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

                              --------------------

                                    FORM 10-Q

            [X] Quarterly Report Pursuant to Section 13 or 15(d) of
                       The Securities Exchange Act of 1934

                For the quarterly period ended: December 31, 1998
                                       or

            [ ] Transition Report Pursuant to Section 13 or 15(d) of
                       The Securities Exchange Act of 1934

                           Commission File No. 1-11474

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                              --------------------

                            BREED TECHNOLOGIES, INC.
               (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

                               Delaware 22-2767118
         (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)

                             5300 Old Tampa Highway
                             Lakeland, Florida 33811
              (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

                                 (941) 668-6000
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

                              --------------------

         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 __.

         As of February 15, 1999,  36,849,160 shares of the registrant's  common
stock, par value $.01 per share, were outstanding.


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 -------------------------------------------------------------------------------



<PAGE>









                                      INDEX


PART I.           FINANCIAL INFORMATION                                 PAGE


ITEM 1.  FINANCIAL STATEMENTS

           Consolidated Condensed Balance Sheets - December 31, 1998
               (Unaudited)and June 30, 1998 ...........................   1

           Consolidated Condensed Statements of Operations (Unaudited)
               Three and six months ended December 31, 1998 and 1997...   3

           Consolidated Condensed Statements of Cash Flows (Unaudited)
               Six months ended December 31, 1998 and 1997.............   4

           Notes to Consolidated Condensed Financial Statements
               (Unaudited) ............................................   5

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATIONS .......................  19



PART II.  OTHER INFORMATION


ITEM 4. Submission of Matters to a Vote of Security Holders............  29

ITEM 6. Exhibits and Reports on Form 8-K ..............................  29

SIGNATURES ............................................................  30




                                        i

<PAGE>




                         PART I - FINANCIAL INFORMATION


ITEM 1.           FINANCIAL STATEMENTS

<TABLE>

BREED TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
IN MILLIONS, EXCEPT FOR SHARE DATA

<CAPTION>
                                                 December 31,         June 30,
                                                    1998               1998
                                              -----------------   --------------
                                             (Unaudited)
<S>     <C>    <C>    <C>    <C>    <C>    <C>
ASSETS
Current Assets:
   Cash and cash equivalents                    $     33.0          $      44.4
   Accounts receivable, principally trade            284.8                275.3
   Inventories:
     Raw materials                                    64.1                 75.0
     Work in process                                  26.3                 18.2
     Finished goods                                   26.9                 15.9
                                                ------------        ------------
         Total Inventories                           117.3                109.1
                                                ------------        ------------
   Income tax receivable                               3.3                 64.6
   Prepaid expenses and other current assets          35.3                 27.7
                                                ------------        ------------

         Total Current Assets                        473.7                521.1

Property, plant and equipment, net                   369.6                365.2
Intangibles, net                                     687.0                692.1
Net assets held for sale                              60.1                 29.0
Other assets                                          48.9                 42.5
                                                ------------        ------------
          Total Assets                           $ 1,639.3          $   1,649.9
                                                ============        ============

See Notes to Consolidated Condensed Financial Statements.
</TABLE>

                                        1

<PAGE>


<TABLE>
BREED TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
IN MILLIONS, EXCEPT FOR SHARE DATA

<CAPTION>
                                                            December 31,            June 30,
                                                                1998                  1998
                                                          -----------------      ---------------
                                                           (Unaudited)
<S>     <C>    <C>    <C>    <C>    <C>    <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
   Notes payable and current portion of long-term
    debt (Note 3)                                               $  555.0             $    46.9
   Accounts payable                                                297.2                 254.9
   Accrued expenses                                                221.5                 233.2
                                                              ------------         ------------
         Total Current Liabilities                               1,073.7                 535.0

Long-term debt (Note 3)                                            352.2                 851.1
Other long-term liabilities                                         25.0                  25.6
                                                              ------------          ------------
         Total Liabilities                                       1,450.9               1,411.7
                                                              ------------          ------------

Company obligated mandatorily redeemable convertible
   preferred securities                                            250.0                 250.0

Stockholders' Deficit:
   Common stock, par value $0.01, authorized 75,000,000 shares, 
     issued and outstanding 36,848,993 and 36,850,261 shares at
     December 31, 1998 and June 30, 1998, respectively               0.4                   0.4
   Series A Preference Stock par value $0.01, authorized 
     5,000,000shares, issued and outstanding 1 share at 
     December 31, 1998 and June 30, 1998                              --                    --
   Additional paid-in capital                                      197.6                 197.6
   Warrants                                                          1.9                   1.9
   Retained deficit                                               (246.9)               (184.0)
   Accumulated other comprehensive loss (Notes 4 and 5)            (14.5)                (27.4)
   Unearned compensation                                            (0.1)                 (0.3)
                                                               ------------          ------------
     Total Stockholders' Deficit                                   (61.6)                (11.8)
                                                               ------------          ------------
         Total Liabilities and Stockholders' Deficit           $ 1,639.3             $ 1,649.9
                                                               ============          ============


See Notes to Consolidated Condensed Financial Statements.
</TABLE>


                                        2

<PAGE>


<TABLE>
BREED TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
IN MILLIONS, EXCEPT PER SHARE DATA


<CAPTION>
                                                               Three Months Ended           Six Months Ended
                                                                  December 31,                December 31,
                                                             -----------------------    ------------------------
                                                                1998         1997          1998         1997
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                                                                         
Net sales                                                   $   396.2    $   340.7     $   735.2     $   535.9
Cost of sales                                                   349.1        312.5         640.8         479.4
                                                            ----------   ----------    ----------   -----------
Gross profit                                                     47.1         28.2          94.4          56.5
                                                           ----------   ----------    ----------   -----------
Operating expenses:
   Selling, general and administrative expenses                  23.3         21.3          44.2          37.5
   Research, development and engineering expenses                25.7         18.6          49.4          27.5
   Repositioning and impairment charges                                      259.5                       259.5
   In-process research and development expenses                               77.5                        77.5
   Amortization of intangibles                                    6.0          3.9          11.8           5.9
                                                           ----------   ----------    ----------   -----------
     Total operating expenses                                    55.0        380.8         105.4         407.9
                                                           ----------   ----------    ----------   -----------
         Operating loss                                          (7.9)      (352.6)        (11.0)       (351.4)
Interest expense                                                 20.6         27.1          42.7          35.4
Other income (expense), net                                       0.4          0.4           1.3          (0.1)
                                                           ----------   ----------    ----------   -----------
    Loss before income taxes, and distributions
       on Company obligated mandatorily redeemable
       convertible preferred securities                         (28.1)      (379.3)        (52.4)       (386.9)
Income taxes (benefit) (Note 6)                                   1.8        (46.5)          1.8         (49.9)
Distributions on Company obligated mandatorily
    redeemable convertible preferred securities                   4.5          1.4           8.7           1.4
                                                           ----------   ----------    ----------   -----------
Loss before extraordinary item                                  (34.4)      (334.2)        (62.9)       (338.4)
Extraordinary loss net of tax benefit of $1.4 million              --          0.7            --           0.7
                                                           ----------   ----------    ----------   -----------
         Net loss                                          $    (34.4)   $  (334.9)   $    (62.9)    $  (339.1)
                                                           ==========    ==========   ==========    ===========

Loss per share (Note 7):
Basic loss per share
     Loss before extraordinary item                        $    (0.93)   $  (10.54)   $    (1.71)    $  (10.68)
     Extraordinary item                                            --        (0.02)           --         (0.02)
                                                            ----------    ----------   ----------    -----------
               Net loss                                    $    (0.93)   $  (10.56)   $    (1.71)    $  (10.70)
                                                            ==========    ==========   ==========    ===========
Diluted loss per share
     Loss before extraordinary item                        $    (0.93)   $  (10.54)   $    (1.71)    $  (10.68)
     Extraordinary item                                            --        (0.02)           --         (0.02)
                                                            ----------    ----------   ----------    -----------
               Net loss                                    $    (0.93)   $  (10.56)   $    (1.71)    $  (10.70)
                                                            ==========    ==========   ==========   ===========
Shares used for computation:
     Basic                                                      36.849       31.705        36.849        31.694
     Diluted                                                    36.849       31.705        36.849        31.694

See Notes to Consolidated Condensed Financial Statements.
</TABLE>

                                        3

<PAGE>


<TABLE>
BREED TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
IN MILLIONS

<CAPTION>
                                                                           Six Months Ended December 31,
                                                                        -----------------------------------
                                                                            1998                   1997
                                                                        ------------           ------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>
Cash Flows from Operating Activities:
   Net loss                                                             $    (62.9)            $    (339.1)
Adjustments to reconcile net loss to net cash provided by
  (used in) operating activities:
   Depreciation and amortization                                              37.4                    26.6
   Changes in working capital items and other                                 32.8                   291.5
                                                                        ------------           ------------
         Net cash provided by (used in) operating activities                   7.3                   (21.0)
                                                                        ------------           ------------
Cash Flows from Investing Activities:
   Cost of acquisitions and capital expenditures                             (32.8)                 (733.4)
   Proceeds from sale of assets                                                3.0                     2.6
                                                                        ------------           ------------
         Net cash used in investing activities                               (29.8)                 (730.8)
                                                                        ------------           ------------
Cash Flows from Financing Activities:
    Proceeds from debt                                                       265.5                   860.8
    Proceeds from Preference Stock issuances                                                         554.0
    Repayment of debt                                                       (256.3)                 (433.3)
    Redemption of Preference Stock                                                                  (210.0)
    Cash dividends paid                                                                               (2.2)
    Proceeds from common stock issued                                                                  0.7
                                                                        ------------           ------------
         Net cash provided by financing activities                             9.2                   770.0
                                                                        ------------           ------------
Effect of exchange rate changes on cash                                        1.9                    (4.6)
                                                                        ------------           ------------
Net (decrease) increase in cash and cash equivalents                         (11.4)                   13.6
Cash and cash equivalents at beginning of period                              44.4                    18.7
                                                                        ------------           ------------
Cash and cash equivalents at end of period                              $     33.0             $      32.3
                                                                        ============           ============



See Notes to Consolidated Condensed Financial Statements.
</TABLE>

















                                        4

<PAGE>



              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

GENERAL - The accompanying unaudited consolidated condensed financial statements
of Breed  Technologies,  Inc.  (the  "Company" or "Breed") have been prepared in
accordance with generally accepted  accounting  principles for interim financial
information and with the  instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly,  they do not include all of the information and notes required
by generally accepted accounting  principles for complete financial  statements.
In the opinion of management,  all adjustments  (consisting of normal  recurring
accruals)  considered  necessary  for a fair  presentation  have been  included.
Operating  results for the three and six months ended  December 31, 1998 are not
necessarily  indicative of results that may be expected for the year ending June
30, 1999. The consolidated  financial  statements  include the accounts of Breed
and all majority owned subsidiaries.  All significant  intercompany accounts and
transactions  have  been  eliminated.  For  further  information,  refer  to the
consolidated  financial  statements and notes thereto  included in the Company's
Annual Report on Form 10-K/A for the year ended June 30, 1998.

