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


--------------------------------------------------------------------------------
                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: March 31, 1998
                                 or

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

                           Commission File No. 1-11474

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

                            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 May 12, 1998, 36,658,707 shares of the registrant's common stock,
par value $.01 per share, were outstanding.


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



<PAGE>









                                      INDEX


PART I.           FINANCIAL INFORMATION                                     Page


Item 1.  Financial Statements

                  Consolidated Condensed Balance Sheets -March 31, 1998
                      (Unaudited)and June 30, 1997 ........................... 1

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

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

                  Consolidated Statement of Stockholders Equity (Unaudited)... 5

                  Notes to Consolidated Condensed Financial Statements
                      (Unaudited) ............................................ 6

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...................22

Item 6. Exhibits and Reports on Form 8-K .....................................22

Signatures ...................................................................23




                                                         

<PAGE>




                         PART I - FINANCIAL INFORMATION


Item 1.           Financial Statements


Breed Technologies, Inc.
Consolidated Condensed Balance Sheets
In Millions, except per share data

                                                       March 31,        June 30,
                                                        1998               1997
                                                     (Unaudited)

ASSETS
Current Assets:
   Cash and cash equivalents                          $     24.1    $       18.7
   Accounts receivable, principally trade                  320.1           208.0
   Inventories:
     Raw materials                                          38.3            24.8
     Work in process                                        22.6            23.4
     Finished goods                                         46.2            27.1
                                                       ---------      ----------
         Total Inventories                                 107.1            75.3
                                                       ---------      ----------
   Prepaid expenses and other current assets                82.0            13.5
                                                       ---------      ----------

         Total Current Assets                              533.3           315.5

Property, plant and equipment, net                         338.2           276.5
Intangibles, net                                           730.3           221.0
Net assets held for sale                                    28.4            52.6
Other assets                                                41.6            11.6
                                                       ---------      ----------
          Total Assets                                $   1671.8     $     877.2
                                                       =========      ==========

See Notes to Consolidated Condensed Financial Statements.

                                       

<PAGE>



Breed Technologies, Inc.
Consolidated Condensed Balance Sheets
In Millions, except per share data

                                                       March 31,        June 30,
                                                        1998              1997
                                                    (Unaudited)



LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Notes payable and current portion of long-term debt  $   72.2    $      191.7
   Accounts payable                                        270.8           121.5
   Accrued expenses                                        215.0            49.5
                                                       ---------      ----------
         Total Current Liabilities                         558.0           362.7
                                                       ---------      ----------

Long-term debt                                             810.9           231.7
Other long-term liabilities                                 29.5            16.3
                                                       ---------      ----------
         Total Liabilities                                1398.4           610.7
                                                       ---------      ----------

Company obligated mandatorily redeemable 
convertible preferred securities                           250.0             ---
Stockholders' Equity:
   Common stock,  par value  $0.01,  authorized 
     50,000,000  shares,  issued and outstanding 
     36,656,241 and 31,679,442 shares at March 31, 
     1998 and June 30, 1997, respectively                    0.4             0.3
   Series A Preference Stock par value $0.001, 
     authorized 5,000,000 shares, issued and
     outstanding 1 share at March 31, 1998                   ---             ---

   Additional paid-in capital                              193.8            77.5
   Warrants                                                  1.9             ---
   Retained earnings                                     (141.7)           208.0
   Foreign currency translation adjustments               (30.7)          (18.8)
   Unearned compensation                                   (0.3)           (0.5)
                                                       ---------      ----------
     Total Stockholders' Equity                             23.4           266.5
                                                       ---------      ----------
         Total Liabilities and Stockholders' Equity   $   1671.8     $     877.2
                                                       =========      ==========



See Notes to Consolidated Condensed Financial Statements.



                                        

<PAGE>



<TABLE>
Breed Technologies, Inc.
Consolidated Condensed Statements of Operations (Unaudited)
In millions, except earnings per share



                                                
<CAPTION>
                                                        Three Months Ended        Nine Months Ended
                                                             March 31,                March 31,
                                                       ---------------------    ---------------------
                                                            1998        1997         1998        1997
<S>                                                    <C>          <C>         <C>         <C>      
Net sales                                              $   431.7    $  209.4    $   968.0   $   550.6

Cost of sales (Note 3)                                     357.3       171.4        837.4       433.9
                                                       ---------    --------    ---------   ---------
Gross profit                                                74.4        38.0        130.6       116.7
                                                       ---------    --------    ---------   ---------
Operating expenses:
   Selling, general and administrative expenses             22.1        19.1         59.7        51.3
   Research, development and engineering expenses           22.4         9.5         49.9        27.3
   Repositioning charges (Note 3)                            ---         ---        244.0         ---
   In-process research and development expenses (Note 3)     ---         ---         77.5         ---
   Amortization of intangibles                               7.0         2.2         13.0         4.3
                                                       ---------    --------    ---------   ---------
     Total operating expenses                               51.5        30.8        444.1        82.9
                                                       ---------    --------    ---------   ---------
         Operating income (loss)                            22.9         7.2      (313.5)        33.8
Interest expense                                            28.2         6.7         63.7        17.8
Other income (expense), net                                  2.8         2.0          2.8         4.6
                                                       ---------    --------    ---------   ---------
         Earnings   (loss)  before  income  taxes, 
         distributions   on  Company
         obligation mandatorily redeemable convertible 
         preferred securities and extraordinary item       (2.5)         2.5      (374.4)        20.6
Income taxes (benefit) (Note 4)                            (4.4)         1.0       (54.3)         8.1
Distributions on Company obligation mandatorily
   redeemable convertible preferred securities               4.3         ---          5.7         ---
                                                       ---------    --------    ---------   ---------
         Earnings (loss) before extraordinary loss         (2.4)         1.5      (325.8)        12.5
Extraordinary loss, net of tax benefit of $0.4 million       ---         ---        (0.7)         ---
                                                       ---------    --------    ---------   ---------


         Net earnings (loss)                           $    (2.4)   $      1.5  $ (326.5)   $     12.5
                                                       =========    ========    =========   =========

Basic earning (loss) per common share (Note 5):
   Earnings (loss) before extraordinary loss           $  (0.07)    $    0.05   $   (9.90)  $     0.39
   Extraordinary loss                                        ---         ---       (0.02)         ---
                                                       ---------    --------    ---------   ---------
         Net earnings (loss)                           $  (0.07)    $    0.05   $   (9.92)  $    0.39
                                                       =========    ========    =========   =========
Diluted earnings (loss) per common share:
   Earnings (loss) before extraordinary loss           $  (0.07)    $    0.05   $   (9.90)  $    0.39
   Extraordinary loss                                        ---         ---       (0.02)         ---
                                                       ---------    --------    ---------   ---------
         Net earnings (loss) - assuming dilution       $  (0.07)    $    0.05   $   (9.92)  $    0.39
                                                       =========    ========    =========   =========
</TABLE>


See Notes to Consolidated Condensed Financial Statements.


                                        

<PAGE>


<TABLE>

Breed Technologies, Inc.
Consolidated Condensed Statements of Cash Flows (Unaudited)

<CAPTION>
In millions                                                              Nine Months Ended March 31
                                                                      ---------------------------------
                                                                          1998                     1997
                                                                      -------------         -----------

Cash Flows from Operating Activities:
<S>                                                                   <C>                <C>           
   Net earnings (loss)                                                $      (326.5)     $         12.5
Adjustments to reconcile net earnings to net cash provided by (
used in)operating activities:
   Depreciation and amortization                                               44.6                34.1
   Non-cash items included in repositioning and other special 
   charges                                                                    195.9                 ---
   Accrual for repositioning and other special charges                         76.5                 ---
   Changes in working capital items and other                                (20.4)                 1.2
                                                                      -------------         -----------
         Net cash provided by (used in) operating activities                 (29.9)                47.8
                                                                      -------------         -----------

Cash Flows from Investing Activities:
   Cost of acquisition, net of cash acquired                                (710.0)             (267.0)
   Capital expenditures                                                      (50.1)              (61.4)
   Proceeds from sale of assets                                                 4.2                 0.1
                                                                      -------------         -----------
         Net cash used in investing activities                              (755.9)             (328.3)
                                                                      -------------         -----------

