listing.

Results of Operations

Comparison  of Three  Months  Ended  September  30, 1998 to Three  Months  Ended
September 30, 1997

     Net Sales.  Net sales for the three  months ended  September  30, 1998 were
$5,590,661  as compared to net sales of  $1,850,076  for the three  months ended
September 30, 1997. The increase of $3,740,585 or 202% was from additional sales
due to the  Merger  with  Quality  during  the  third  quarter  of  1997  plus a
significant gain (45%) in the Company's base business.

     Gross Profit.  For the three months ended  September 30, 1998,  the Company
had a gross profit of $1,558,784 as compared to the gross profit of $258,257 for
the three months ended  September 30, 1997.  The increase in gross profit (504%)
is the  result of the  increase  in sales  offset by a smaller  increase  in the
overall cost of sales, attributable to the economies of scale as a result of the
Merger and the increase in Company sales.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administration  expenses  for the three  months  ended  September  30, 1998 were
$1,849,580  as compared to $5,941,011  for the three months ended  September 30,
1997,  representing  a decrease of 69%. As a percentage  of net sales,  selling,
general and administrative expenses decreased from 321% to 33%.

     Interest Expense.  Interest expense decreased by $1,255,287 from $1,675,097
in the third  quarter of 1997 to  $419,810  in the third  quarter of 1998.  This
decrease was  attributable to a decrease in the principal  amount of convertible
debentures  outstanding  in 1998 offset by the increase in borrowings  under the
Company's borrowing facilities.

     Net  Loss.  The net loss in the third  quarter  of 1998 was  ($710,606)  or
($.05)  per  share  based on  15,724,893  weighted  average  common  and  common
equivalent shares  outstanding  compared to a net loss of ($7,357,851) or ($.66)
per share in the third  quarter  of 1997 based on  11,086,610  common and common
equivalent  shares  outstanding.  The  decrease  in net loss of  $6,647,245  was
primarily the result of economies of scale, the decrease of interest expense and
the reduction in other non-recurring expenses.

Comparison  of Nine  Months  Ended  September  30,  1998 to  Nine  Months  Ended
September 30, 1997

     Net Sales.  Net sales for the nine  months  ended  September  30, 1998 were
$14,947,830  as compared to net sales of  $3,345,379  for the nine months  ended
September  30, 1997.  The increase of  $11,602,451  or 347% was from  additional
sales  due to  the  Merger  with  Quality  during  the  third  quarter  of  1997
($8,567,071) plus an overall gain of 25.5% in the Company's base business.

     Gross Profit. For the nine months ended September 30, 1998, the Company had
a gross profit of  $3,734,081  as compared to a gross profit of $364,925 for the
nine months  ended  September  30, 1997.  The  increase in gross  profit  (923%)
resulted  from  economies  of scale  realized  as a result of the Merger and the
increase in sales.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administration  expenses  for the nine  months  ended  September  30,  1998 were
$5,086,853  as compared to  $8,417,098  for the nine months ended  September 30,
1997,  representing  an decrease of $3,330,245  (39.6%).  As a percentage of net
sales (which  increased  during such nine month  period),  selling,  general and
administrative expenses decreased from 252% to 34.0%.

                                      -10-


<PAGE>


     Interest Expense.  Interest expense decreased by $2,717,404 from $3,688,317
in the nine months ended September 30, 1997 to $970,913 in the nine months ended
September 30, 1998. The decrease is  attributable to a decrease in the principal
amount  of  convertible  debentures  outstanding  in 1998  offset  by  increased
borrowings under the Company's credit facilities.

     Net  Income  (Loss).  The net loss in the  first  nine  months  of 1998 was
($2,323,685)  or ($0.15) per share based on 15,724,893  weighted  average common
and common equivalent shares outstanding compared to a net loss of ($11,740,490)
or  ($1.06)  per share in the nine  months  ended  September  30,  1997 based on
11,086,610 common and common equivalent shares outstanding.  The decrease in net
loss of $9,416,805  was primarily the result of cost savings due to economies of
scale,  a decrease in interest  expense and the decrease of other  non-recurring
expenses.