REVENUE  RECOGNITION AND SALES  COMMITMENTS- The Company recognizes revenue when
title and risk of loss  transfers  to its  customers,  which is  generally  upon
shipment of products to customers.  The company generally enters into agreements
with  its  customers  at the  beginning  of a given  vehicle's  life to  produce
products.  Once such agreements are entered into by the Company,  fulfillment of
the  customers'  purchasing  requirements  is generally  the  obligation  of the
Company for the entire  production  life of the  vehicle  (which  averages  five
years).  In certain  instances,  the Company  may be  committed  under  existing
agreements to supply  products to its  customers at selling  prices that are not
sufficient  to  cover  the  direct  cost  to  produce  such  products.  In  such
situations,  the Company records a liability for the estimated  future amount of
such losses under such  agreements to the earliest date on which the Company can
terminate such agreements.  Such losses are recognized at the time that the loss
is  probable  and  reasonably   estimable.   Losses  are  estimated  based  upon
information  available at the time of the estimate,  including future production
volume  estimates,  length of the program and selling price and production  cost
information.

NOTE 2 - REPOSITIONING AND IMPAIRMENT CHARGES

During  the  quarter  ended  December  31,  1997,   the  Company   formulated  a
repositioning   program   which  is  intended  to  (i)  enhance  the   Company's
competitiveness  and productivity,  (ii) reduce costs and increase asset control
and (iii)  improve  processes  and systems (the  "Repositioning  Program").  The
Company expects that the Repositioning  Program will be substantially  completed
by March 31, 1999.

During the six months ended December 31, 1998, the  repositioning and impairment
accrual was reduced by $5.7 million as a result of cash  charges.  The following
table  sets  forth the  details  and the  cumulative  activity  relating  to the
repositioning and impairment charge as of December 31, 1998:
<TABLE>

<CAPTION>
                                           Accrual                                        Accrual
                                          Balance at                                     Balance at
                                           June 30,         Cash          Non-Cash        December
IN MILLIONS                                  1998        Reductions      Reductions       31, 1998
--------------------------------------- -------------- --------------  -------------- ----------------
<S>                                       <C>            <C>             <C>             <C>          
Headcount reductions                      $     15.9    $      2.3      $       --      $      13.6
Facility consolidations                         18.9           3.4              --             15.5
--------------------------------------- -------------- --------------  -------------- ----------------
     Total                                $     34.8    $      5.7      $       --      $      29.1
======================================= ============== ==============  ============== ================
</TABLE>
                                       5
<PAGE>

NOTE 3 - DEBT

<TABLE>
A summary of debt follows:

<CAPTION>
                                                                                December 31,             June 30,
                                                                                  1998                     1998
                                                                              -----------------      -----------------
<S>                      <C>        <C>                <C> <C>      
Term Loan A, interest at 7.375% and 7.825% at December 31, 1998, and
    June 30, 1998, respectively, installments due 1999 through 2004             $     297.6            $     309.2
Term Loan B, interest at 7.625%and 8.075% at December 31, 1998, and
    June 30, 1998, respectively, installments due 2005 through 2006                   190.4                  197.8
Revolver, interest at 7.555% at December 31, 1998                                      40.0
Senior Subordinated Notes, interest at 9.50% and 9.25% at December 31,
     1998 and June 30, 1998 respectively, due April 15, 2008                          330.0                  330.0
Foreign short-term lines of credit, weighted average
     interest rate of 5.67%, installments due various                                  20.9                   30.4
Mortgages and equipment financing loans                                                28.3                   30.6
                                                                              -----------------      -----------------

Total debt                                                                            907.2                  898.0
                                                                              -----------------      -----------------
Less current maturities                                                               555.0                   46.9
                                                                              -----------------      -----------------
Total long-term debt                                                            $     352.2            $     851.1
                                                                              =================      =================
</TABLE>

On April  28,  1998,  the  Company  entered  into a new  $675.0  million  credit
facility.  At December 31, 1998,  the Company had an aggregate of $528.0 million
of borrowings  outstanding  under the credit facility,  which bore interest at a
weighted  average  rate of 7.48%  per  annum  at such  date,  and had  aggregate
borrowing  availability  thereunder of $54.4 million.  Because the Company would
have been in violation of the net worth covenant in the loan agreement  relating
to the credit facility as of December 30, 1998, the Company obtained a waiver of
this covenant from the lenders that was effective from December 30, 1998 through
February  12,  1999 (the "First  Waiver").  Pursuant  to the First  Waiver,  the
maximum borrowing  availability under the company's revolving line of credit was
decreased  from $150.0 million  (including  letters of credit) to $110.0 million
(including letters of credit).

On February 11, 1999, the Company obtained a new waiver (the "Second Waiver") of
such net worth  covenant as well as an event of default  that existed due to the
Company's  failure to register  certain  securities  as required  under  certain
agreements to which it is a party.  The Second Waiver is effective from February
13, 1999 through  March 30, 1999.  In  connection  with the Second  Waiver,  the
maximum borrowing  availability under the revolving line of credit was increased
to $125.0 million  (including  letters of credit).  As of February 15, 1999, the
Company had an aggregate of $570.9 million of borrowings  outstanding  under the
credit facility (including $82.9 million of revolver borrowings).  Additionally,
$15.6 million of letters of credit were outstanding  under the revolving line of
credit leaving an aggregate borrowing availability  thereunder of $26.5 million.
The Company paid the lenders fees  aggregating  $1.3 million in connection  with
the Second  Waiver.  The Company is not  currently in violation of any covenants
contained in the loan agreement.

The Company is in the process of  negotiating an amendment to the loan agreement
relating to the net worth  covenant and the existing event of default as well as
certain other financial covenants.  The Company is not currently in violation of
these  other  financial  covenants  but  anticipates  that,  to the extent  such
covenants are not amended,  it will be in violation on March 31, 1999 of the two
covenants  presently  waived  and it  anticipates  violation  of  certain  other
financial covenants by June 30, 1999. The Company anticipates that

                                        6

<PAGE>



in  connection  with  any  such  amendment,  borrowing  availability  under  the
revolving  line of credit  will be  restored  to $150.0  million.  Although  the
Company believes that it will be able to negotiate the necessary amendments with
its  lenders,  there  can be no  assurance  that it  will be able to do so.  Any
amendment  to the loan  agreement  must be approved by the lenders  holding more
than  50% of  the  commitments  and  borrowings  outstanding  under  the  credit
facility.  In the  absence  of a  further  waiver  or an  amendment  to the loan
agreement,  after March 30, 1999,  the lenders would be entitled to exercise all
of  their  rights  under  the  loan  agreement  including,  without  limitation,
declaring all amounts outstanding under the credit facility  immediately due and
payable and/or  exercising their rights with respect to the collateral  securing
the credit facility which consists of, among other things,  substantially all of
the real and personal property of the Company and its subsidiaries.

If the  Company is unable to obtain a further  waiver or  amendment  to the loan
agreement, the Company may not have sufficient cash to meet its working capital,
debt service and capital expenditure needs beyond March 30, 1999, in which case,
the Company may be required to obtain financing from other sources. There can be
no assurance  that such  financing  will be available or, if available,  that it
will be on terms  satisfactory  to the Company.  Consequently,  the inability to
obtain any such waiver, amendment or alternative financing would have a material
adverse effect on the Company's financial condition and results of operations.

Until such time as the credit  facility  is  amended as  discussed  above or all
amounts  outstanding  under the credit  facility are repaid in full,  borrowings
outstanding  under the credit facility will be classified as a current liability
on the Company's consolidated balance sheet.

On April 28, 1998,  the Company  issued and sold an aggregate of $330 million of
its  9.25%  Senior  Subordinated  Notes  due 2008  (the  "Notes")  in a  private
transaction  under Rule 144A under the  Securities  Act of 1933, as amended (the
"Securities Act") (the "Notes Offering"). In connection with the Notes Offering,
the Company entered into a registration rights agreement (the "Notes Agreement")
pursuant  to which it agreed to offer to  exchange  the Notes for  substantially
identical  9.25%  Senior  Subordinated  Notes  due  2008  registered  under  the
Securities  Act (the "Exchange  Offer").  Pursuant to the Notes  Agreement,  the
Company was required to complete  the Exchange  Offer by the date 180 days after
April  28,  1998 (the  "Closing  Date").  The  Company  filed  the  registration
statement  relating to the Exchange Offer on June 24, 1998. Because the Exchange
Offer  had not been  consummated  on or prior  to the  date 180 days  after  the
Closing Date as required under the Notes  Agreement,  the interest rate borne by
the Notes  increased  pursuant to the Notes  Agreement by 0.25% on the 181st day
after the Closing  Date.  The interest rate has and will continue to increase by
0.25% on the 1st day of each subsequent 90-day period;  provided,  however, that
in no event will the interest  rate borne by the Notes be increased by more than
1.5%. The Notes currently bear interest at a rate of 9.75% per annum.

On November 25, 1997, the Company sold $257.7  million of its 6.50%  Convertible
Subordinated  Debentures due 2027 (the "Convertible  Debentures") to BTI Capital
Trust, which,  concurrently therewith, sold $250.0 million aggregate liquidation
amount of its 6.50%  Convertible  Trust  Preferred  Securities  (the  "Preferred
Securities") (which are fully and unconditionally  guaranteed by the Company) in
a private  transaction  under Rule 144A under the Securities Act (the "Preferred
Securities Offering"). In connection with the Preferred Securities Offering, the
Company entered into a registration rights agreement (the "Preferred  Securities
Agreement") pursuant to which it agreed to register (and cause BTI Capital Trust
to  register),  among other things,  the  Convertible  Debentures  and Preferred
Securities.   Pursuant  to  the  Preferred  Securities   Agreement,   the  Shelf
Registration  Statement (as defined  therein) was required to be effective on or
prior to June 17, 1998.  The Company filed the Shelf  Registration  Statement on
March 18,  1998.  Because  the Shelf  Registration  Statement  was not  declared
effective by June 17, 1998, the interest rate on the Convertible  Debentures and
the distribution rate applicable to the Preferred Securities increased by 0.25%,
payable in arrears,  with the first quarterly  payment due on the first interest
or distribution date following June 17, 1998.