Cash Flows from Financing Activities:
   Proceeds from (repayment of) debt, net                                     459.7               215.9
   Proceeds from Series A Preference Stock issuance                           115.0                 ---
   Proceeds from Series B Preference Stock issuance                           200.0                 ---
   Fees associated with Series B Preference Stock issuance                   (10.0)                 ---
   Redemption of Series B Preference Stock issuance                         (200.0)                 ---

   Proceeds from Company obligated mandatorily redeemable
     convertible preferred securities, less related fees                      239.0                 ---
   Cash dividends paid                                                        (2.2)               (6.6)
   Proceeds from common stock issued                                            1.6                 0.5
                                                                      -------------         -----------
         Net cash provided by financing activities                            803.1               209.8
                                                                      -------------         -----------

Effect of exchange rate changes                                              (11.9)               (7.0)
                                                                      -------------         -----------

Net increase/(decrease) in cash and cash equivalents                            5.4              (77.7)
Cash and cash equivalents at beginning of period                               18.7                95.8
                                                                      -------------         -----------
Cash and cash equivalents at end of period                             $       24.1         $      18.1
                                                                      =============         ===========

Cost of Acquisition:
Working capital, net of cash acquired                                 $        39.5     $        (40.7)
Property, plant and equipment                                               (140.3)             (162.9)
Cost in excess of net assets acquired                                       (683.3)             (121.1)
Intangibles-write-off of in-process research and development costs             77.5                 ---
Investments and other assets                                                 (11.8)              (19.1)
Long-term debt                                                                  ---                33.9
Other long-term liabilities                                                     8.4                42.9
                                                                      -------------         -----------
Net cost of acquisition                                               $      (710.0)     $      (267.0)
                                                                      =============         ===========
</TABLE>

See Notes to Consolidated Condensed Financial Statements.



                                                        

<PAGE>




<TABLE>
Breed Technologies, Inc.
Consolidated Statement of Stockholders' Equity (Unaudited)
In millions, except per share data




<CAPTION>
                                                                                                                                    
                                                                  Series A       Series B     Additional                            
                                     Common Stock                Preference     Preference      Paid-In                   Retained  
                                       Shares          Amount      Stock          Stock        Capital       Warrants     Earnings  
                                  ---------------------------- -------------  ------------- -------------  ------------ ------------
<S>                                   <C>           <C>         <C>              <C>         <C>           <C>           <C>
Balance at June 30, 1997               31,679,442  $       0.3           ---            ---  $       77.5           ---  $     208.0
   Net loss                                                                                                                  (326.5)
   Translation adjustments                                                                                                          
   Issue Series A Preference
   Stock                                                               115.0                                                        
   Issue Series B Preference
   Stock, (including fees)                                                            200.0                                   (10.0)

   Redemption of Series B
   Preference Stock                                                                 (200.0)                                         
   Fees associated with
   Company obligated
   mandatorily redeemable
   convertible preferred
   securities                                                                                                                 (11.0)
   Warrants issued with Credit
   Facility                                                                                                         1.9             
   Shares issued under Stock
   Option Plans                           101,793                                                     1.6                           
   Shares terminated under
   Stock Incentive Plan, net of
   granted Shares                         (8,220)                                                   (0.2)                           
   Cash dividends                                                                                                              (2.2)
   Conversion of Series A
   Preference Stock                     4,883,226          0.1       (115.0)                        114.9
                                  ---------------  ----------- -------------  ------------- -------------  ------------ ------------
Balance at March 31, 1998              36,656,241  $       0.4 $        ---           ---    $      193.8  $        1.9    $ (141.7)
                                  ===============  =========== =============  ============= =============  ============ =========== 
</TABLE>


                                                                 

<PAGE>



                                      Foreign
                                     Currency
                                   Translation        Unearned
                                   Adjustments      Compensation     Total
                                  --------------  ---------------- ----------
Balance at June 30, 1997          $       (18.8)     $       (0.5)    $ 266.5
   Net loss                                                           (326.5)
   Translation adjustments                (11.9)                       (11.9)
   Issue Series A Preference
   Stock                                                                115.0
   Issue Series B Preference
   Stock, (including fees)                                              190.0
 
   Redemption of Series B
   Preference Stock                                                   (200.0)
   Fees associated with
   Company obligated
   mandatorily redeemable
   convertible preferred
   securities                                                          (11.0)
   Warrants issued with Credit
   Facility                                                               1.9
   Shares issued under Stock
   Option Plans                                                           1.6
   Shares terminated under
   Stock Incentive Plan, net of
   granted Shares                                              0.2        ---
   Cash dividends                                                       (2.2)
   Conversion of Series A
   Preference Stock
                                  --------------  ---------------- ----------
Balance at March 31, 1998         $       (30.7)     $       (0.3)   $   23.4
                                  ==============  ================ ==========


              Notes to Consolidated Condensed Financial Statements
                                   (Unaudited)

Note 1 - Basis of Presentation

     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 nine  months  ended March 31, 1998 are not
necessarily  indicative  of the results that may be expected for the year ending
June 30, 1998. 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 for the year ended June 30, 1997.

     Revenue Recognition - The Company recognizes revenue when title and risk of
loss transfers to its customers, which is generally upon shipment of products.

     Cash and Cash  Equivalents - Cash and cash equivalents  include  short-term
interest  bearing  securities  with  maturities  of three  months  or less  when
purchased.

     Grant - The Company  earned and recorded as income in 1997 a grant from the
Italian  Ministry of Labor and Social  Security of $1.0  million for  locating a
plant in southern Italy in 1994.

Note 2 - Acquisitions

     On October 30, 1997 the Company completed the acquisition of certain assets
and the  assumption of certain  liabilities of the "Safety  Restraints  Systems"
business  unit of  AlliedSignal,  Inc.  and 100% of the  outstanding  shares  of
capital  stock  of ICSRD  Rucckhaltesysteme  Fahrzeugsicherheit  GmbH,  a German
company, BSRD Limited, an English company,  AlliedSignal India, Inc., a Delaware
company,  Sistemas  AlliedSignal de Seguridad,  S.A. de C.V., a Mexican company,
and  AlliedSignal  Cinturones  de  Seguridad,  S.A. de C.V.,  a Mexican  company
(collectively,  "SRS").  The acquisition was made pursuant to the Asset Purchase
Agreement  ("Agreement")  dated August 27, 1997 among  AlliedSignal,  Inc.  (and
certain  subsidiaries  identified  in the  Agreement)  and  Breed  (and  certain
subsidiaries identified in the Agreement).

     SRS produces  seatbelts and airbags with principal  locations in Knoxville,
Tennessee;  Maryville,   Tennessee;   Greenville,  Alabama;  St.  Clair  Shores,
Michigan; Sterling Heights, Michigan; Douglas, Arizona;  Brownsville,  Texas; El
Paso,  Texas;  Aqua Prieta,  Mexico;  Juarez,  Mexico;  Valle  Hermoso,  Mexico;
Carlisle, England; Colleferro, Italy; Turin, Italy; Siena, Italy; Arzano, Italy;
and Barcelona, Spain.

     The purchase price for the SRS acquisition  was $710.0  million,  which was
financed with  borrowings  under a revolving and term credit  facility,  the net
proceeds from the issuance and sale of Series B Preference  Securities,  and the
net proceeds from the issuance and sale of Series A Preference Shares to Siemens
AG.

     The Purchase price is subject to post-closing  adjustments based on the net
book value of the acquired  business,  retained cash  balances,  if any, and any
amounts  paid with  respect to certain  intercompany  obligations.  The  initial
purchase  price will be  increased  or  decreased by the amount by which the net
book  value  of SRS as of the  closing  date  is  greater  than  or  less  than,
respectively,  $175.3 million. The Company has submitted to AlliedSignal, Inc. a
post closing  purchase  price  adjustment  in  accordance  with the terms of the
agreement.  The final adjustment will be determined in accordance with the terms
of the Agreement.

                                                                 

<PAGE>



     As a part of the purchase price allocation, the Company evaluated the value
of  the  identifiable  intangible  assets,  including  in-process  research  and
development (In-Process R&D). Under generally accepted accounting principles, if
the  technological   feasibility  of  the  acquired   technology  has  not  been
established and the technology has no future  alternative uses, such in- process
research and development must be written off ($77.5 million).