Liquidity and Capital Resources

     During the nine months ended  September 30, 1998, the Company  financed its
operations  primarily  through net proceeds from the Company's  private sales of
equity and debt  securities,  borrowings  under its lending  facilities and cash
generated by operations.

     At September 30, 1998,  the Company had  consolidated  cash and  short-term
investments  totalling $743,076 and working capital of $3,549,849.  At September
30, 1997, the Company had consolidated cash and short-term investments totalling
$2,664,969 and working  capital of $9,475,750.  This decrease in working capital
was due to the Merger, and the  reclassification of certain debt items from long
term (1997) to current (1998).

     Net cash provided by financing  activities for nine months ended  September
30, 1998 was $5,240,981,  consisting  primarily of advances to the Company under
the USAM  Revolving  Loan (as  defined  below)  and the  proceeds  of a  private
placement of  convertible  debt  securities  in the gross amount of  $2,250,000.
Proceeds  from such  offerings  were  used to fund  on-going  operations  and to
replace cash depleted through losses by the Company.

     Prior to April 1997, the Company had a $7.5 million  secured line of credit
with Congress Financial Corporation.  Such line of credit matured in April 1997,
at which time the Company did not renew the credit line.

     After  the  Merger,  a  principal  source  of  capital  for  the  Company's
operations has been the line of credit (the "Credit  Facility")  between Quality
and LaSalle Business Credit, Inc. ("LaSalle"), which Credit Facility was renewed
for a one year period commencing April 1, 1998. The term of such Credit Facility
will  expire  March  30,1999.  The  Company  and  LaSalle  have  agreed  not  to
automatically  renew the  current  facility at the current  maturity  date.  The
Company is in the process of putting  together  requested data for submission to
LaSalle as the basis for negotiations of a new credit  facility.  As a temporary
measure to help the Company meet its immediate  cash  requirements,  LaSalle has
increased the revolving  facility to $8,000,000 for 90 days. The Company was and
continues to be in  noncompliance  with certain  financial  covenants  under the
Credit Facility as at the date of renewal, at September 30, 1998 and at November
14, 1998.

     The Credit Facility consists of the following components:

          (i)  a  secured  revolving  credit  facility  of up to  $7.5  million.
               Advances are made by formula on the Company's accounts receivable
               and inventory.  At September 30, 1998,  the revolving  credit had
               approximately   $7.035  million  of  a  possible  $7.500  million
               outstanding.  Quality had  additional  qualifying  assets against
               which it could not  borrow,  based on the $7.5  million  facility
               maximum.  Had this maximum not been in place management  believes
               an additional $1 million would have been  available.  Interest is
               calculated  at the prime  rate plus 1%  (9.25% at  September  30,
               1998)

          (ii) a secured loan covering machinery  equipment,  property and plant
               having an original loan amount of  approximately  $3.5 million of
               which $450,000 was outstanding at September 30, 1998. Monthly


                                      -11-


<PAGE>


               installments of $50,000 are due until maturity, at which time any
               balance  owing is due.  Interest is  calculated  at the prime are
               plus 1% (9.25% at September 30, 1998)

         (iii) a secured loan covering  machinery and equipment put into service
               under a capital expenditure facility in 1995. The original amount
               outstanding was approximately $1 million.  At September 30, 1998,
               the balance  outstanding  was  approximately  $379,000.  The loan
               calls for monthly  payments of $25,000 with any balance being due
               at the maturity  date.  Interest is  calculated at the prime rate
               plus 1% (9.25% at September 30, 1998).

     Quality's obligation to pay the principal of, interest on, premium, if any,
and all other  amounts  payable on account of the Credit  Facility is secured by
substantially  all of the  assets of Quality as well as the pledge of all of the
Company's ownership interest in Quality.