The Shelf  Registration  Statement  was not declared  effective and the Exchange

                                        7

<PAGE>



Offer was not completed on or prior to the required dates because the Securities
and Exchange  Commission was reviewing certain periodic reports previously filed
by the Company.  The  commission  has now  completed its review and the interest
rate borne by the Notes and the Convertible Debentures and the distribution rate
in respect of the Preferred  Securities will be reduced to the original  amounts
on the date the Shelf  Registration  Statement  is  declared  effective  and the
Exchange  Offer is  completed,  as the case may be, which the Company  currently
expects will be prior to April 15, 1999.

NOTE 4 -COMPREHENSIVE INCOME

Effective July 1, 1998, the Company  adopted  Statement of Financial  Accounting
Standards No. 130, "Reporting  Comprehensive  Income" ("SFAS No. 130"). SFAS No.
130  establishes new rules for the reporting and display of  comprehensive  loss
and its  components.  The  adoption  of this  Statement  requires  that  foreign
currency translation  adjustments be included in other comprehensive loss, which
prior to adoption were reported separately in stockholders'  equity. There is no
tax effect because the Company intends to reinvest  foreign  earnings in foreign
business  operations.  Prior year financial statements have been reclassified to
conform to the requirements of SFAS No. 130.
<TABLE>
<CAPTION>

                                                                Six months ended December 31,
                                                           --------------------------------------
                                                                1998                   1997
                                                           --------------         --------------
<S>                                                         <C>                         <C>         
Net loss                                                    $      (62.9)           $    (339.1)
Foreign currency translation adjustment                              12.9                  (5.4)
                                                           --------------         --------------
Comprehensive loss                                          $      (50.0)           $    (344.5)
                                                           ==============         ==============
</TABLE>

NOTE 5 - FOREIGN CURRENCY TRANSLATIONS

The Company  translates  foreign  currencies into U.S. dollars using quarter-end
exchange rates for foreign assets and liabilities and weighted average rates for
foreign  income and  expenses.  Translation  gains and losses  arising  from the
conversion of the foreign balance sheets and income statements into U.S. dollars
are  reflected  as a separate  component of  comprehensive  loss and included in
other comprehensive loss in accumulated  stockholders'  deficit. With respect to
operations in Mexico, the functional  currency is the U.S. dollar, and any gains
or losses from  translations  are  included  directly in income.  During the six
months ended December 31, 1998 major European currencies  strengthened  relative
to the U.S. dollar.  As a result,  the conversion of foreign balance sheets into
U.S. dollars improved the foreign currency  translation  adjustment reported for
such six month  period and  increased  the  related  assets and  liabilities  as
measured in U.S.  dollars.  The change in the U.S.  dollar during the six months
ended  December  31,  1998 did not have a  material  impact  on the  results  of
operations.

NOTE 6 -INCOME TAXES

During the six months ended December 31, 1998, the Company  recorded foreign tax
expense of $2.3 million  which was partially  offset by a $0.5 million  domestic
benefit  for a tax  credit.  No other tax  benefit  was  recognized  for  either
domestic or foreign  purposes  due to the  provisions  of statement of financial
accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109). SFAS
No. 109  requires  a  valuation  allowance  to reduce  the  deferred  tax assets
reported  if,  based on the weight of the  evidence,  it is more likely than not
that some portion or all of the  deferred  tax assets will not be realized.  The
need for a valuation allowance was addressed separately for domestic and foreign
purposes.  For domestic  purposes,  the Company is in a cumulative loss position
and pursuant to SFAS No. 109, a valuation  allowance was recorded by the Company
to offset the portion of the domestic  deferred tax asset which,  upon reversal,
could not be carried  back  against  prior year's  taxable  income.  A valuation
allowance has been  recognized to reduce to zero,  foreign  deferred tax assets,
primarily related to net operating loss carry-forwards in Finland, Spain and

                                        8

<PAGE>



the U.K.  and  restructuring  charges  in Italy.  Income  taxes  will be paid in
foreign  jurisdictions  in which there is no ability to offset  income earned in
such jurisdictions against tax loss carry-forwards.

NOTE 7 - LOSS PER SHARE

The following  table sets forth the computation of the numerator and denominator
of the basic and diluted loss per share calculations:
<TABLE>

<CAPTION>
                                                             Three Months Ended             Six Months Ended
                                                                December 31,                  December 31,
                                                        ----------------------------   ---------------------------
                                                            1998            1997          1998           1997
                                                            
                                                               (AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
<S>     <C>    <C>    <C>    <C>    <C>    <C>
BASIC LOSS

     Loss before extraordinary item                     $   (34.4)       $  (334.2)     $  (62.9)     $  (338.4)
     Extraordinary item, net                                   --             (0.7)           --           (0.7)
                                                        -------------   ------------   -----------   -------------
     Loss applicable to common stock                    $   (34.4)       $  (334.9)     $  (62.9)     $  (339.1)
                                                        =============   ============   ===========   =============

Weighted average common shares outstanding                 36.849           31.705        36.849         31.694
                                                        =============   ============   ===========   =============

BASIC LOSS
     Loss before extraordinary item                     $   (0.93)      $   (10.54)     $  (1.71)     $  (10.68)
     Extraordinary item                                        --            (0.02)           --          (0.02)
                                                        -------------   ------------   -----------   -------------
               Net loss                                 $   (0.93)      $   (10.56)     $  (1.71)     $  (10.70)
                                                        =============   ============   ===========   =============

DILUTED LOSS PER SHARE
     Loss before extraordinary item                     $   (34.4)      $   (334.2)     $  (62.9)     $  (338.4)
     Extraordinary item, net                                   --             (0.7)           --           (0.7)
                                                        -------------   ------------   -----------   -------------
     Loss applicable to common stock                    $   (34.4)      $   (334.9)     $  (62.9)     $  (339.1)
                                                        =============   ============   ===========   =============

Share computation:
     Weighted average common shares outstanding            36.849           31.705        36.849         31.694
     Effect of diluted securities:
        Assumed exercise of stock options and warrants          *                *             *              *
        Series A Preference Stock                               *                *             *              *
        Company obligated mandatorily redeemable
          convertible preferred securities                      *                *             *              *
                                                        -------------   ------------   -----------   -------------
     Weighted average common shares outstanding
       as adjusted                                         36.849           31.705        36.849         31.694
                                                        -------------   ------------   -----------   -------------

DILUTED LOSS PER SHARE
     Loss before extraordinary item                     $   (0.93)      $   (10.54)     $  (1.71)     $  (10.68)
     Extraordinary item                                        --            (0.02)           --          (0.02)
                                                        -------------   ------------   -----------   -------------
               Net loss                                 $   (0.93)      $   (10.56)     $  (1.71)     $  (10.70)
                                                        =============   ============   ===========   =============

   * ITEMS NOT ASSUMED IN THE COMPUTATION BECAUSE THEIR EFFECT IS ANTI-DILUTIVE
</TABLE>

Each Company obligated mandatorily  redeemable convertible preferred security is
convertible,  at the option of the holder,  into shares of the Company's  common
stock,  at a conversion rate of 2.1973 shares of common stock for each Preferred
Security, subject to adjustment in certain circumstances.

                                        9

<PAGE>



Options to purchase  2,453,770  shares of common stock at prices  between $6.875
and $32.25 per share  were  outstanding  as of  December  31,  1998 but were not
included in the  computation  of diluted  earnings per share  because the effect
would be anti-dilutive.

As part of the acquisition of VTI in June 1995, the Company issued to certain of
the former  stockholders  of VTI  warrants to  purchase up to 100,000  shares of
common stock  between July 1, 1998 and June 30,  2000,  at an exercise  price of
$25.75 per share.  The 100,000  shares subject to the VTI warrants have not been
included in the computation of diluted  earnings per share for the three and six
months ended December 31, 1998 because the effect would be anti-dilutive.

In connection  with the bridge loan credit  facility  entered into in connection
with the  acquisition  of the  safety  restraints  systems  business  ("SRS") of
AlliedSignal,  the  Company  issued to  NationsBank,  N.A. a warrant to purchase
250,000  shares of common  stock of the Company at an exercise  price of $23.125
per share.  The 250,000 shares subject to the NationsBank  warrant have not been
included in the computation of diluted  earnings per share for the three and six
months ended December 31, 1998 because the effect would be anti-dilutive.

NOTE 8 - BSRS JOINT VENTURE

The Company and Siemens Aktiengesallschaft  ("Siemens") completed formation of a
joint  venture,  known as BSRS  Restraint  Systems  International  GmbH & Co. KG
("BSRS"),  in June 1998.  Pursuant to the joint  venture  agreement  between the
Company and Siemens,  on June 30, 1998, the Company  transferred  various assets
relating  to the  development,  research  and  testing  of  integrated  occupant
protection  systems  having an  aggregate  value of $5.6 million (net book value
approximates  fair  value) to BSRS and  Siemens  contributed  its shares in PARS
Ruckhaltesysteme  GmbH,  which  operates  crash  test  facilities  and  develops
occupant safety systems.

NOTE 9 - FINANCIAL  INFORMATION  FOR  SUBSIDIARY  GUARANTORS  AND  NON-GUARANTOR
         SUBSIDIARIES

The Company conducts a significant portion of its business through subsidiaries.
On April 28, 1998,  the Company  issued and sold an aggregate of $330 million of
9.25% Senior Subordinated Notes due 2008 ("the Notes"). The Notes of the Company
are  guaranteed,  jointly and severally on a senior  subordinated  basis, by the
domestic  subsidiaries of the Company (the "Subsidiary  Guarantors")  other than
BTI  Capital  Trust  and  certain  domestic  subsidiaries  owned  by  a  foreign
subsidiary  of the Company  (the  "Non-Guarantor  Subsidiaries").  The Notes are
effectively  subordinated  in right of  payment  to all  indebtedness  and other
liabilities (including trade payables) of the Non-Guarantor Subsidiaries.

Presented  below are the condensed  consolidating  balance sheets as of December
31, 1998 and June 30, 1998, the condensed consolidating statements of operations
for the three and six months ended  December 31, 1998 and 1997 and the condensed
consolidating statement of cash flows for the six months ended December 31, 1998
and 1997, for the Subsidiary Guarantors, the Non-Guarantor Subsidiaries,  Parent
only and the Company consolidated.