     The Company identified approximately 40 In-Process R&D projects at SRS that
do not have  future  alternative  uses,  but  which  have a high  likelihood  of
obtaining  technological  feasibility  at various times over a six month to five
year period,  with a midpoint  development date of approximately two years. That
In- Process R&D ($158.1  million) was recorded  based on the fair value based on
the present cash value to the going  concern as if SRS were sold to an unrelated
party having similar application purposes.

     The estimated  goodwill and  preliminary  allocation  of purchase  price to
identifiable intangible assets acquired in the SRS acquisition are summarized as
follows:

<TABLE>
<S>                                                                         <C>                       <C>



Cash purchase price                                                                                   $       710.0
Less:
     Estimated fair value of SRS net assets acquired less assumed liabilitie$      122.8
     Adjustment for planned closings of facilities                                 (45.0)                    (77.8)
                                                                          ---------------          ----------------
                                                                                                              632.2
Adjustment for estimated costs of planned employee termination                                                 16.7
Estimated costs related to the SRS acquisition                                                                 15.0
Other                                                                                                          19.4
    Cost in excess of net assets acquired                                                                     683.3
Less estimated in-process research and development                                                           (77.5)
                                                                                                   ----------------
     Excess of purchase price over fair value of net assets acquired                                   $      605.8
                                                                                                   ================

                                                                                                     Amortization
                                                                               Value                  Period in
                                                                             Allocated                  Years
                                                                          ---------------          ----------------
Trained workforce                                                          $         10.3                        10
Developed technology                                                                158.1                        22
Goodwill                                                                            437.4                        40
                                                                          ---------------
                                                                            $       605.8
                                                                          ===============
</TABLE>

     The pro-forma  unaudited  results of  operations  for the nine months ended
March 31, 1998 and 1997, assuming the acquisition of SRS had been consummated on
the first day of the respective periods are as follows:
<TABLE>
<CAPTION>

In millions, except per share data                                                            Nine Months Ended March 31,
                                                                                            1998                         1997
                                                                                     ------------------             ---------------
<S>                                                                                  <C>                             <C>           
Net sales                                                                            $        1245.1                 $       1292.2
Net income (loss)                                                                    $       (349.9)                 $          6.6
Net income (loss) per share - basic and diluted                                      $       (10.63)                 $         0.21
Net Income (loss) per share - diluted                                                $       (10.63)                 $         0.18
</TABLE>

Note 3 - Repositioning and Other Special Charges

     During the three months ended December 31, 1997,  the Company  formulated a
repositioning   program   designed  to  reduce   operating  costs  and  increase
productivity (the "Repositioning  Program").  The Repositioning Program consists
primarily  of a 25% planned  reduction in the  Company's  global  workforce  (or
approximately   4,900  employees)  through  the  elimination  of  redundant  and
overlapping  positions resulting from recent acquisitions,  the consolidation of
the Company's manufacturing, sales and engineering facilities primarily in North
America  and Europe  through  the  closing of  approximately  50% (or 32) of its
manufacturing facilities and 33% (or 10) of its sales and engineering facilities
and  the  disposal  of  certain   non-core   assets.   It  is  anticipated  that
approximately  $73.4  million of these  costs will result in cash  outlays.  The
Company expects the Repositioning Program to generate approximately $855 million
in aggregate cumulative cost savings (which includes  approximately $780 million
of cash  savings),  which will be realized over the five year period ending June
30, 2002.

     In connection with the Repositioning Program, the Company incurred a $244.0
million  repositioning  charge during the three months ended  December 31, 1997,
which included the following:  (i) $30.8 million  relating to planned work force
reductions; (ii) $31.4 million relating to proposed facility consolidations (not
including any SRS facilities); (iii) $77.6 million relating to the write-down of
goodwill  associated with the disposal of long-lived assets;  (iv) $41.3 million
relating to the write-down to net realizable value of certain  long-lived assets
in connection with Gallino  Plastics;  S.r.l.  ("Gallino") and (v) $62.9 million
relating to the write-down of impaired  production  and other  equipment and the
write-off  of  assets  used  to  manufacture  products  being  replaced  by  new
technologies.

     During  the three  months  ended  December  31,  1997,  the  Company  began
implementing its Repositioning  Program. The Company has continued to reduce its
work force , closed seven manufacturing  facilities and announced plans to close
an additional facility and relocated a major portion of a Canadian facility to a
Mexican facility.  These actions are expected to result in $60 million of annual
ongoing cost savings to the Company under the Repositioning Program.

     As discussed above, the Company has closed or plans to close  manufacturing
plants and sales and engineering facilities. During the three months ended March
31, 1998 the property,  plant and equipment at those plants and  facilities  was
written down from the aggregate  carrying value of approximately $139 million to
$29.9  million.  At  March  31,  1998  the  Company  had  closed  seven of those
facilities and expects to close the remaining facilities by the end of the third
quarter  of fiscal  1999.  The  Company  has not yet  reclassified  the value of
property,  plant and equipment closed as a part of the repositioning  program to
assets  held for sale  because the  amounts  are not  material.  The Company has
ceased  recording  depreciation  for any  plants and  facilities  that have been
identified for disposal, including Gallino's non-steering wheel business.

     In  addition,  during the three months  ended  December  31,  1997,  (i) in
connection  with the purchase price  allocation  for SRS the Company  incurred a
$77.5  million  charge  relating to the  write-off  of  in-process  research and
development  for  acquired   technology   that  has  not  been   established  as
technologically  feasible and (ii) the Company  incurred a $28.4 million  charge
against cost of sales for inventory and long-term customer contracts relating to
manufacturing processes that will be exited.

     During the nine months ended March 31, 1998, the repositioning  reserve was
reduced  by  $172.0  million  as a result  of cash  and  non-cash  charges.  The
following  table sets  forth the  details  and the  cumulative  activity  of the
repositioning charges as of March 31, 1998:



                                                                 

<PAGE>


<TABLE>

<CAPTION>

                                                                                                                Reserve
                                           Charge taken                                                        Balance at
                                           at December                Cash                Non-Cash            March 31,
                                            31, 1997               Reductions            Reductions              1998
                                      -------------------      ----------------       ---------------      --------------
<S>                                   <C>                    <C>                   <C>                   <C>        
Headcount Reductions                  $         30.8         $         2.9         $         ---         $      27.9
Facility Consolidations                         31.4                                        14.5                16.9
Goodwill Write-down                             77.6                                        77.6                 ---
Gallino Write-down                              41.3                                        41.3                 ---
Impaired Assets and Equipment 
     Write-down                                 62.9                   2.9                  32.8                27.2
                                      -------------------      ----------------       ---------------      --------------
Total                                  $       244.0         $         5.8            $    166.2         $      72.0
                                      ===================      ================       ===============      ==============
</TABLE>

     The Repositioning Plan is expected to be substantially  complete at the end
of the third  quarter  of fiscal  year 1999  (March  31,  1999) and the  Company
believes the provisions recorded are adequate to cover the costs associated with
this plan.

Note 4 -Income Taxes

     Foreign  income tax expense for fiscal 1997 was greater  than the amount of
foreign income  generated due to the inability to offset certain  foreign losses
against  foreign  income.  Within certain  jurisdictions,  such as Italy and the
United Kingdom, consolidation of certain legal entities or group relief within a
controlled group is not permitted and, thus, operating losses in one entity will
not be  available  to offset  operating  income of another  commonly  controlled
entity.  In this case,  operating  losses  incurred by certain of the  Company's
legal  entities  within  one  taxing  jurisdiction  could  not be used to offset
operating income of entities in other taxing jurisdictions owned by the Company.
Losses for fiscal 1997 of  approximately $4 million and $2 million were incurred
by subsidiaries located in the United Kingdom and Finland, respectively. Both of
these subsidiaries are in a cumulative loss position and no significant positive
evidence exists to support realization of the deferred tax benefit. Accordingly,
a valuation allowance was recorded. As a result of the inability to record a tax
benefit on the aforementioned losses, foreign income tax expense is greater than
the amount of foreign net income  generated.  Accordingly the effective tax rate
for fiscal 1997 was approximately 50%.