     As  discussed  above,  Quality has had  substantial  difficulties  with its
transition to a new computer system. Among other consequences, such difficulties
have created  substantial  delays in submitting  required reports to LaSalle (as
well as internal reports to management).  While  management  believes that steps
that were put in place have been  sufficient  to guarantee  the integrity of its
financial statements, the lack of timely data continues to be a problem. LaSalle
is aware of the situation and has worked with the Company.  The current schedule
for  resolving  these  computer  related  issues is year end 1998.  LaSalle  has
granted a 90 day  increase  in the  revolving  facility  to $8 million to assist
Quality  with its rapid  ramp-up  of  business  pending  the  resolution  of the
Company's computer  problems.  Discussions of a new credit facility with LaSalle
are  continuing.   Notwithstanding,  until  continuing  technical  defaults  are
resolved, the maturity date of the existing credit agreements may be accelerated
by LaSalle.  There can be no assurance that the LaSalle credit  facilities  will
remain in place or be renewed as currently  contemplated.  Management  believes,
that  should  it  become   necessary  or  advisable  to  change  its   borrowing
arrangements,  there are a number of  financial  institutions  available  to the
Company. No such change is contemplated or expected.

     The Company  also  entered  into a revolving  credit  facility on March 31,
1998,  pursuant to which up to $2.0  million was made  available  to the Company
(the "USAM  Revolving  Loan").  At June 30,  1998,  an  aggregate of up to $1.05
million had been advanced to the Company under the USAM  Revolving  Loan.  Under
the terms of the USAM Revolving Loan, the Lender is not obligated to advance the
Company  more than $1 million at any time during the term of the loan.  Advances
pursuant to the USAM  Revolving  Loan bear interest at the rate of 11% per annum
and are to be repaid by the Company,  together with accrued interest thereon, at
the expiration of 2 years, unless earlier prepaid, at the option of the Company.
The USAM Revolving Loan is secured by a general security  interest in the assets
of the  Company as well as a first  security  interest  in and to the  Company's
Florida  production  facility.  Under the terms of the USAM Revolving  Loan, the
Company (i) granted five year  warrants to purchase up to 210,000  shares of the
Company's  Common  Stock,  exercisable  after  March 31, 1999 and (ii) agreed to
grant additional  warrants to purchase up to an aggregate of 210,000  additional
shares of the Company's  Common Stock in the event that funds advanced under the
USAM Revolving Loan remain outstanding, commencing March 31, 1999 and continuing
at each three (3) month anniversary thereafter until December 31, 1999, to grant
to the lender at each such  three  month  anniversary  an  additional  five year
warrants  for the  purchase  of 52,500  shares of the  Company's  Common  Stock,
exercisable at the time of such granting.  Prepayment by the Company will result
in a reduction  of the total  aggregate  warrants to be granted by the  Company.
Such warrants  shall be exercisable at an exercise price equal to eighty percent
(80%) of the average  closing  sales  price for the Common  Stock for the twenty
(20) trading days preceding  March 31, 1999 or the granting  date,  whichever is
later.  The  Company  has also  agreed  to grant to the  lender  or its  assigns
"piggyback"  registration  rights  with  respect to the shares  underlying  such
warrants.

     In addition to the Credit Facility and the USAM Revolving Loan, the Company
obtained  additional  financing  during the second  quarter of 1998  through the
sale,  on  June  30,  1998,  of 8%  Redeemable  Convertible  Debentures  (each a
"Debenture"),  in the aggregate  principal  amount of $2,250,000,  in accordance
with,  and in  reliance  upon  the  exemption  from  registration  afforded  by,
Regulation S ("Regulation  S") promulgated  under the Securities Act of 1933, as
amended (the "Act").  The  Debentures  represent  unsecured  obligations  of the
Company  and must be  converted  into shares  (the  "Conversion  Shares") of the
Company's  Common Stock at maturity  date  (December  31, 2000) unless they have
been