                                       10

<PAGE>


<TABLE>
                    BREED TECHNOLOGIES, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATING BALANCE SHEET
                                DECEMBER 31, 1998
                                   (Unaudited)
                                   IN MILLIONS


<CAPTION>
                                                                           NON-
                                                        SUBSIDIARY      GUARANTOR        PARENT
                                                        GUARANTORS     SUBSIDIARIES       ONLY        ELIMINATIONS     CONSOLIDATED
                                                      --------------  ---------------  -----------  ----------------  --------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>
ASSETS
Cash and cash equivalents                              $        4.4     $      21.9      $   6.7        $        --     $      33.0
Accounts receivable, principally trade                        647.2           167.6          0.7             (530.7)          284.8
Inventories                                                    58.9            58.4           --                 --           117.3
Other current assets                                            6.4            20.0         12.2                 --            38.6
                                                      --------------  ----------------  ------------ ----------------  -------------
          Total current assets                                716.9           267.9          19.6            (530.7)          473.7
Property, plant and equipment, net                            172.7           167.9          34.6              (5.6)          369.6
Intangibles, net                                              510.3           176.7            --                --           687.0
Net assets held for sale                                         --            58.3            --               1.8            60.1
Other assets                                                   26.2             3.3       1,031.6          (1,012.2)           48.9
          Total assets                                 $    1,426.1     $     674.1      $1,085.8       $  (1,546.7)     $  1,639.3
                                                      ==============  ================  ============ ================== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
     Notes payable and current portion of 
       long-term debt                                  $         --     $      27.0      $  528.0       $        --      $    555.0

     Accounts payable                                         220.3           336.2         260.6            (519.9)          297.2
     Accrued expenses                                         138.1            38.6          53.2              (8.4)          221.5
                                                      --------------   ----------------  ------------ ----------------  ------------
          Total current liabilities                           358.4           401.8         841.8            (528.3)        1,073.7
Long-term debt                                                   --            22.2         330.0                --           352.2
Other long-term liabilities                                    12.4            12.6            --                --            25.0
                                                      --------------   ----------------  ------------ ----------------  ------------
          Total liabilities                                   370.8           436.6       1,171.8            (528.3)        1,450.9
Company obligated mandatorily redeemable convertible
  preferred securities                                           --              --         250.0                --          250.0
Stockholders' equity (deficit)                              1,055.3           237.5        (336.0)         (1,018.4)         (61.6)
                                                      --------------   ----------------  ------------ ----------------  ------------
          Total liabilities and stockholders' 
             equity (deficit)                          $    1,426.1     $     674.1      $1,085.8       $  (1,546.7)     $  1,639.3
                                                      ==============   ================  ============ ================  ============

</TABLE>







                                       11

<PAGE>



<TABLE>
                    BREED TECHNOLOGIES, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATING BALANCE SHEET
                                  JUNE 30, 1998
                                   (Unaudited)
                                   IN MILLIONS
<CAPTION>

                                                                          NON-
                                                     SUBSIDIARY       GUARANTOR        PARENT
                                                     GUARANTORS      SUBSIDIARIES       ONLY         ELIMINATIONS     CONSOLIDATED
                                                   --------------  ----------------  ------------ -----------------  ---------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>
ASSETS
Cash and cash equivalents                          $      (22.9)      $     19.0      $    48.3      $         --      $       44.4
Accounts receivable, principally trade                    138.8            135.9            0.6                --             275.3
Inventories                                                57.3             51.8             --                --             109.1
Other current assets                                      527.5             72.1           67.4            (574.7)             92.3
                                                   --------------  ----------------  -----------  ------------------  --------------
          Total current assets                            700.7            278.8          116.3            (574.7)            521.1
Property, plant and equipment, net                        203.1            129.5           32.6                --             365.2
Intangibles, net                                          431.1            257.8            3.2                --             692.1
Net assets held for sale                                     --             29.0             --                --              29.0
Other assets                                               25.0             44.4        1,015.4          (1,042.3)             42.5
          Total assets                             $    1,359.9        $   739.5      $ 1,167.5      $   (1,617.0)      $   1,649.9
                                                   ==============  ================  ============ ==================  ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
     Notes payable and current portion of 
       long-term debt                              $         --        $    35.2      $    11.7      $         --       $      46.9
     Accounts payable                                      84.9            158.9           11.1                --             254.9
     Accrued expenses                                     229.0            235.4          346.6            (577.8)            233.2
                                                   --------------  ----------------  ------------ ------------------  --------------
          Total current liabilities                       313.9            429.5          369.4            (577.8)            535.0
Long-term debt                                               --             25.8          825.3                --             851.1
Other long-term liabilities                                10.5             16.1           (1.0)               --              25.6
                                                   --------------  ----------------  ------------ ------------------  --------------
          Total liabilities                               324.4            471.4        1,193.7            (577.8)          1,411.7
Company obligated mandatorily redeemable convertible
  preferred securities                                       --               --          250.0                --             250.0
Stockholders' equity (deficit)                          1,035.5            268.1         (276.2)         (1,039.2)            (11.8)
                                                   --------------  ----------------  ------------ ------------------  --------------
          Total liabilities and stockholders' 
            equity (deficit)                       $    1,359.9        $   739.5      $ 1,167.5      $   (1,617.0)      $   1,649.9
                                                   ==============  ================  ============ ==================  ==============
</TABLE>








                                       12

<PAGE>


<TABLE>
                    BREED TECHNOLOGIES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATING STATEMENT OF OPERATION
                      THREE MONTHS ENDED DECEMBER 31, 1998
                                   (Unaudited)
                                   IN MILLIONS

<CAPTION>
                                                                           NON-
                                                        SUBSIDIARY       GUARANTOR        PARENT
                                                        GUARANTORS     SUBSIDIARIES        ONLY       ELIMINATIONS    CONSOLIDATED
                                                      --------------  ---------------  ------------  --------------- ---------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>
Net Sales                                               $     218.1     $     218.0      $    --       $    (39.9)     $      396.2
Cost of sales                                                 193.7           193.5          1.8            (39.9)            349.1
                                                      --------------  ---------------  ------------  --------------- ---------------
     Gross profit                                              24.4            24.5         (1.8)               --             47.1
                                                      --------------  ---------------  ------------  --------------- ---------------
Selling, general and administrative expenses                    3.2             9.5         10.6                --             23.3
Research, development, and engineering expenses                14.8             8.4          2.5                --             25.7
Amortization of intangibles                                     5.7             1.3         (1.0)               --              6.0
                                                      --------------  ---------------  ------------  --------------- ---------------
     Operating income (loss)                                    0.7             5.3         (13.9)              --             (7.9)
Interest expense                                                 --             1.9          18.7               --             20.6
Other income (expense), net                                    (0.9)            4.4          (2.6)            (0.5)             0.4
                                                      --------------  ---------------  ------------  --------------- ---------------
   Earnings (loss) before income taxes, and distributions
       on Company obligated mandatorily redeemable
       convertible preferred securities                        (0.2)            7.8         (35.2)            (0.5)           (28.1)
Income taxes (benefit)                                         (6.8)            1.8           6.8               --              1.8
Distributions on Company obligated mandatorily
  redeemable convertible preferred securities                    --             --            4.5               --              4.5
                                                      --------------  ---------------  ------------  --------------- ---------------
     Net earnings (loss)                              $         6.6      $      6.0      $  (46.5)    $       (0.5)    $      (34.4)
                                                      ==============  ===============  ============  =============== ===============
</TABLE>





















                                       13

<PAGE>


<TABLE>
                    BREED TECHNOLOGIES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATING STATEMENT OF OPERATION
                       SIX MONTHS ENDED DECEMBER 31, 1998
                                   (Unaudited)
                                   IN MILLIONS

<CAPTION>
                                                                        NON-
                                                    SUBSIDIARY        GUARANTOR       PARENT
                                                    GUARANTORS      SUBSIDIARIES       ONLY        ELIMINATIONS        CONSOLIDATED
                                                  --------------   ---------------  ------------  ---------------   ----------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>
Net Sales                                          $    403.3        $    405.6      $     --      $    (73.7)        $       735.2
Cost of sales                                           353.9             356.1           4.5           (73.7)                640.8
                                                  --------------   ---------------  ------------  ---------------   ----------------
     Gross profit                                        49.4              49.5          (4.5)             --                  94.4
                                                  --------------   ---------------  ------------  ---------------   ----------------
Selling, general and administrative expenses              9.0              17.9          17.3              --                  44.2
Research, development, and engineering expenses          30.2              15.5           3.7              --                  49.4
Amortization of intangibles                              10.6               2.1          (0.9)             --                  11.8
                                                  --------------   ---------------  ------------  ---------------   ----------------
     Operating income (loss)                             (0.4)             14.0         (24.6)             --                 (11.0)
Interest expense                                           --               4.8          37.9              --                  42.7
Other income (expense), net                               0.3               4.9          (3.4)           (0.5)                  1.3
                                                  --------------   ---------------  ------------  ---------------   ----------------
   Earnings (loss) before income taxes, and distributions
       on Company obligated mandatorily redeemable
       convertible preferred securities                  (0.1)             14.1         (65.9)           (0.5)                (52.4)
Income taxes (benefit)                                   (6.8)              2.4           6.2              --                   1.8
Distributions on Company obligated mandatorily
  redeemable convertible preferred securities              --                --           8.7              --                   8.7
                                                  --------------   ---------------  ------------   ---------------  ----------------
     Net earnings (loss)                           $      6.7       $      11.7      $  (80.8)       $   (0.5)        $       (62.9)
                                                  ==============   ===============  ============   ===============  ================

</TABLE>



















                                       14

<PAGE>


<TABLE>
                    BREED TECHNOLOGIES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATING STATEMENT OF OPERATION
                      THREE MONTHS ENDED DECEMBER 31, 1997
                                   (Unaudited)
                                   IN MILLIONS
<CAPTION>

                                                                       NON-
                                                    SUBSIDIARY       GUARANTOR        PARENT
                                                    GUARANTORS     SUBSIDIARIES        ONLY        ELIMINATIONS        CONSOLIDATED
                                                  --------------  ---------------  ------------   ---------------   ----------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>
Net Sales                                          $     202.1      $    191.0       $     --       $    (52.4)       $       340.7
Cost of sales                                            167.6           172.6           14.6            (42.3)               312.5
                                                  --------------  ---------------  ------------   ---------------   ----------------
     Gross profit                                         34.5            18.4          (14.6)           (10.1)                28.2
                                                  --------------  ---------------  ------------   ---------------   ----------------
Selling, general and administrative expenses               4.9            11.9            4.5               --                 21.3
Research, development, and engineering expenses            8.0             5.8            4.8               --                 18.6
Repositioning and impairment charges                      80.2             0.7          188.6            (10.0)               259.5
In-process research and development expenses                --              --           77.5               --                 77.5
Amortization of intangibles                                3.6             1.1           (0.8)              --                  3.9
                                                  --------------  ---------------  ------------   ---------------   ----------------
     Operating loss                                      (62.2)           (1.1)        (289.2)            (0.1)              (352.6)
Interest expense                                            --             1.5           32.2             (6.6)                27.1
Other income (expense), net                               (2.0)            0.4            9.3             (7.3)                 0.4
                                                  --------------  ---------------  ------------   ---------------   ----------------
   Loss before income taxes, and distributions
       on Company obligated mandatorily redeemable
       convertible preferred securities                  (64.2)           (2.2)        (312.1)             (0.8)             (379.3)
Income taxes (benefit)                                    (2.0)            1.5          (49.6)              3.6               (46.5)
Distributions on Company obligated mandatorily
  redeemable convertible preferred securities               --              --            1.4                --                 1.4
                                                  --------------  ---------------  ------------   ---------------   ----------------
Loss before extraordinary loss                           (62.2)           (3.7)        (263.9)             (4.4)             (334.2)
Extraordinary loss, net of tax benefit of $1.4 million      --              --           (0.7)               --                (0.7)
                                                  --------------  ---------------  ------------   ---------------   ----------------
     Net loss                                      $     (62.2)      $    (3.7)     $  (264.6)      $      (4.4)      $      (334.9)
                                                  ==============  ===============  ============   ===============   ================