     The Company revised its estimated  effective tax rate from a 45% benefit in
the first  quarter of fiscal 1998 to  approximately  13% in the six months ended
December  31, 1997.  This change is  primarily  the result of: (i) the impact of
certain   repositioning  and  other  special  charges  (see  Note  3)  taken  in
jurisdictions where the Company may not be able to recognize the full income tax
benefit  and (ii) no tax  benefit on  write-down  of  goodwill  included  in the
repositioning  charge.  Financial  Accounting Standards Statement 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.  Because  of
limitations   on  the   utilization   of  net  operating   losses  from  foreign
jurisdictions,  a valuation  allowance for a portion of the deferred  income tax
benefit  related to the  repositioning  and the other  special  charges has been
recorded.

     The Company  revised its effective  tax rate to a benefit of  approximately
65% for the third quarter of fiscal 1998. This change is primarily the result of
income in the third quarter in certain European taxing  jurisdictions  where the
Company had previously  recorded a 100%  valuation  allowance so that the income
had no associated income tax expense. The net effect is a tax benefit percentage
greater  than the expected  statutory  rate.  The Company  expects this trend to
continue in the fourth quarter of fiscal 1998.




                                                                 

<PAGE>



Note 5 - Earning per Share

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

<CAPTION>
                                                        Three Months Ended             Nine Months Ended
                                                             March 31,                     March 31,
                                                   -----------------------------  ----------------------------
                                                            1998            1997           1998           1997
Numerator:

<S>                                                <C>             <C>             <C>            <C>         
         Net earnings (loss)                       $        (2.4)  $          1.5  $    (326.5)   $       12.5
                                                   -------------   -------------  -------------   ------------
         Numerator for basic earnings per
           share-income available to common
           stockholders                                    (2.4)             1.5        (326.5)           12.5
                                                   -------------   -------------  -------------   ------------
         Effect of dilutive securities:
         Company obligated mandatorily
         redeemable convertible preferred
         securities , net of tax benefit                       *             ---              *            ---
                                                   -------------   -------------  -------------   ------------
         Numerator for diluted earnings per
           share-income available to common
           stockholders after assumed
           conversions                             $        (2.4)   $          1.5  $   (326.5)   $       12.5
                                                   -------------   -------------  -------------   ------------
Denominator:
         Denominator for basic earnings per
         share- weighted-average shares               35,380,458      31,661,377     32,922,510     31,643,055
                                                   -------------   -------------  -------------   ------------
Effect of dilutive securities:
         Employee stock options                                *         230,509              *        269,276
         Series A Preference Stock                             *             ---              *            ---
         Company obligated mandatorily
           redeemable convertible preferred
           securities                                          *             ---              *            ---
                                                   -------------   -------------  -------------   ------------
         Dilutive potential common shares                    ---         230,509            ---        269,276
                                                   -------------   -------------  -------------   ------------
         Denominator for diluted earnings per
           share- adjusted weighted-average
           shares and assumed  conversions            35,380,458      31,891,886     32,922,510     31,912,331
                                                   =============   =============  =============   ============
</TABLE>

   * Items not assumed in the computation because their effect is anti-dilutive.

     Each Company Obligated Mandatory 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.

     Options to  purchase  1,232,031  shares of common  stock at prices  between
$20.375 and $32.25 per share were  outstanding as of March 31, 1998 but were not
included in the  computation of diluted  earnings per share because the exercise
prices were  greater  than the average  market  price of the common  shares and,
therefore, 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  warrants  have not been included in the
computation of diluted earnings per share for the three and

                                                                 

<PAGE>



nine months ended March 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 SRS,  the Company  issued to  NationsBank,
National  Association  ("NationsBank"),  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  warrants have not been included in the computation of diluted  earnings
per share for the three and nine months  ended March 31, 1998 because the effect
would be anti-dilutive.

Note 6 - Subsequent Events

     On April 28, 1998, the Company completed the refinancing of its bridge loan
credit  facility  with a $675 million  long-term  senior credit  facility  ("New
Credit Facility"), and completed an offering of $330 million of its 9.25% senior
subordinated notes ("Notes").  Borrowings under the New Credit Facility together
with the net proceeds of the Notes  offering  were used to repay all  borrowings
outstanding  under the bridge  loan  credit  facility  the  Company  obtained to
finance in part the SRS acquisition.

     New  Credit  Facility  -  The  New  Credit   Facility   entered  into  with
NationsBank, as Agent and as Lender, consists of (1) a revolving credit facility
of up to $150.0 million (the "Revolving  Credit  Facility") (which was not drawn
at closing,  except for approximately $10.0 million of Letters of Credit), (2) a
term loan in the amount of $325.0 million ("Term Loan A") and (3) a term loan in
the amount of $200.0  million ("Term Loan B", and together with Term Loan A, the
"Term  Loans").  The  Revolving  Credit  Facility  includes (a) a $25.0  million
sublimit  for the  issuance of standby  letters of credit,  (b) a $75.0  million
sublimit for foreign  currency  denominated  borrowings  and (c) a $20.0 million
sublimit  for swing  line  loans to be  provided  by  NationsBank  ("Swing  Line
Loans"). All amounts outstanding under the Revolving Credit Facility are payable
on the sixth anniversary of the closing of the New Credit Facility.  Term Loan A
is payable in quarterly installments, subject to annual amortization, based on a
principal  amount equal to $325.0  million,  ranging from $27.5  million for the
fiscal  year 1999 to $97.5  million  for the fiscal  year  2004.  Term Loan B is
payable  in annual  installments,  subject  to annual  amortization,  based on a
principal  amount  equal to $200.0  million,  ranging  from $1.3 million for the
fiscal year 1999 to $96.3 million for the fiscal year 2006.

     Interest  accrues  on the loans made under the  Revolving  Credit  Facility
(other  than  Swing  Line  Loans)  and on Term  Loan A at  either  LIBOR  plus a
specified  margin ranging from 1.125% to 2.125%,  or the base rate, which is the
higher of  NationsBank's  prime rate and the federal  funds rate plus 0.50% (the
"Base  Rate"),  plus a specified  margin  ranging from 0.125% to 1.125%,  at the
Company's  option.  Interest  accrues  on Term  Loan B at  either  LIBOR  plus a
specified margin ranging from 1.75% to 2.375%, or the Base Rate plus a specified
margin ranging from 0.75% to 1.375%, at the Company's  option.  Swing Line Loans
will bear interest at the Base Rate plus a specified  margin ranging from 0.125%
to 2.125%.  The applicable margins will be determined by reference to a leverage
ratio of the Company and its subsidiaries.

     The  aggregate  amount  outstanding  under the New Credit  Facility will be
prepaid by amounts equal to the net proceeds,  or a specified  portion  thereof,
from certain  indebtedness and equity issuances and specified asset sales by the
Company  and its  subsidiaries,  and by a specified  percentage  of cash flow in
excess of certain  expenditures,  costs and  payments.  The  Company  may at its
option reduce the amount  available  under the New Credit Facility to the extent
such amounts are unused or prepaid in certain minimum amounts, provided that any
holder of Term Loan B shall  have,  under  certain  circumstances,  the right to
refuse to permit the  Company to  optionally  prepay all or any  portion of Term
Loan B.

     The New Credit Facility is secured by a security  interest in substantially
all of the real and personal property,  tangible and intangible,  of the Company
and its  domestic  subsidiaries  as well as a pledge of all of the stock of such
domestic subsidiaries, a pledge of not less than 65% of the voting stock and all
of the non-voting common stock of each direct foreign  subsidiary of the Company
and each direct foreign  subsidiary of each domestic  subsidiary of the Company,
and a pledge of all of the capital  stock of any  subsidiary  of a subsidiary of
the  Company  that is a borrower  under the New Credit  Facility.  The  security
interest,  other than the pledge of stock,  will be  released  if the  unsecured
long-term indebtedness of the Company has received certain minimum rating or the
leverage ratio of the Company and its subsidiaries has decreased below a certain
threshold.

                                                                

<PAGE>



The New Credit Facility is guaranteed by all of the domestic subsidiaries of the
Company.