                                      -12-


<PAGE>


converted  earlier,  at the option of the holder.  The  conversion  price of the
Debentures  will be equal to 80% of the average  closing bid price of the shares
of Common Stock as quoted on the Nasdaq SmallCap Market for the five (5) trading
days  immediately   preceding  the  date  of  conversion.   Notwithstanding  the
foregoing,  the Company is not obligated to issue more than 3,144,900 Conversion
Shares (the "Maximum Conversion Share Allotment").  The Company has also agreed,
at its expense,  to (x) file with the Securities and Exchange Commission ("SEC")
on or before August 29, 1998, a registration  statement covering the issuance by
the Company of the Conversion  Shares and (y) use its reasonable best efforts to
cause such registration statement to be declared effective under the Act as soon
as possible  thereafter.  Through November 14,1998 the Company has yet to file a
registration  statement  but  intends so to do  shortly  after the filing of the
September 30, 1998 10-QSB.

     The  Debentures  bear interest at 8% per annum  (subject to increase  under
certain circumstances), payable upon conversion or redemption of the Debentures,
in cash or shares of Common  Stock,  at the option of the Company.  The interest
rate will increase to 20% per annum for the period  commencing  January 31, 1999
in the  event  that  the  underlying  Conversion  Shares  are not  covered  by a
registration  statement  filed  with  the  SEC.  It is  not  expected  that  the
Conversion  Shares will be able to be  registered  with the SEC in the remaining
time frame before  January 31, 1999. At such time as the  underlying  shares are
tradable,  without  regard to  conversion,  the rate shall  revert to the 8% per
annum. Further, if upon conversion of the Debentures the Company would otherwise
issue  shares  of  Common  Stock  in  excess  of the  Maximum  Conversion  Share
Allotment,  the  interest  rate  on the  Debentures  will,  effective  as of the
issuance of the Maximum  Conversion Share  Allotment,  increase to 25% per annum
with respect to the  unconverted  Debentures.  The Company has agreed that if it
has not either retired the remaining Debentures with accrued but unpaid interest
within ten (10) days of the issuance of the Maximum  Conversion  Share Allotment
or  issued  a proxy  statement  soliciting  stockholder  authorization  to issue
additional  shares in lieu of such cash redemption of the remaining  Debentures,
the Company  would pay a penalty  equal to the  difference  between the interest
rate paid since inception and 25% on those Debentures  which remain  outstanding
after the issuance of the Maximum  Share  Allotment.  Such penalty  shall not be
applicable if the Company issues such proxy as contemplated.

     During the quarter ended  September  30, 1998,  the Company's two principal
market makers ceased doing  business.  This has resulted in the Company's  stock
price falling to levels  severely below book value.  At such levels,  management
does not believe  that the Company can raise funds on an equity basis upon terms
that are reasonable and not significantly  below market prices. 

Impact of the Year 2000

     In 1997,  as part of a general  improvement  to  Company  reporting,  a new
manufacturing  and financial  software  package was  purchased.  As part of that
general upgrade,  the Company moved from an IBM 36 advanced to an IBM AS400. The
new system,  which fully contemplates the computer related problems with the new
millennium,  continues to be in the final stages of testing in the Tappahannock,
Virginia facility.  The Company's new system  accommodates  remote locations and
the Sanford, Florida facility is expected to be placed on-line early next year.