</TABLE>













                                       15

<PAGE>



<TABLE>
                    BREED TECHNOLOGIES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATING STATEMENT OF OPERATION
                       SIX MONTHS ENDED DECEMBER 31, 1997
                                   (Unaudited)
                                   IN MILLIONS

<CAPTION>
                                                                       NON-
                                                    SUBSIDIARY       GUARANTOR        PARENT
                                                    GUARANTORS      SUBSIDIARIES       ONLY        ELIMINATIONS        CONSOLIDATED
                                                  --------------  ---------------  ------------   ---------------   ----------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>
Net Sales                                          $      298.4      $   309.5       $     --       $    (72.0)        $      535.9
Cost of sales                                             246.1          277.4           17.9            (62.0)               479.4
                                                  --------------  ---------------  ------------   ---------------   ----------------
     Gross profit                                          52.3           32.1          (17.9)           (10.0)                56.5
                                                  --------------  ---------------  ------------   ---------------   ----------------
Selling, general and administrative expenses                5.1           19.2           13.2               --                 37.5
Research, development, and engineering expenses             8.4            6.7           12.4               --                 27.5
Repositioning and impairment charges                       80.3            0.7          188.5            (10.0)               259.5
In-process research and development charges                  --             --           77.5               --                 77.5
Amortization of intangibles                                 4.4            2.1           (0.6)              --                  5.9
                                                  --------------  ---------------  ------------   ---------------   ----------------
     Operating income (loss)                              (45.9)           3.4         (308.9)              --               (351.4)
Interest expense                                             --            3.2           32.2               --                 35.4
Other income (expense), net                                 1.0           (1.2)           0.4             (0.3)                (0.1)
                                                  --------------  ---------------  ------------   ---------------   ----------------
   Earnings (loss) before income taxes, and distributions
       on Company obligated mandatorily redeemable
       convertible preferred securities                   (44.9)          (1.0)        (340.7)             (0.3)             (386.9)
Income taxes (benefit)                                      3.4            1.7          (55.0)               --               (49.9)
Distributions on Company obligated mandatorily
  redeemable convertible preferred securities                --             --            1.4                --                 1.4
                                                  --------------  ---------------  ------------    ---------------   ---------------
Earnings (loss) before extraordinary loss                 (48.3)          (2.7)        (287.1)              (0.3)            (338.4)
Extraordinary loss, net of tax benefit of $0.4 million       --             --            0.7                 --                0.7
                                                  --------------  ---------------  ------------    ---------------  ----------------
     Net earnings (loss)                           $      (48.3)      $   (2.7)      $ (287.8)       $      (0.3)      $     (339.1)
                                                  ==============  ===============  ============    ===============  ================
</TABLE>













                                       16

<PAGE>



<TABLE>
                    BREED TECHNOLOGIES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
                       SIX MONTHS ENDED DECEMBER 31, 1998
                                   (Unaudited)
                                   IN MILLIONS
<CAPTION>

                                                                        NON-
                                                    SUBSIDIARY       GUARANTOR        PARENT
                                                    GUARANTORS     SUBSIDIARIES        ONLY        ELIMINATIONS       CONSOLIDATED
                                                  --------------  ---------------  ------------   ---------------   ----------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>
Cash flows from operating activities:
   Net earnings(loss)                              $       6.7       $    11.7       $  (80.8)       $    (0.5)        $      (62.9)
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
   Depreciation and amortization                          23.5            12.9            1.0               --                 37.4
   Changes in working capital items and other             16.0            (8.3)          24.6              0.5                 32.8
                                                  --------------  ---------------   ------------  ---------------   ----------------
   Net cash provided by (used in) operating activities    46.2            16.3          (55.2)              --                  7.3
                                                  --------------  ---------------   ------------  ---------------   ----------------
Cash flows from investing activities:
   Capital expenditures                                  (13.8)          (11.6)          (7.4)              --                (32.8)
   Proceeds from sale of assets                            0.7             2.3             --               --                  3.0
                                                  --------------  ---------------   ------------  ---------------   ----------------
   Net cash (used in) investing activities               (13.1)           (9.3)          (7.4)              --                (29.8)
                                                  --------------  ---------------   ------------  ---------------   ----------------
Cash flows from financing activities:
    Proceeds from debt                                      --             5.6          259.9               --                265.5
    Repayment of debt                                     (5.8)          (11.6)        (238.9)              --               (256.3)
                                                  --------------  ---------------   ------------  ---------------   ----------------
   Net cash provided by (used in) financing activities    (5.8)           (6.0)          21.0               --                  9.2
                                                  --------------  ---------------   ------------  ---------------   ----------------
Effect of exchange rate changes on cash                     --             1.9             --               --                  1.9
                                                  --------------  ---------------   ------------  ---------------   ----------------
Increase (decrease) in cash and cash equivalents          27.3             2.9          (41.6)              --                (11.4)
Cash and cash equivalents at beginning of period         (22.9)           19.0           48.3               --                 44.4
                                                  --------------  ---------------   ------------  ---------------   ----------------
Cash and cash equivalents at end of period         $       4.4      $     21.9        $   6.7       $       --        $        33.0
                                                  ==============  ===============   ============  ===============   ================
</TABLE>















                                       17

<PAGE>



<TABLE>
                    BREED TECHNOLOGIES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
                       SIX MONTHS ENDED DECEMBER 31, 1997
                                   (Unaudited)
                                   IN MILLIONS
<CAPTION>

                                                                       NON-
                                                    SUBSIDIARY       GUARANTOR        PARENT
                                                    GUARANTORS     SUBSIDIARIES        ONLY        ELIMINATIONS        CONSOLIDATED
                                                  --------------  ---------------  ------------   ---------------    ---------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>
Cash flows from operating activities:
   Net earnings(loss)                              $       (48.0)    $    (2.7)      $  (288.1)     $     (0.3)         $    (339.1)
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
   Depreciation and amortization                            14.8           9.6             2.2              --                 26.6
   Changes in working capital items and other               50.5          (2.7)          243.4             0.3                291.5
                                                  --------------  ---------------   ------------  ---------------    ---------------
   Net cash provided by (used in) operating activities      17.3           4.2           (42.5)             --                (21.0)
                                                  --------------  ---------------   ------------  ---------------    ---------------
Cash flows from investing activities:
   Cost of acquisitions and Capital expenditures            (9.3)        (17.9)         (706.2)             --               (733.4)
   Proceeds from sale of assets                              1.2           1.3             0.1              --                  2.6
                                                  --------------  ---------------   ------------  ---------------    ---------------
   Net cash (used in) investing activities                  (8.1)        (16.6)         (706.1)             --               (730.8)
                                                  --------------  ---------------   ------------  ---------------    ---------------
Cash flows from financing activities:
   Proceeds from debt                                         --            --           860.8              --                860.8
    Proceeds from Preference Stock Issuances                  --            --           554.0              --                554.0
    Repayment of debt                                         --         (14.5)         (418.8)             --               (433.3)
    Redemption of Preference Stock                            --            --          (210.0)             --               (210.0)
    Cash dividends paid                                       --            --            (2.2)             --                 (2.2)
    Proceeds from common stock issued                         --            --             0.7              --                  0.7
                                                  --------------  ---------------   ------------  ---------------    ---------------
    Net cash provided by financing activities                 --         (14.5)          784.5              --                770.0
                                                  --------------  ---------------   ------------  ---------------    ---------------
Effect of exchange rate changes on cash                       --          (4.6)             --              --                 (4.6)
                                                  --------------  ---------------   ------------  ---------------    ---------------
Increase (decrease) in cash and cash equivalents             9.2         (31.5)           35.9              --                 13.6
Cash and cash equivalents at beginning of period              --          20.0            (1.3)             --                 18.7
                                                  --------------  ---------------   ------------  ---------------    ---------------
Cash and cash equivalents at end of period                   9.2         (11.5)           34.6              --                 32.3
                                                  ==============  ===============   ============  ===============    ===============

</TABLE>








                                       18

<PAGE>



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

OVERVIEW

IMPLEMENTATION OF REPOSITIONING PROGRAM

The Company  formulated  the  Repositioning  Program  during the  quarter  ended
December 31, 1997.  As of December 31, 1998,  the Company had reduced its global
work force by  approximately  4,300  employees  (compared to a net  reduction of
approximately  1,800  employees as of September 30, 1998) and closed and/or sold
approximately 40 manufacturing facilities.  During the six months ended December
31, 1998, the Company incurred  disruption  costs of approximately  $5.0 million
associated  with closing and relocating  manufacturing  facilities in connection
with the Repositioning  Program. These costs were included in cost of sales. The
Company expects the Repositioning Program to be substantially completed by March
31, 1999.

As of December 31, 1998,  actions  taken by the Company in  connection  with the
Repositioning  Program have  resulted in  approximately  $90.0 million in annual
cost  savings to the Company.  The benefit of cost savings  realized to date has
been  substantially  offset by costs associated with an unusually high number of
product launches  commenced during the three months ended September 30, 1998. In
addition,  the Company  believes  that the benefit of  anticipated  cost savings
during fiscal 1999  attributable  to the  Repositioning  Program will be further
offset in part due to the  deteriorating  business  conditions at USS and Custom
Trim.

PRODUCT LAUNCHES

The Company's  results of operations  for the six months ended December 31, 1998
were adversely impacted by a number of factors including higher costs associated
with an unusually  high number of product  launches  commenced  during the three
months ended  September  30, 1998.  During the three months ended  September 30,
1998, the Company launched 44 products  compared to 10 products  launched during
the three months ended September 30, 1997 and an average of 15 products launched
during the second,  third and fourth  quarters  of fiscal  1998 (which  includes
product launches attributable to SRS, which was acquired on October 30, 1997). A
"launch"  means the start of production of a product and the related  activities
including, among other things,  manufacturing,  engineering,  quality, sales and
administrative support necessary to bring a product into production.  A "launch"
continues until such time as the Company is able to meet the customer's  quality
and volume  requirements  for the  product  on a  consistent  basis with  normal
production resources and is typically a resource intensive and complex process.