     The New Credit  Facility  contains a number of significant  covenants that,
among other  things,  restrict  the ability of the Company to dispose of assets,
incur  additional  indebtedness,   prepay  other  indebtedness,  pay  dividends,
repurchase or redeem capital stock, enter into certain investments or create new
subsidiaries,   enter  into  sale  and  lease-back  transactions,  make  certain
acquisitions,  engage in mergers or  consolidations,  create liens, make capital
expenditures,  or engage  in  certain  transactions  with  affiliates,  and that
otherwise restrict corporate and business activities. In addition, under the New
Credit  Facility,  the Company is required  to comply with  specified  financial
ratios and tests,  including a minimum net worth test, a fixed  charge  coverage
ratio, an interest coverage ratio and a leverage ratio.

     Senior  Subordinated Notes - The Notes bear interest at 9.25% and mature on
April 15, 2008,  unless  previously  redeemed.  Interest on the Notes is payable
semiannually  on April 15 and  October 15 of each year,  commencing  October 15,
1998.  The  Notes  are  redeemable,  in whole or in part,  at the  option of the
Company at any time on or after April 15, 2003,  at certain  redemption  prices,
plus accrued and unpaid interest to the date of redemption.  In addition, at any
time on or prior to April 15,  2001,  the Company may redeem  Notes with the net
proceeds of one or more equity  offerings at a redemption price equal to 109.25%
of the principal amount thereof, plus accrued and unpaid interest to the date of
redemption,  provided  that at least 65% of the  aggregate  principal  amount of
Notes issued remains  outstanding  after each such redemption.  Upon a change of
control,  the  Company  will be  required  to make an  offer to  repurchase  all
outstanding Notes at a price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest to the date of repurchase.

     The Notes are general unsecured obligations of the Company, subordinated in
right of payment to all existing and future senior  indebtedness  (as defined in
the related Indenture) of the Company,  including indebtedness incurred pursuant
to the New Credit  Facility.  The Notes rank pari passu in right of payment with
all future senior  subordinated  indebtedness  of the Company,  if any, and rank
senior  in right of  payment  to all  future  subordinated  indebtedness  of the
Company,  if any. The Notes are guaranteed,  on a senior  subordinated basis, by
the active 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 Notes are  effectively  subordinated in
right of payment to all  indebtedness  and other  liabilities  (including  trade
payables) of the Company's subsidiaries that are not Subsidiary Guarantors.

     The maturities of long-term debt at March 31, 1998 reflect the terms of the
New Credit Facility and the Notes.

     If the  refinancing  had  occurred  on the  later of the  first  day of the
respective  periods,  or on the date the bridge loan credit facility was entered
into,  the pro forma net earnings  (loss) for the third  quarter and nine months
ended March 31, 1998 would have been $1.7 million,  $0.05 a share,  and $(316.0)
million,  $(9.60) a share,  respectively,  as  compared  to actual net  earnings
(loss) of $(2.4) million, $(0.07) a share and $(326.5) million, $(9.92) a share.
The  following is the unaudited pro forma  condensed  consolidated  statement of
operations:



                                                                 

<PAGE>


<TABLE>

<CAPTION>
Condensed Consolidated Statement of Operations (Unaudited)
 


   In millions, except earnings per share                                  Pro-forma

                                            Three Months Ended March 31,                          Nine Months Ended March 31,
                                    Actual          Adjustments         Proforma         Actual         Adjustments         Proforma
                                    1998                                  1998            1998                                1998
<S>                               <C>            <C>                <C>               <C>              <C>              <C>        
Net Sales                         $  431.7                          $     431.7       $   968.0                         $     968.0
Cost of Sales                        357.3                                357.3           837.4                               837.4
                                -----------     ---------------     ------------     -----------     --------------     ------------
         Gross profit                 74.4                 ---             74.4           130.6                ---            130.6
Total operating expenses              51.5                 ---             51.5           444.1                ---            441.1
                                -----------     ---------------     ------------     -----------     --------------     ------------
         Operating income (loss)      22.9                                 22.9         (313.5)                             (313.5)
Interest expense                      28.2               (6.4)             21.8            63.7             (16.4)             47.3
Other income (expense), net            2.8                                  2.8             2.8                                 2.8
                                -----------     ---------------     ------------     -----------     --------------     ------------
   Earnings (loss) before 
   income taxes,distribution 
   on Company obligated 
   mandatorily redeemable
   convertible preferred 
   securities and extraordinary 
   loss                              (2.5)                 6.4              3.9         (374.4)               16.4          (358.0)
Income taxes (benefit)               (4.4)                 2.3            (2.1)          (54.3)                5.9           (48.4)
Distributions on Company obligated
mandatorily redeemable convertible 
preferred securities                   4.3                                  4.3             5.7                                 5.7
                                -----------     ---------------     ------------     -----------     --------------     ------------
      Earnings (loss) before
      extraordinary loss             (2.4)                 4.1              1.7         (325.8)               10.5          (315.3)
Extraordinary loss, net of tax 
benefit of $0.4 million               ---                                                (0.7)                               (0.7)
                                -----------     ---------------     ------------     -----------     --------------     ------------
          Net earnings (loss)   $   (2.4)     $           4.1     $         1.7       $(326.5)     $           10.5     $  (316.0)
                                ===========     ===============     ============     ===========     ==============     ============
Earnings(loss)per common share:
     Earnings (loss) before 
         extraordinary loss      $  (0.07)                         $       0.05       $  (9.90)                         $    (9.58)
     Extraordinary loss               ---                                  ---          (0.02)                              (0.02)
                                -----------     ---------------     ------------     -----------     --------------     ------------
          Net earnings (loss)
           per common share      $  (0.07)                         $       0.05       $  (9.92)                         $    (9.60)
                                ===========     ===============     ============     ===========     ==============     ============

</TABLE>

     The pro-forma  adjustment is  attributable to lower interest costs and bank
fees associated with the new capital structure put in place on April 28, 1998.

     Note 7 - Financial  Information for Subsidiary Guarantors and Non-Guarantor
Subsidiaries

     The  Company  conducts  a  significant  portion  of  its  business  through
subsidiaries.  The Notes of the Company are guaranteed, jointly and severally on
a senior subordinated  basis, by the domestic  subsidiaries of the Company other
than BTI Capital  Trust and  certain  domestic  subsidiaries  owned by a foreign
subsidiary of the Company.  BTI Capital Trust, such domestic  subsidiaries owned
by a foreign  subsidiary  and the foreign  subsidiaries  of the Company have not
guaranteed  the Notes  (the  "Non-Guarantor  Subsidiaries").  The Notes  will be
effectively  subordinated  in right of  payment  to all  indebtedness  and other
liabilities (including trade payables) of the Non-Guarantor Subsidiaries.

                                                                 

<PAGE>



     Presented below are a condensed consolidating balance sheet as of March 31,
1998,  a condensed  consolidating  statement of  operations  for the nine months
ended March 31, 1998 and a condensed  consolidating  statement of cash flows for
the nine  months  ended  March 31,  1998,  for the  Subsidiary  Guarantors,  the
Non-Guarantor Subsidiaries and the Company consolidated.

<TABLE>
                                             BREED Technologies, Inc. And Subsidiaries
                                                Condensed Consolidated Balance Sheet
                                                           March 31, 1998
                                                            (Unaudited)



<CAPTION>
                                               Subsidiary            Non-Guarantor
                                               Guarantors             Subsidiaries            Eliminations         Consolidated
                                             ---------------      --------------------      ----------------      ---------------
                                                                                  (in millions)
                                            