     The  Company,  in assessing  the  readiness  of third party  suppliers  and
customers,  has  concentrated on alternative  back-up  procedures to minimize or
eliminate any adverse effect on the Company's business in the event customers or
suppliers  systems  have a Year 2000  problem.  As at September  30,  1998,  the
Company believes it has set sufficient  back-up systems in place to insulate its
business from a Year 2000 problem.  Nevertheless,  although the Company does not
expect  significant  costs or disruption in  operations  from its  customers' or
suppliers'  inability  to achieve  Year 2000  compliance,  the  Company  can not
guaranty customer or supplier performance.  Accordingly,  it cannot predict what
effect noncompliance might have. While the Company has a substantial  investment
in the new computer and software,  such costs were incurred as part of a general
system upgrade and not in response to a potential Year 2000 problem. The Company
estimates that costs incurred in investigating and correcting any potential Year
2000 problem have been and will continue to be immaterial.


                                      -13-

<PAGE>


PART II: OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

     On August 21, 1998, an eight count complaint,  entitled Al Dulisse, Bernard
Bard, Michael Scicchitano and Barry Schwartz vs. U.S. Automotive  Manufacturing,
Inc., f/k/a R.T.  Industries,  Inc., a Delaware  Corporation (Case No. 98-007490
AN),  was  filed in the  Circuit  Court of the  Fifteenth  Judicial  Circuit  of
Florida,  in and for Palm Bach County (the  "Complaint").  The Complaint alleges
that the Company failed to recognize certain stock options purportedly exercised
by each  plaintiff  under  alleged  stock option  agreements  with the Company's
predecessor,  R.T. Industries,  Inc. The Complaint contains a breach of contract
claim and an unpaid-wages claim for each of the four plaintiffs. On November 12,
1998, the Court heard argument on the Company's Motion to Dismiss With Prejudice
Counts II, IV, VI and VIII of the  Complaint and to Strike  Certain  Allegations
from Counts I, III, V, and VII of the  Complaint.  The Court  announced  that it
would enter an Order dismissing with prejudice all of the  unpaid-wages  claims,
and that the case would  proceed  solely on the breach of contract  claims.  The
Company's  Answer and Affirmative  Defenses as to the remaining counts is due on
December 14,  1998.  No discovery  has been  conducted to date.  In light of the
court's November 12th decision, management believes that the allegations are not
of a material nature.

ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS

     On September 30, 1998,  the Company issued to lender five (5) year warrants
to  purchase  an  aggregate  of 105,000  shares of the  Company's  common  stock
pursuant to the USAM  Revolving  Loan,  which warrants are  unexercisable  after
March 31, 1999 at an exercise price equal to eighty percent (80%) of the average
closing  sale  price of the  Common  Stock  for the  twenty  (20)  trading  days
preceding  March 31,  1999.  At  November  13,  1998,  warrants  to  purchase an
aggregate  of 210,000  shares of Common  Stock had been  issued to the lender in
accordance with the USAM Revolving Loan.

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

     On July 20, 1998, a final vote was taken with respect to the  authorization
of an amendment to the Company's Certificate of Incorporation to provide for the
issuance of a class of preferred  stock,  which final vote had been adjourned at
the Company's  Annual Meeting of  stockholders on June 30, 1998. The proposal to
amend the  Certificate  of  Incorporation  of the Company was not  approved  for
failure to obtain the requisite vote of the voting stockholders.  The votes cast
by stockholders was as follows:

    Votes Cast        Votes Cast
       "For"           "Against"       Abstentions        Broker Non-Votes
    ----------         ---------       -----------        ----------------

     4,278,173          871,610          68,920             8,336,938


ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

          Exhibit 27 Financial Data Schedule

     (b)  Form 8-K

     The Company filed a Report on Form 8-K with the Commission on July 29, 1998
with respect to its offering of  convertible  debentures  pursuant to Regulation
promulgated under the Securities Act of 1933, as amended.



                                      -14-


<PAGE>


                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


Dated: November 14, 1998


                                        U.S. AUTOMOTIVE MANUFACTURING, INC.


                                        By: /s/ John W. Kohut  
                                            ------------------------------------
                                                John W. Kohut,
                                                Chairman of the Board
                                                and Principal Financial Officer
                                                (duly authorized officer)


                                      -15-