As a result of the higher than normal  number of launches  commenced  during the
six months  ended  December  31,  1998,  the  Company  was  required to allocate
resources  during such period to such  launches that would have  otherwise  been
directed  towards  implementing  the  Repositioning  Program.  For example,  the
Company could not implement  scheduled  personnel  reductions during such period
pursuant  to the  Repositioning  Program  and,  in  some  instances,  additional
personnel  were  hired to support  these  launches.  In  addition,  the  Company
incurred  significant  costs  associated  with  (i)  premium  freight  (both  in
receiving  supplies from vendors and shipping products to customers) as a result
of  these  product   launches  and  (ii)  generally   higher  material   content
requirements  in  connection  with  launches  relating  to  seatbelt  and airbag
programs.  To address the increased  costs relating to higher  material  content
requirements,  the Company is seeking customer  approval of certain  engineering
changes with respect to certain  programs  that the Company  believes will lower
material  costs for such  programs,  has sought  price  reductions  from certain
vendors and, in some cases,  has  increased  prices for subject  products.  As a
result of the  reallocation  of resources  and these  significant  costs,  these
launches  adversely  impacted the Company's  results of operations for the three
and six months  ended  December 31, 1998 and reduced the benefit of cost savings
realized under the  Repositioning  Program to date. The Company does not believe
that the product launches  commenced during the three months ended September 30,
1998 will  adversely  impact its results of  operations  during the three months
ending March 31, 1999.

                                       19

<PAGE>



RESULTS OF OPERATIONS

THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1997

Net sales  increased 16% to $396.2  million for the three months ended  December
31, 1998 from $340.7  million for the three months ended  December 31, 1997. The
increase in net sales was primarily due to the acquisition of SRS on October 30,
1997,  which  accounted for  approximately  $87.0 million of the increase in net
sales for the three months ended  December 31, 1998.  That increase in net sales
was partially offset by a reduction in net sales  attributable to USS and Custom
Trim due to  previously  announced  decrease in sales and a decrease in sales of
EMS sensors.  Deteriorating  business  conditions at USS and Custom Trim reduced
net sales by  approximately  $8.5  million.  The Company  expects that net sales
attributable  to USS and Custom  Trim will  continue  to  decline  significantly
during the balance of fiscal  1999 due to the loss of business  (and the failure
to replace such business on a timely basis with new business) and  industry-wide
pricing pressures.

EMS sensors  sales  decreased  52% to $13.4  million for the three  months ended
December 31, 1998 from $28.1  million for the three  months  ended  December 31,
1997.  This  decrease  was  primarily  due to lower  demand  as major  customers
continued  to shift from EMS  sensors to  electronic  sensors  that are  sourced
internally.  The Company  believes  that sales of EMS sensors  will  continue to
decline in the foreseeable future.

Cost of sales  increased  12% to  $349.1  million  for the  three  months  ended
December 31, 1998 from $312.5  million for the three  months ended  December 31,
1997. The increase  reflected  additional  production costs for the three months
ended December 31, 1998,  resulting  from the  acquisition of SRS in fiscal 1998
and the unusually  high number of product  launches  commenced  during the three
months ended September 30, 1998. See discussion above under "Product  Launches".
This  increase in production  costs was partially  offset by lower cost of sales
associated  with the  loss of  sales  as  discussed  above  and a  reduction  in
production costs as a result of actions taken under the  Repositioning  Program.
In addition,  the Company incurred  approximately  $2.1 million during the three
months ended December 31, 1998 related to disruption  costs  associated with the
closing  of  manufacturing  facilities  in  connection  with  the  Repositioning
Program,  as well as $1.3 million  charge  relating to  settlement of a warranty
claim.

Gross profit  increased 67% to $47.1 million for the three months ended December
31, 1998 from $28.2 million for the three months ended December 31, 1997.  Gross
profit as a percentage of net sales was 12% for the three months ended  December
31, 1998  compared to 8% for the three  months ended  December  31, 1997.  Gross
profit for the three months ended  December 31, 1997  reflected a $21.7  million
charge  against  cost of sales  relating  to  expected  losses  under  contracts
acquired in connection with the SRS  acquisition.  Excluding this charge,  gross
profit as a percentage of net sales for the three months ended December 31, 1997
would have been 17%  compared to 12% for the three  months  ended  December  31,
1998.  Excluding  this charge,  this decrease in gross profit as a percentage of
sales during the three months ended  December 31, 1998 was due to (i) a shift in
product  mix from high margin EMS sensors to lower  margin  products,  primarily
seat belts  acquired in the SRS  acquisition,  (ii)  disruption  costs  incurred
during the three months ended December 31, 1998,  (iii) higher  production costs
associated with multiple  product  launches and (iv) a shift in product mix to a
higher proportion of products with lower average margins than the average margin
attributable  to products  sold by the  Company  during the three  months  ended
December 31, 1997.

Selling,  general and administrative  expenses increased 9% to $23.3 million for
the three months ended December 31, 1998 from $21.3 million for the three months
ended  December 31,  1997.  The increase  was  primarily  attributable  expenses
aggregating $1.1 million incurred to settle a claim relating to the Lemelson bar
coding patent,  costs  associated  with SRS, which was acquired in October 1997,
and bad debt  expenses  aggregating  $0.6  million.  This  increase  in selling,
general  and  administrative  expenses  was  partially  offset  by cost  savings
associated with the Repositioning Program.

                                       20

<PAGE>




Research,  development and engineering  expenses  increased 38% to $25.7 million
for the three  months ended  December 31, 1998 from $18.6  million for the three
months  ended  December  31,  1997.  This  increase  reflected  increased  costs
associated  with the ongoing  activities  of SRS,  which was acquired in October
1997, and HS Technik and Design, which was acquired in May 1998, and an increase
in spending for new product development and additional  application  engineering
costs associated with new product  launches.  This increase was partially offset
by cost savings  relating to reduced  headcount and related expenses as a result
of the Repositioning Program.

Amortization  of  intangibles  increased by $2.1 million during the three months
ended December 31, 1998. The increase in amortization  expense was primarily the
result of the goodwill and other intangibles  associated with the acquisition of
SRS.

Operating  loss for the three  months  ended  December 31, 1998 was $7.9 million
compared  to $352.6  million  for the three  months  ended  December  31,  1997.
Operating  loss as a percentage of net sales was (2)% for the three months ended
December 31, 1998  compared to (103)% for the three  months  ended  December 31,
1997.  The operating  loss for the three months ended December 31, 1997 included
$365.4  million in one-time  charges:  (i) $259.5 million of  repositioning  and
impairment  charges,  (ii) a $77.5 million  charge  relating to the write-off of
certain  in-process  research and development,  and (iii) a $28.4 million charge
against  cost of  sales  for  inventory  and  long-term  contracts  relating  to
manufacturing  processes that will be exited.  Excluding these $365.4 million of
charges,  the decrease in  operating  income was  primarily  due to the shift in
product mix, product launches, and disruption costs discussed above.

Interest  expense for the three months ended  December 31, 1998 decreased 24% to
$20.6   million.   This  decrease  was  primarily  due  to  lower  domestic  and
international interest rates, this year versus last year.

During the three months ended December 31, 1998, the Company  recorded a foreign
tax expense in the amount of $1.8  million.  No tax benefit was  recognized  for
either domestic or foreign  purposes due to the provisions of SFAS No. 109. SFAS
No. 109 states that a valuation  allowance is  recognized  if, it is more likely
than not,  some  portion or all of the  deferred tax asset will not be realized.
For both  domestic  and foreign  jurisdictions,  a valuation  allowance  for the
deferred  income tax  benefit  related to the  current  loss  incurred  has been
recorded.





















                                       21

<PAGE>



RESULTS OF OPERATIONS

SIX MONTHS  ENDED  DECEMBER 31, 1998  COMPARED TO SIX MONTHS ENDED  DECEMBER 31,
1997

Net sales  increased 37% to $735.2 million for the six months ended December 31,
1998 from  $535.9  million  for the six months  ended  December  31,  1997.  The
increase in net sales was primarily due to the acquisition of SRS on October 30,
1997,  which accounted for  approximately  $273.5 million of the increase in net
sales for the six months ended December 31, 1998. That increase in net sales was
offset  significantly by a reduction in net sales attributable to USS and Custom
Trim due to  previously  announced  decrease in sales and a decrease in sales of
EMS sensors.  Deteriorating  business  conditions at USS and Custom Trim reduced
net sales by  approximately  $21.5 million.  The Company  expects that net sales
attributable  to USS and Custom  Trim will  continue  to  decline  significantly
during the balance of fiscal  1999 due to the loss of business  (and the failure
to replace such business on a timely basis with new business) and  industry-wide
pricing pressures.

EMS  sensors  sales  decreased  47% to $29.2  million  for the six months  ended
December 31, 1998 from $54.7 million for the six months ended December 31, 1997.
This decrease was primarily due to lower demand as major customers  continued to
shift from EMS sensors to electronic  sensors that are sourced  internally.  The
Company  believes  that sales of EMS  sensors  will  continue  to decline in the
foreseeable future.

Cost of sales  increased 34% to $640.8 million for the six months ended December
31, 1998 from $479.4  million for the six months ended  December  31, 1997.  The
increase reflected additional production costs for the six months ended December
31, 1998, resulting from the acquisition of SRS in fiscal 1998 and the unusually
high  number  of  product  launches  commenced  during  the three  months  ended
September 30, 1998. See discussion above under "Product Launches". This increase
in production  costs was partially offset by lower cost of sales associated with
the loss of sales volume as discussed above and a reduction in production  costs
as a result of actions taken under the Repositioning  Program. In addition,  the
Company incurred approximately $5.0 million during the six months ended December
31,  1998  related  to  disruption   costs   associated   with  the  closing  of
manufacturing  facilities in connection with the Repositioning  Program, as well
as $1.3 million charge relating to settlement of a warranty claim.

Gross profit  increased 67% to $94.4  million for the six months ended  December
31, 1998 from $56.5  million for the six months ended  December 31, 1997.  Gross
profit as a percentage  of net sales was 13% for the six months  ended  December
31, 1998  compared to 11% for the six months  ended  December  31,  1997.  Gross
profit for the six months  ended  December  31, 1997  reflected a $21.7  million
charge  against  cost of sales  relating  to  expected  losses  under  contracts
acquired in connection with the SRS  acquisition.  Excluding this charge,  gross
profit as a percentage  of net sales for the six months ended  December 31, 1997
would have been 17% compared to 12% for the six months ended  December 31, 1998.
Excluding  this charge,  this  decrease in gross profit as a percentage of sales
was due to (i) a shift in  product  mix from high  margin  EMS  sensors to lower
margin  products,  primarily  seat belts acquired in the SRS  acquisition,  (ii)
disruption  costs incurred during the six months ended December 31, 1998,  (iii)
higher  production  costs  associated  with the unusually high number of product
launches  commenced during the three months ended September 30, 1998, and (iv) a
shift in product mix due to a higher  proportion  of products with lower average
margins than the average  margin  attributable  to products  sold by the Company
during the six months ended December 31, 1997.