ASSETS
<S>                                        <C>                     <C>                                            <C>          
                                           $           5.6         $           18.5$                   ---        $        24.1
Accounts receivable , net                            466.8                     215.8               (362.5)                320.1
Inventories                                           61.2                      45.9                   ---                107.1
Other current assets                                  56.8                      25.2                   ---                 82.0
                                            ---------------      --------------------      ----------------      ---------------
         Total current assets                        590.4                     305.4               (362.5)                533.3
Property, plant and equipment, net                   212.0                     126.2                   ---                338.2
Intangibles, net                                     614.7                     115.6                   ---                730.3
Net assets held for sale                               ---                      28.4                   ---                 28.4
Other assets                                        1038.1                       2.6               (999.1)                 41.6
                                            ---------------      --------------------      ----------------      ---------------
         Total assets                     $         2455.2        $            578.2        $     (1361.6)        $      1671.8
                                            ===============      ====================      ================      ===============
LIABILITIES AND STOCKHOLDERS' EQUITY 
Current liabilities:
     Notes payable and current portion
     of long-term debt                    $           20.4        $             51.8        $         ---         $        72.2
     Accounts payable                                105.4                     165.4                   ---                270.8
     Accrued expenses                                325.1                     214.2               (324.3)                215.0
                                            ---------------      --------------------      ----------------      ---------------
         Total current liabilities                   450.9                     431.4               (324.3)                558.0
Long-term debt                                       781.7                      29.2                   ---                810.9
Other long-term liabilities                           13.6                      15.9                   ---                 29.5
                                            ---------------      --------------------      ----------------      ---------------
         Total liabilities                $         1246.2        $            476.5        $      (324.3)      $         1398.4
Company obligated mandatorily redeemable 
convertible preferred securities                     250.0                       ---                   ---                250.0
Stockholders' equity                                 959.0                     101.7              (1037.3)                 23.4
                                            ---------------      --------------------      ----------------      ---------------
         Total liabilities and 
         stockholders' equity             $         2455.2     $                   578.2  $      (1361.6)      $         1671.8
                                            ===============      ====================      ================      ===============

</TABLE>

                                                                 

<PAGE>


<TABLE>


                                             BREED Technologies, Inc. And Subsidiaries
                                            Condensed Consolidating Statement of Operations
                                                  Nine Months Ended March 31, 1998
                                                          (Unaudited)


<CAPTION>
                                               Subsidiary            Non-Guarantor
                                                Guarantors             Subsidiaries            Eliminations         Consolidated
                                              ---------------      --------------------      ----------------       ---------------
                                                                                    (in millions)
                                              
<S>                                           <C>                  <C>                        <C>                   <C>            
Net Sales                                     $    567.8           $            488.1         $       (87.9)        $         968.0
Cost of sales                                      494.2                        431.1                 (87.9)                  837.4
                                              ---------------      --------------------      ----------------       ---------------
         Gross profit                               73.6                         57.0                    ---                  130.6
                                              ---------------      --------------------      ----------------       ---------------
Selling, general and administrative expenses        29.9                         29.8                    ---                   59.7
Research, development, and engineering              37.3                         12.6                    ---                   49.9
Repositioning Charges                               78.5                        165.5                    ---                  244.0
In-process research and development expenses        77.5                          ---                    ---                   77.5
Amortization of intangibles                         10.6                          2.4                    ---                   13.0
                                              ---------------      --------------------      ----------------       ---------------
         Operating (loss)                         (160.2)                      (153.3)                   ---                (313.5)
Interest expense                                     58.0                         5.7                    ---                   63.7
Other income (expense), net                           2.8                         0.2                   (0.2)                   2.8
                                              ---------------      --------------------      ----------------       ---------------
     Earnings  (loss) before income taxes,  
     distributions  on Company  obligated
     mandatorily  redeemable  convertible 
     preferred securities and extraordinary
     item
                                                   (215.4)                     (158.8)                  (0.2)               (374.4)
Income tax (benefit)                                (49.8)                       (4.5)                    ---                (54.3)
Distributions on Company obligated mandatorily
     redeemable convertible preferred securities       5.7                         ---                    ---                   5.7
                                              ---------------      --------------------      ----------------       ---------------
     Earnings (loss) before extraordinary loss      (171.3)                    (154.3)                  (0.2)               (325.8)
                                             ----------------      --------------------      ----------------       ---------------
Extraordinary loss, net of tax benefit of  
$0.4 million                                           0.7                         ---                    ---                   0.7
                                             ---------------      --------------------       ----------------       ---------------
     Net earnings (loss)                     $     (172.0)     $               (154.3)      $           (0.2)       $       (326.5)
                                             ===============      ====================       ================       ===============

</TABLE>




                                                                 

<PAGE>


<TABLE>

                                             BREED Technologies, Inc. and Subsidiaries
                                          Condensed Consolidating Statement of Cash Flows
                                                  Nine Months Ended March 31, 1998
                                                            (Unaudited)


<CAPTION>
                                                           Subsidiary       Non-Guarantor
                                                           Guarantors        Subsidiaries            Eliminations       Consolidated
                                                         ---------------   ------------------      ----------------  ---------------
                                                                                        (in millions)
                                                                             
Cash flows from operating activities:
<S>                                              <C>                       <C>                      <C>                   <C>       
   Net earnings(loss)                            $       (172.0)           $        (154.3)         $       (0.2)         $  (326.5)
Adjustments to reconcile net cash used 
in operating activities:
   Depreciation and amortization                            26.0                      18.6                   ---                44.6
   Non-cash items included in and accrual for
   repositioning and other special charges                 137.8                     134.6                   ---               272.4
   Changes in working capital items and other             (123.9)                    103.5                   0.2              (20.2)
                                                  ---------------        --------------------      ----------------  ---------------
   Net cash provided by(used in)operating 
   activities                                             (132.1)                    102.4                   ---              (29.7)
                                                  ----------------       --------------------      ----------------   --------------
Cash flows from investing activities:
   Cost of acquisitions, net of cash acquired             (638.8)                   (71.2)                   ---             (710.0)
   Capital expenditures                                    (11.6)                   (38.5)                   ---              (50.1)
   Proceeds from sale of assets and equipment                 1.9                      2.3                   ---                 4.2
                                                   ---------------       --------------------      ----------------  ---------------
   Net cash provided by (used in) 
   investing activities                                   (648.5)                  (107.4)                   ---             (755.9)
                                                   ---------------       --------------------      ----------------  ---------------
Cash flows from financing activities:
   Net change in debt                                       444.1                     15.4                   ---               459.5
   Net change in equity                                     343.4                      ---                   ---               343.4
                                                   ---------------       --------------------      ----------------  ---------------
     Net cash provided by (used in) financing
     activities                                             787.5                     15.4                   ---               802.9
                                                   ---------------       --------------------      ----------------  ---------------
Effects of exchange rate changes on cash                      ---                   (11.9)                   ---              (11.9)
                                                   ---------------       --------------------      ----------------  ---------------
Increase (decrease) in cash and cash equivalents              6.9                    (1.5)                   ---                 5.4
Cash and cash equivalents at beginning of year              (1.3)                     20.0                   ---                18.7
                                                   ---------------       --------------------      ----------------   --------------
Cash and cash equivalents at end of year           $          5.6         $           18.5                   ---        $       24.1
                                                   ===============       ====================      ================   ==============

</TABLE>


                                                                

<PAGE>



Note 8 - Foreign Operations

     The  following  financial  information  relates to  operations in different
geographic areas:

<TABLE>

<CAPTION>
In millions                                                      Nine Months
                                                               Ended March 31,
                                                                     1998              1997            1996                1995
------------------------------------------------------------ -------------------- ---------------  --------------   ---------------
Net sales to unaffiliated customers:
<S>                                                          <C>                   <C>              <C>                <C>         
North America                                                $           594.8     $      379.3     $      324.6       $      345.6
Europe                                                                   373.2            415.6            107.1               55.4
------------------------------------------------------------ -------------------- ---------------  --------------   ---------------
Total net sales                                              $           968.0     $      794.9     $      431.7      $       401.0
------------------------------------------------------------ -------------------- ---------------  --------------   ---------------
Earnings before income taxes,  distributions  
on Company  obligated  mandatorily
convertible preferred securities and 
extraordinary item 
Operating income:
   North America                                             $          (202.6)    $       46.6      $      88.4      $       100.5
   Europe                                                               (110.9)             4.0              2.4                4.0
Other income (expense), net                                              (60.9)          (21.0)              7.5                5.6
------------------------------------------------------------ -------------------- ---------------  --------------   ---------------
Earnings before income taxes                                 $          (374.4)    $       29.6     $       98.3      $       110.1
------------------------------------------------------------ -------------------- ---------------  --------------   ---------------
Identifiable assets:
North America                                                $           1210.3    $      466.6     $      284.5      $       240.3
Europe                                                                    461.5           410.6            219.3               38.4
------------------------------------------------------------ -------------------- ---------------  --------------   ---------------
Total assets                                                 $           1671.8    $      877.2    $       503.8      $       278.7
============================================================ ==================== ===============  ==============   ===============
</TABLE>

     Fiscal year 1996 includes  only three months of operations of MOMO,  S.p.A.
which was acquired in April 1996.  Fiscal year 1997 includes the  acquisition of
Gallino in July 1996, United Steering Systems in October 1996 and Custom Trim in
February 1997.  The nine months ended March 31, 1998 include the  acquisition of
SRS in October 1997.

Note 9 - Dividends

     On October  17,  1997 the Board of  Directors  decided  to  suspend  future
dividend  payments in view of the  acquisition of SRS and the related  financing
transactions.

     Under terms of the New Credit Facility  entered into on April 28, 1998, the
Company is obligated not to make  restricted  payments (as defined in the credit
agreement) including dividends,  until the consolidated  leverage ratio is equal
to or less  than  3.50 to 1.00  as at the end of the  four-quarter  period  most
recently then ended. The Company does not presently meet this standard and it is
unclear when it will be met.

Note 10 - Stock Options

     The Company  adopted  Statement of Financial  Accounting  Standards No. 123
(SFAS 123)  "Accounting  for  Stock-Based  Compensation",  in fiscal  1997,  but
elected to  continue  to measure  compensation  cost using the  intrinsic  value
method,  in accordance  with APB Option No. 25,  "Accounting for Stock issued to
Employees". Accordingly no compensation cost

                                                                

<PAGE>



     for stock  options has been  recognized in fiscal year 1996 or 1997. If the
Company had accounted for its options under the fair value method of SFAS 123 in
fiscal year 1997 and 1996,  net income  would have been  reduced by $0.6 million
and $0.3  million for the years ended June 30, 1997 and 1996,  respectively,  to
the pro-forma amounts indicated below:

<TABLE>

<CAPTION>
                                                                                              Year Ended June 30,
                                                                      --------------------------------------------------------------
                                                                                 1997                                    1996
                                                                      --------------------------         ---------------------------
<S>                                                                             <C>                                     <C>   
Net earnings in millions                                                        $ 14.3                                  $ 62.7
Earnings per common share                                                       $ 0.45                                  $ 1.99
</TABLE>


Note 11 - Leases

The Company owns most of its major  facilities,  but does lease certain  office,
     factory and warehouse space and data processing and other equipment under
principally noncancelable operating leases. The minimum rental commitments under
these noncancelable operating leases is immaterial.

Note 12 - Revenue by Class of Similar Product

     The  following is a summary of revenue by class of similar  product for the
last three fiscal years and for the nine months ended March 31, 1998:

<TABLE>

<CAPTION>
                                          Nine Months Ended
                                           March 31, 1998                 1997                  1996                  1995
                                      -------------------------   ---------------------   ----------------      -----------------
<S>                                              <C>                       <C>                  <C>                    <C>
Electronics and sensors                          16%                       34%                  70%                    85%
Airbag systems                                   22                         9                   23                     14
Steering wheels                                  28                        33                    5                    ---
Interior and plastics                            13                        23                   ---                   ---
Seatbelts                                        20                        ---                  ---                   ---
Other                                             1                         1                    2                      1
</TABLE>



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


     Three and Nine Months  Ended  March 31,  1998 (FY98)  Compared to Three and
Nine Months Ended March 31, 1997 (FY97)

     Net sales for the three and nine  months  ended  March 31, 1998 were $431.7
million and $968.0 million, respectively, an increase of $222.3 million or 106%,
and $417.4  million or 76%,  respectively,  from the  comparable  periods of the
prior  year.  The  increase  in net sales was  primarily  due to growth from the
acquisition of Custom Trim on February 25, 1997 and SRS

                                                                 
<PAGE>



on October 30, 1997. These two acquisitions  accounted for approximately  $242.0
million and $421.8  million of the  increase in net sales for the three and nine
months ended March 31, 1998,  respectively.  The increases were partially offset
by a decline in sales of EMS sensors and inflator and airbag modules.

     EMS sensor  sales for the three and nine  months  ended March 31, 1998 were
$26.6 million and $85.6 million, a decrease of 32% and 33%,  respectively,  from
the comparable  prior year periods.  These  decreases are primarily due to lower
demand as major customers continued to shift from EMS to electronic sensors that
are sourced internally.

     Inflator and airbag module sales  (excluding  SRS)  decreased 6% and 24% to
$22.6  million and $63.0  million,  respectively,  for the three and nine months
ended  March 31,  1998 as compared to the  comparable  prior year  periods.  The
decrease was primarily  due to the planned  phase-out of all  mechanical  airbag
systems at Chrysler and Fiat,  and the  reduction of shipments  into Asia of all
inflators and airbags due to the economic situation in Asia.

     The  Company's  mix of sales by class of similar  product  has  experienced
certain changes as described above.  The other principal  changes are due to the
acquisition  of SRS in October 1997 which had sales by class of similar  product
weighted  differently  from  that of the  Company.  Note 12 to the  Consolidated
Condensed Financial Statements discloses revenue by class of similar product for
fiscal 1997, 1996 and 1995 and for the nine months ended March 31, 1998.

     As disclosed in Note 8 to the Consolidated  Condensed Financial Statements,
the  Company  earned the  majority  of its  revenues  in fiscal  1997 in Europe,
whereas in earlier  years the Company  earned the  majority  of its  revenues in
North America.  This change occurred due to the  acquisition of MOMO,  S.p.A. in
April 1996 and Gallino in July 1996,  both of which are based in Europe and earn
all of their revenues in Europe.  In October 1997 the Company acquired SRS which
earns  approximately  30% of its  revenues in Europe and the  remainder in North
America, resulting in the Company's revenues for the nine months ended March 31,
1998 to be earned primarily in North America.

     Net sales for the third  quarter  ended  March 31,  1998  increased  27% to
$431.7  million from $340.7  million in the second  quarter  ended  December 31,
1998.  The  quarter-over-quarter  increase  was  primarily  attributable  to the
Company's acquisition of SRS on October 30, 1997. Excluding the SRS acquisition,
net sales for the third  quarter of fiscal 1998 were  comparable  with sales for
the second quarter.

     Cost of sales for the  three  and nine  months  ended  March 31,  1998 were
$357.3 and  $837.4,  respectively,  as  compared  to $171.4  million  and $433.9
million, respectively, for the quarter and nine months ended March 31, 1997. The
increase primarily  reflected the additional  production costs of $208.1 million
and $375.9  million  for the  quarter  and nine  months  ended  March 31,  1998,
resulting  from the  acquisition  of  Custom  Trim  during  fiscal  1997 and the
acquisition  of  SRS  in  fiscal  1998.  In  addition,   the  Company   incurred
approximately  $4.5 million and $9.0 million  during the quarter and nine months
ended March 31, 1998 related to disruption  costs associated with the closing of
seven manufacturing facilities and the ongoing relocation of a facility in North
America to Mexico,  as well as a $28.4  million  charge,  in the second  quarter
ended December 31, 1997,  related to other special  charges (see  "Repositioning
and Other Special Charges"in Note 2 above).

     Gross profit as a percentage of net sales was 17% and 14% for the three and
nine  months  ended  March  31,  1998,  respectively,  compared  to 18% and 21%,
respectively,  for the  comparable  periods of the prior year.  The  decrease in
gross  margin was  primarily  attributable  to a shift in product  mix from high
margin  EMS  sensors  to those of  lower  margin  products  acquired  in  recent
acquisitions and disruption costs.  Also, during the nine months ended March 31,
1998,  the Company  incurred  $28.4  million of other  special  charges and $9.0
million of disruption  costs.  Excluding  these special  charges and  disruption
costs, gross profit as a percentage of net sales would have been 18% and 17% for
three and nine months ended March 31, 1998, respectively.

     Selling,  general and administrative expenses for the three and nine months
ended  March 31,  1998 were $22.1  million  and $59.7  million (5% and 6% of net
sales), respectively,  compared to $19.1 million and $51.3 million (in each case
9% of net

                                                                 

<PAGE>



sales)  for the  comparable  periods of the prior  year.  Selling,  general  and
administrative  expenses as a percentage of net sales  decreased  primarily as a
result of cost  improvements  associated  with the  reduction of  headcount  and
reduced spending.