Selling,  general and administrative expenses increased 18% to $44.2 million for
the six months  ended  December  31, 1998 from $37.5  million for the six months
ended  December 31,  1997.  The increase  was  primarily  attributable  expenses
aggregating $1.1 million incurred to settle a claim relating to the Lemelson bar
coding patent,  costs  associated  with SRS, which was acquired in October 1997,
and bad debt  expenses  aggregating  $0.6  million.  This  increase  in selling,
general  and  administrative  expenses  was  partially  offset  by cost  savings
associated with the Repositioning Program.


                                       22

<PAGE>



Research,  development and engineering  expenses  increased 80% to $49.4 million
for the six months ended December 31, 1998 from $27.5 million for the six months
ended December 31, 1997. This increase reflected increased costs associated with
the  ongoing  activities  of SRS,  which was  acquired in October  1997,  and HS
Technik and Design,  which was acquired in May 1998, and an increase in spending
for  new  product  development  and  additional  application  engineering  costs
associated with new product launches. This increase was partially offset by cost
savings  relating to reduced  headcount and related  expenses as a result of the
Repositioning Program.

Amortization  of  intangibles  increased by $5.9  million  during the six months
ended December 31, 1998. The increase in amortization  expense was primarily the
result of the goodwill and other intangibles  associated with the acquisition of
SRS.

Operating  loss for the six months  ended  December  31, 1998 was $11.0  million
compared to $351.4 million for the six months ended December 31, 1997. Operating
loss as a percentage of net sales was (2)% for the six months ended December 31,
1998 compared to (66)% for the six months ended December 31, 1997. The operating
loss for the six months  ended  December  31, 1997  includes  $365.4  million in
one-time charges:  (i) $259.5 million of repositioning  and impairment  charges,
(ii) a $77.5  million  chargerelating  to the  write-off  of certain  in-process
research and development, and (iii) a $28.4 million charge against cost of sales
for inventory and long-term  contracts relating to manufacturing  processes that
will be exited.  Excluding  these  $365.4  million of charges,  the  decrease in
operating income was primarily due to the shift in product mix, product launches
and disruption costs discussed above.

Interest  expense for the six months ended  December 31, 1998  increased  21% to
$42.7  million as compared  to the six months  ended  December  31,  1997.  This
increase  in  interest  expense  was  primarily  due to the  increase in average
borrowings  outstanding  as a result of the  acquisition of SRS in October 1997.
This increase was offset partially by interest savings  resulting from voluntary
debt reductions.

During the six months ended December 31, 1998 the Company recorded a foreign tax
expense of $2.3 million  which was partially  offset by a $0.5 million  domestic
benefit  for a tax  credit.  No other tax  benefit  was  recognized  for  either
domestic or foreign purposes due to the provisions of SFAS No. 109. SFAS No. 109
states that a valuation  allowance is recognized if, it is more likely than not,
some portion or all of the  deferred  tax asset will not be  realized.  For both
domestic  and foreign  jurisdictions,  a valuation  allowance  for the  deferred
income tax benefit related to the current loss incurred has been recorded.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary cash  requirements are for working capital,  servicing the
Company's  indebtedness  and capital  expenditures.  The Company intends to fund
these cash needs with cash from operations  together with  borrowings  available
under its credit  facility.  On April 28, 1998,  the Company  entered into a new
$675.0  million  credit  facility.  At  December  31,  1998,  the Company had an
aggregate of $528.0 million of borrowings outstanding under the credit facility,
which bore interest at a weighted  average rate of 7.48% per annum at such date,
and had aggregate borrowing  availability  thereunder of $54.4 million.  Because
the Company  would have been in violation of the net worth  covenant in the loan
agreement  relating to the credit  facility as of December 31, 1998, the Company
obtained a waiver of this  covenant  from the lenders  that was  effective  from
December 30, 1998 through  February 12, 1999 (the "First  Waiver").  Pursuant to
the First  Waiver,  the  maximum  borrowing  availability  under  the  company's
revolving line of credit was decreased from $150.0 million (including letters of
credit) to $110.0 million (including letters of credit).

On February 11, 1999, the Company obtained a new waiver (the "Second Waiver") of
such net worth  covenant as well as an event of default  that existed due to the
Company's  failure to register  certain  securities  as required  under  certain
agreements to which it is a party.  The Second Waiver is effective from February
13, 1999 through  March 30, 1999.  In  connection  with the Second  Waiver,  the
maximum borrowing

                                       23

<PAGE>



availability  under the revolving line of credit was increased to $125.0 million
(including  letters of credit).  As of  February  15,  1999,  the Company had an
aggregate of $570.9 million of borrowings  outstanding under the credit facility
(including $82.9 million of revolver borrowings). Additionally, $15.6 million of
letters of credit were outstanding under the revolving line of credit leaving an
aggregate borrowing  availability  thereunder of $26.5 million. The Company paid
the lenders fees  aggregating $1.3 million in connection with the Second Waiver.
The Company is not currently in violation of any covenants contained in the loan
agreement.

The Company is in the process of  negotiating an amendment to the loan agreement
relating to the net worth  covenant and the existing event of default as well as
certain other financial covenants.  The Company is not currently in violation of
these  other  financial  covenants  but  anticipates  that,  to the extent  such
covenants are not amended,  it will be in violation on March 31, 1999 of the two
covenants  presently  waived  and it  anticipates  violation  of  certain  other
financial covenants by June 30, 1999. The Company anticipates that in connection
with any such  amendment,  borrowing  availability  under the revolving  line of
credit will be restored to $150.0 million. Although the Company believes that it
will be able to negotiate the necessary  amendments with its lenders,  there can
be no  assurance  that  it will be able  to do so.  Any  amendment  to the  loan
agreement  must  be  approved  by  the  lenders  holding  more  that  50% of the
commitments and borrowings outstanding under the credit facility. In the absence
of a further waiver or an amendment to the loan agreement, after March 30, 1999,
the lenders  would be entitled to exercise  all of their  rights  under the loan
agreement including, without limitation, declaring all amounts outstanding under
the credit facility  immediately due and payable and/or  exercising their rights
with respect to the collateral  securing the credit  facility which consists of,
among other things,  substantially  all of the real and personal property of the
Company and its subsidiaries.

If the  Company is unable to obtain a further  waiver or  amendment  to the loan
agreement, the Company may not have sufficient cash to meet its working capital,
debt service and capital expenditure needs beyond March 30, 1999, in which case,
the Company may be required to obtain financing from other sources. There can be
no assurance  that such  financing  will be available or, if available,  that it
will be on terms  satisfactory  to the Company.  Consequently,  the inability to
obtain any such waiver, amendment or alternative financing would have a material
adverse effect on the Company's financial condition and results of operations.

Until such time as the credit  facility  is  amended as  discussed  above or all
amounts  outstanding  under the credit  facility are repaid in full,  borrowings
outstanding  under the credit facility will be classified as a current liability
on the Company's consolidated balance sheet.

On April 28, 1998,  the Company  issued and sold an aggregate of $330 million of
its Notes in a private  transaction under Rule 144A under the Securities Act. In
connection with the Notes Offering, the Company entered into the Notes Agreement
pursuant  to which it agreed to offer to  exchange  the Notes for  substantially
identical  9.25%  Senior  Subordinated  Notes  due  2008  registered  under  the
Securities  Act.  Pursuant to the Note  Agreement,  the Company was  required to
complete the  Exchange  Offer by the date 180 days after the Closing  Date.  The
Company filed the registration  statement relating to the Exchange Offer on June
24, 1998. Because the Exchange Offer had not been consummated on or prior to the
date 180 days after the Closing Date as required under the Note  Agreement,  the
interest  rate borne by the Notes  increased  pursuant to the Note  Agreement by
0.25% on the 181st day after the Closing  Date.  The interest  rate has and will
continue to increase by 0.25% on the 1st day of each  subsequent  90-day period;
provided, however, that in no event will the interest rate borne by the Notes be
increased  by more than 1.5%.  The Notes  currently  bear  interest at a rate of
9.75% per annum.

On November  25,  1998,  the  Company  sold  $257.7  million of its  Convertible
Debentures to BTI Capital  Trust,  which,  concurrently  therewith,  sold $250.0
million  aggregate  liquidation  amount of its Preferred  Securities  (which are
fully and  unconditionally  guaranteed by the Company) in a private  transaction
under Rule 144A under the Securities Act (the "Preferred Securities  Offering").
In connection with the Preferred Securities Offering, the Company entered into a
registration rights agreement (the "Preferred Securities

                                       24

<PAGE>



Agreement") pursuant to which it agreed to register (and cause BTI Capital Trust
to  register),  among other things,  the  Convertible  Debentures  and Preferred
Securities.   Pursuant  to  the  Preferred  Securities   Agreement,   the  Shelf
Registration  Statement (as defined  therein) was required to be effective on or
prior to June 17, 1998.  The Company filed the Shelf  Registration  Statement on
March 18,  1998.  Because  the Shelf  Registration  Statement  was not  declared
effective by June 17, 1998, the interest rate on the Convertible  Debentures and
the distribution rate applicable to the Preferred Securities increased by 0.25%,
payable in arrears,  with the first quarterly  payment due on the first interest
or distribution date following June 17, 1998.

The Shelf  Registration  Statement  was not declared  effective and the Exchange
Offer was not completed on or prior to the required dates because the Commission
was reviewing  certain  periodic reports  previously  filed by the Company.  The
commission has now completed its review and the interest rate borne by the Notes
and the  Convertible  Debentures  and the  distribution  rate in  respect of the
Preferred  Securities  will be reduced to the  original  amounts on the date the
Shelf  Registration  Statement is declared  effective and the Exchange  Offer is
completed, as the case may be, which the Company currently expects will be prior
to April 15, 1999.

The cash flow from  operations  for the six months  ended  December 31, 1997 was
adversely  affected by the $365.4  million in one-time  charges  recorded in the
quarter ended December 31, 1997,  partially offset by changes in working capital
items.

Capital expenditures  aggregated $32.3 million for the six months ended December
31, 1998. Investments continue to be made to support productivity  improvements,
cost reduction programs,  finance new program launches, capital needs to improve
manufacturing  efficiency and added capability for existing and new products and
reconfigurations  of  manufacturing  facilities  relating  to the  Repositioning
Program.   The  Company  estimates  that  capital  expenditures  will  aggregate
approximately   $38.0  million  during  the  remainder  of  fiscal  1999.   Cash
investments in BSRS during the period were not material.  The Company's  ability
to invest in BSRS is limited under the Company's  credit facility and the Senior
Subordinated Notes due 2008.