     Research,  development  and  engineering  expenses  for the  three and nine
months ended March 31, 1998 were $22.4 million and $49.9 million,  respectively,
as compared to $9.5 million and $27.3 million for the comparable  periods in the
prior year.  These increases  primarily  reflect costs  associated with acquired
businesses  of $14.7  million  and $23.8  million  for the three and nine months
ended March 31,  1998,  respectively.  As  discussed  in Note 3 to  Consolidated
Condensed Financial  Statements,  the Company incurred a $77.5 million charge in
the second  quarter of fiscal  1998  relating  to the  write-off  of in- process
research and development for technology  acquired with SRS that has not yet been
established as  technologically  feasible.  The Company  expects to benefit from
this technology as the products are launched over the next five years.

     Operating  income  for the three  months  ended  March  31,  1998 was $22.9
million or 5% of net sales  compared to $7.2  million or 3% of net sales for the
prior year period. The increase in operating income as a percentage of net sales
was primarily due to cost reductions  from the  repositioning  program.  Savings
associated with the repositioning  program were approximately $15 million during
the third  quarter of fiscal year 1998.  Also,  included in cost of sales during
the three months  ended March 31, 1998 were  disruption  costs of $4.5  million.
Exclusive of the effects of disruption  costs,  operating income would have been
$27.4 million or 6% of net sales of the three months ended March 31, 1998.

     Operating  income (loss) for the nine months ended March 31, 1998 decreased
significantly   from  last  year's   comparable  period  primarily  due  to  the
repositioning and other special charges  aggregating  $349.9 million included in
cost of sales and  operating  expenses  (see  "Repositioning  and Other  Special
Charges"  in Note 3 above).  Also,  included  in cost of sales  during the three
months ended March 31, 1998 were disruption costs of $9.0 million.  Exclusive of
the effects of the repositioning and other special charges and disruption costs,
operating  income would have been $45.4  million or 5% of net sales for the nine
months  ended March 31, 1998,  compared to $33.8  million or 6% of net sales for
the nine months ended March 31, 1997.

     Operating  income for the third  quarter of fiscal year 1998  increased 86%
from the second quarter of fiscal year 1998. Operating income was $22.9 million,
or 5% of net sales,  versus  $12.3  million,  or 4% of net sales,  in the second
quarter of fiscal year 1998,  before  repositioning  and other special  charges.
This  quarter-over-quarter  increase was largely attributable to cost reductions
from the  repositioning  program and the contribution of SRS business for a full
three months.  The  operating  income gains were  partially  offset by declining
sales  volumes  for the  electromechanical  sensor  business  and lower  product
pricing.

     Interest  expense  for the three and nine  months  ended March 31, 1998 was
$28.2 million and $63.7 million,  respectively, an increase of $21.5 million and
$45.9  million,  respectively,  from the  comparative  prior year  periods.  The
increase  in  interest  expense  was  primarily  due to the  increase in average
outstanding borrowings as a result of the acquisitions of USS and Custom Trim in
fiscal 1997 and SRS in fiscal 1998 and the fees  associated  with the short-term
bridge loan facility.

     The estimated  fiscal 1998 annual  effective tax rate has been revised to a
14% benefit to reflect  the impact of certain  repositioning  and other  special
charges  (i)  taken  in  jurisdictions  where  the  Company  may  not be able to
recognize  the full income tax benefit due to  limitations  imposed by Financial
Accounting  Standards  Statement  No. 109 (SFAS 109) and (ii) no tax  benefit on
write-down of goodwill  included in the  repositioning  charge.  SFAS 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.  Because  of
limitations   on  the   utilization   of  net  operating   losses  from  foreign
jurisdictions,  a valuation  allowance for a portion of the deferred  income tax
benefit  related to the  repositioning  and the other  special  charges has been
recorded. See Note 4 to the Financial Statements.

     The  extraordinary  loss  recorded in the nine months  ended March 31, 1998
related to the write-off of  unamortized  debt costs of the previous bank credit
facility.

     The Company's net loss of $(2.4)  million for the third quarter ended March
31, 1998  includes  $3.3 million  (after tax) of excess bank fees related to the
bridge loan credit facility that was refinanced on April 28, 1998. Excluding the
excess bank fees on the bridge loan  credit  facility,  net income for the third
quarter  was $0.9  million,  or $0.03 per  share.  This  compares  to a net loss
(before  repositioning  and other special  charges and  extraordinary  items) of
$(0.8)  million,  or $(0.03) per share, in the second quarter ended December 31,
1997. Excess bank fees represents the amount of fee amortization  related to the
bridge loan credit facility in excess of the amortization of the fees related to
the new long-term capital structure.


                                                                 

<PAGE>



Liquidity and Capital Resources

     The Company's  primary cash  requirements are for working capital,  capital
expenditures  and interest  payments on  outstanding  indebtedness.  The Company
believes that cash generated from operations, and borrowings available under its
New Credit  Facility will be sufficient to meet the Company's  working  capital,
capital  expenditures,  debt service and repositioning needs for the foreseeable
future.

     Cash flows from  operating  activities  for the nine months ended March 31,
1998 was a deficit of $29.9 million  compared  with a $47.8 million  surplus for
the nine months ended March 31, 1997.  The decrease in cash flows was  primarily
attributed  to the net loss of  $326.5  million,  net of the  noncash  items and
accruals included in the repositioning and other special charges.

     Capital  expenditures  aggregated  $50.1  million for the nine months ended
March  31,  1998.  Investments  continue  to be  made  to  support  productivity
improvements,  cost reduction programs,  capital needs to improve  manufacturing
efficiency and added capability for existing and new products.

     During the nine months  ended March 31,  1998,  the Company  increased  its
outstanding  indebtedness  by $459.7 million which  resulted  primarily from the
acquisition  of SRS and the financing of capital  expenditures.  The Company had
unused  availability  under its New  Credit  Facility  as of March  31,  1998 of
approximately $90 million.

     On April 28, 1998, the Company  replaced its short-term  bridge loan credit
facility with the New Credit Facility,  under which the Company has $675 million
of aggregate  borrowing  availability.  The New Credit Facility  consists of two
term loans totaling $525 million and a $150 million  revolving  credit  facility
(which was  largely  undrawn at  closing).  At April 28, 1998 the Company had an
aggregate  of $525  million  of  borrowings  outstanding  under  the New  Credit
Facility, which bore interest at a weighted average rate of 8% per annum at such
date.  Under the terms of the New Credit  Facility,  the Company is obligated to
not make  restricted  payments  (as defined in the Credit  Agreement)  including
dividends,  until the consolidated  leverage ratio is equal to or less than 3.50
to 1.00 as at the end of the  four-quarter  period most recently then ended. The
Company does not presently  meet this standard and it is unclear when it will be
met.  Also,  the Company  issued and sold $330 million of the Notes in a private
transaction  under Rule 144A under the Securities act of 1933. The interest rate
on the Notes is 9.25%.

     Based  on a  recent  assessment,  the  Company  determined  that it will be
required  to modify or replace  portions of its  software  so that its  computer
systems  will  function  properly  with  respect  to dates in the year  2000 and
thereafter.  The Company presently  believes that with modifications to existing
software  and  conversions  to new  software,  the Year 2000 issue will not pose
significant  operational  problems for its computer systems.  The Company cannot
currently quantify the costs of these modifications and conversions. However, if
such  modifications  and conversions are not made, or are not timely  completed,
the Year 2000  Issue  could  have a  material  impact on the  operations  of the
Company.

     The Company  believes its  financial  position will permit the financing of
its business needs and  opportunities  in an orderly  manner.  It is anticipated
that  ongoing  operations  will be financed  primarily by  internally  generated
funds. In addition,  the Company has the flexibility to meet short-term  working
capital and other temporary  requirements  through the utilization of borrowings
under its New Credit Facility.

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

                                                                 

<PAGE>



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,   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.

                           PART II - OTHER INFORMATION

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

     None

Item 6.  Exhibits and Reports on Form 8-K

   (a)  Exhibits

     None

   (b) Reports on Form 8-K -

       None

                                   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)



May 15, 1998

                                              By:   /s/ Frank J. Gnisci
                                                    Frank J. Gnisci
                                                    Executive Vice President and
                                                      Chief Financial Officer