The Company has market risk  exposure  from the impact of interest rate changes.
The Company has elected to manage this risk  through the  maturity  structure of
its  borrowings  and through the use of interest rate swap and cap  instruments.
Currently, interest rates affecting approximately 35% of the Company's debt will
vary directly with market rates due to the short-term nature of its maturity and
the absence of interest rate management  instruments  associated with this debt.
Given the  Company's  present  exposure to rate  movements,  each 0.5% change in
rates will impact interest  approximately $1.6 million.  This analysis considers
only the impact of the  hypothetical  interest  rate changes and not the overall
economic activity impacting the Company.

YEAR 2000
The Year 2000 Issue is the result of computer  programs  being written using two
digits  rather than four to define the  applicable  year.  Any of the  Company's
computer  programs or hardware that have  date-sensitive  or embedded  chips may
recognize  a date using "00" as the year 1900  rather  than the year 2000.  This
could  result in a system  failure  or  miscalculation  causing  disruptions  of
operations,  including,  among other  things,  a temporary  inability to process
transactions, send invoices, or engage in similar normal business activities.

The Company is a member of the  Automotive  Industry  Action  Group  (AIAG),  an
automotive  trade  association  whose  members  are the North  American  vehicle
manufacturers and many large suppliers.  These member organizations  assemble as
the AIAG to  tackle  industry  issues  in  supply,  manufacturing,  engineering,
quality and finance.  The AIAG investigates the benefits of commonization in new
areas,  examines  established  processes  with an eye  toward  improvements  and
compares procedures to determine best practices.  The result of this work is the
development of new  technologies  and the standards that govern their usage. One
of the issues the AIAG has been charged with confronting is Year 2000 compliance
among automotive suppliers.

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<PAGE>



As a member of the AIAG and in conjunction with our major customers, the Company
has used the AIAG guidelines for Y2K compliance.  The phases  prescribed by AIAG
are:

AWARENESS  Within the Company the level of awareness of the  significance of the
Y2K issue has been elevated  through meetings and  notifications  throughout the
organization. This phase of the project is an ongoing effort.

INVENTORY The Company  conducted a worldwide  inventory of all computer hardware
and software (including business and operational applications, operating systems
and  third  party  products)  and  other  equipment  that  may be at  risk,  and
identified key third party businesses whose Y2K failure might most significantly
impact the Company. This phase has been completed.

RISK EVALUATION  After the  identification  of each at-risk system,  the Company
assessed how critical the system was to the business operation and the potential
impact of failure.  Resources for remediation  were allocated based on the level
of risk assigned. This phase has been completed.

REMEDIATION  The  Company  has  targeted  a  completion  date of March  1999 for
remediation of its critical systems and will continue to address  remediation of
other systems on a prioritized basis thereafter.

TESTING After remediation, all implemented solutions will be tested in isolation
and with their  interface with all other systems.  This phase is closely related
to the remediation phase and is scheduled for completion by June 30, 1999.

ACCEPTANCE AND  IMPLEMENTATION  This phase involves  having  functional  experts
review test  results and  pre-established  criteria to ensure  compliance.  This
phase  assures that  business  processes or groups of  components  will function
correctly  regardless of dates used. The Company expects all critical systems to
be accepted and implemented by August 31, 1999.

The  Company  has  determined  that it will be  required  to modify  or  replace
portions of its  software and  hardware so its  computer  systems will  properly
utilize dates beyond December 31, 1999. These assessments indicated that some of
the  Company's   significant   information   technology  systems  and  operating
equipment, (i.e., production and manufacturing systems) could be affected.

Affected  operating  equipment  includes  automated  assembly  lines and related
technologies  used in various  aspects of the  manufacturing  process.  However,
based on a review of its product  lines,  the Company  has  determined  that the
products it has sold and will continue to sell do not require  remediation to be
Year 2000  compliant.  Accordingly,  the Company  does not believe the Year 2000
presents  a  material  exposure  as it relates  to the  Company's  products.  In
addition,  the Company has gathered  information  about the Year 2000 compliance
status of its significant  suppliers and subcontractors and continues to monitor
their compliance.

For its  information  technology  exposures,  the  Company  expects to  complete
software   reprogramming  no  later  than  March  31,  1999.  Once  software  is
reprogrammed  and  replaced  for  a  system,  the  Company  begins  testing  and
implementation.  These phases run concurrently for different systems. Completion
of the testing phase for all significant  systems is expected by March 31, 1999,
with all remediated systems fully tested and implemented by August 31, 1999.

The remediation of operating  equipment is significantly more difficult than the
remediation  of  the  information   technology   systems  because  some  of  the
manufacturers  of that  equipment  are no longer in  business.  Testing  of this
equipment is also more difficult than the testing of the information  technology
systems.  Once  testing  is  complete,  the  operating  equipment  is ready  for
immediate use. The Company expects to complete its remediation  efforts by March
31, 1999. Testing and implementation of all critical equipment is expected to be
completed by June 30, 1999.

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<PAGE>



The Company is in the process of working with  suppliers and customers to ensure
that the Company's  systems that interface  directly with third parties are Year
2000  compliant by December 31, 1999.  The Company has completed its  assessment
efforts.  Testing of all  material  systems is  expected no later than March 31,
1999.  Implementation  is expected to be completed by June 30, 1999. Each vendor
queried believed its order entry and inventory  management systems would be Year
2000 compliant by the end of 1999.

The Company has queried its important  suppliers and customers that do not share
information  systems with the Company.  To date, the Company is not aware of any
suppliers  or  customers  Year 2000  issue  that  would  materially  impact  the
Company's results of operations or financial condition. However, the Company has
no means of ensuring that suppliers and customers  will be Year 2000 ready.  The
inability of its external agents to complete their Year 2000 resolution  process
in a  timely  fashion  could  materially  impact  the  Company.  The  effect  of
noncompliance by its suppliers and customers is not determinable.

The Company will utilize  both  internal and external  resources to reprogram or
replace,  test and implement the software and operating  equipment for Year 2000
modifications.  The  total  cost of the Year 2000  project  is  estimated  at $7
million and is being funded with cash from operations.  To date, the Company has
incurred  approximately  $2.5 million ($2.5 million  expensed)  relating for all
phases of the Year 2000  project.  Of the total  remaining  project  costs,  the
remaining  $4.5  million  relates to repair of hardware and software and will be
expensed as incurred.

The  Company  plans  to  complete  the  Year  2000  modifications  are  based on
management's best estimates,  which were derived utilizing numerous  assumptions
of future events including the continued availability of certain resources,  and
other factors. Estimates on the status of completion and the expected completion
dates are based on costs  incurred  to date  compared to total  expected  costs.
However,  there can be no guarantee  these estimates will be achieved and actual
results could differ  materially from those plans.  Specific  factors that might
cause  such  material   differences   include,  but  are  not  limited  to,  the
availability  and cost of personnel  trained in this area, the ability to locate
and correct all relevant computer codes, and similar uncertainties.

There can be no assurance that the Company will be completely  successful in its
efforts to address  Year 2000  issues.  The Company  could  suffer lost sales or
other  negative  consequences,  including,  but not  limited  to,  diversion  of
resources,  damage to the Company's  reputation,  increased service and warranty
costs  and  litigation,  any of which  could  materially  adversely  affect  the
Company's business operations or financial statements.

The Company is also dependent on third parties such as its customers, suppliers,
service providers and other business  partners.  If these or other third parties
fail to  adequately  address Year 2000 issues,  the Company  could  experience a
negative impact on its business operations or financial statements. For example,
the failure of certain of the  Company's  principal  suppliers to have Year 2000
compliant  internal  systems could impact the Company's  ability to  manufacture
and/or  ship  its  products  or  to  maintain  adequate   inventory  levels  for
production.

Although the Company has not yet developed a comprehensive  contingency  plan to
address  situations  that may result if the  Company or the third  parties  upon
which the Company is  dependent  are unable to achieve Year 2000  readiness  the
Company's Year 2000  compliance  program is ongoing and its ultimate  scope,  as
well as the consideration of contingency plans, will continue to be evaluated as
new information becomes available.





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<PAGE>



FORWARD LOOKING STATEMENTS

Statements herein regarding estimated cost savings and the Company's anticipated
performance in future periods constitute  forward-looking  statements within the
meaning of the Securities  Act of 1933 and the Securities  Exchange Act of 1934.
Such statements are subject to certain risks and uncertainties  that could cause
actual  amounts to differ  materially  from  those  projected.  With  respect to
estimated cost savings,  management has made assumptions regarding,  among other
things,  the  timing of plant  closures,  the  amount  and  timing  of  expected
short-term operating losses and reductions in fixed labor costs. The realization
of cost savings is subject to certain risks, including,  among other things, the
risks that expected  operating  losses have been  underestimated,  expected cost
reductions  have  been  overestimated,  unexpected  costs and  expenses  will be
incurred and anticipated operating  efficiencies will not be achieved.  Further,
statements  herein  regarding the Company's  performance  in future  periods are
subject  to risks  relating  to,  among  other  things,  possible  higher  costs
associated  with  product   launches,   difficulties  in  integrating   acquired
businesses,  deterioration of relationships  with material  customers,  possible
significant  product  liability  claims,  decreases in demand for the  Company's
products  and  adverse  changes  in  general  market  and  industry  conditions.
Management believes these  forward-looking  statements are reasonable;  however,
undue reliance should not be placed on such  forward-looking  statements,  which
are based on current expectations.




































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<PAGE>



                           PART II - OTHER INFORMATION

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

The annual meeting of  shareholders  was held on Thursday,  November 19, 1998 at
which the following matters was submitted to a vote of the shareholders:

Votes cast for or withheld regarding the seven individuals  elected as directors
of the Company for a term  expiring at the next annual  meeting of  shareholders
were as follows:


Name                          # of Shares Voted For         # of Shares Withheld
----                          ---------------------         --------------------
Allen K. Breed                      34,747,811                     181,307
Johnnie C. Breed                    34,757,774                     171,344
Larry W. McCurdy                    34,774,495                     154,623
Charles J. Speranzella              34,770,978                     158,140
Robert W. Shower                    34,770,178                     159,940
Alberto Negro                       34,769,678                     159,840
Dr. -Ing. Franz Wressnigg           34,768,678                     160,440


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

   (a)  Exhibits

None

    (b)  Reports on Form 8-K -

None




















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<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.

                            Breed Technologies, Inc.
                                  (REGISTRANT)



February 16, 1999




                         By:   /s/ J.F. Gallagher
                                   Cheif Financial Officer
 






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