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

                                  FORM 10-K/A

                       FOR ANNUAL AND TRANSITION REPORTS
                    PURSUANT TO SECTIONS 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)

[X]       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
          EXCHANGE ACT OF 1934

                    FOR THE FISCAL YEAR ENDED JUNE 30, 1997

                                      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 its charter)

                 DELAWARE                             22-2767118
           (State or other jurisdiction of         (I.R.S. Employer
           incorporation or organization)         Identification No.)

          5300 OLD TAMPA HIGHWAY                         33811
            LAKELAND, FLORIDA                          (Zip Code)
   (Address of principal executive offices)

      Registrant's telephone number, including area code:  (941) 668-6000

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

       Title of Each Class             Name of Each Exchange on Which Registered
 -------------------------------       -----------------------------------------
  Common Stock, $.01 par value                New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:  None

     Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  YES    X         NO ______
                                               -------            

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

     As of July 31, 1997, the approximate aggregate market value of the voting
and non-voting stock held by non-affiliates of the registrant was $263,834,000
based on the last reported sale price of the Company's Common Stock on the New
York Stock Exchange as of the close of business on July 31, 1997. There were
31,679,217 shares of Common Stock outstanding as of July 31, 1997.

                 DOCUMENTS OR PARTS INCORPORATED BY REFERENCE

<TABLE>
<CAPTION>
                         Document                                Form 10K Part into Which the Document is Incorporated
---------------------------------------------------------        ------------------------------------------------------  
<S>                                                              <C> 
Proxy Statement relating to Registrant's Annual Meeting                               Part III
  of Stockholders to be held on November 20, 1997
</TABLE>
  
<PAGE>
 
                                     INDEX
                                     -----

     The undersigned registrant hereby amends the following items of its Annual
Report on Form 10-K for the year ended June 30, 1997 as set forth in the pages
attached hereto:

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
ITEM 1.   BUSINESS......................................................      1

ITEM 2.   FINANCIAL STATEMENTS

          Consolidated Balance Sheets...................................     10

          Consolidated Statements of Earnings...........................     11

          Consolidated Statements of Stockholders' Equity...............     12

          Consolidated Statements of Cash Flows.........................     13

          Notes to Consolidated Financial Statements....................     14
</TABLE>

                                       i
<PAGE>
 
ITEM 1.   BUSINESS

     BREED Technologies, Inc. (the "Company" or "BREED") designs, develops,
manufactures and sells a complete range of occupant safety systems and other
components including electronic and electromechanical sensors, airbag modules,
inflators, steering wheels, and plastic exterior and interior components.  The
Company's reed switch and silicon micro- sensor products are used in a wide
variety of automotive as well as industrial sensor and switching applications.
Headquartered in Lakeland, Florida, BREED is one of the world's leading
suppliers of automotive occupant safety systems and steering wheels, providing
its global automotive customers with research and development, engineering and
manufacturing support through its global network of facilities in 13 countries.
BREED employs more than 11,100 people at its 57 facilities worldwide.

     BREED has acquired nine companies in the past three years, five in the area
of electronic components and subassemblies and four in the area of steering
wheels, interior/exterior components and automotive accessories.  Throughout the
world, BREED subsidiaries -- A/2/M, BREED Italia, Custom Trim, Force Imaging,
Gallino Plasturgia, Hamlin, Italtest, MOMO, United Steering Systems and VTI
Hamlin -- provide leading technologies to automotive, industrial and commercial
markets.

RECENT DEVELOPMENTS

     Recent acquisitions provide BREED with strategic vertical and horizontal
integration, and strengthen our position as a major global supplier of fully
integrated occupant safety systems.  BREED completed several strategic
acquisitions in fiscal 1997, including:

          .    In July 1996, the steering wheel and plastic exterior and
               interior components business of the Gallino Group.

          .    In October 1996, the steering wheel business of United
               Technologies Automotive, renamed United Steering Systems, which
               provided additional patented technologies and expanded BREED's
               customer base, and;

          .    In March 1997, Custom Trim Ltd., the automobile industry's
               primary supplier of leather-wrapped steering wheels and shift
               knobs.

     These acquisitions, combined with the Company's acquisition of MOMO,
established BREED as the world's largest supplier of steering wheels.  This
position enables BREED to bid on global steering wheel contracts and provides an
entry point for bidding other global supply agreements in the area of occupant
safety.  To better integrate these acquisitions, and to enhance customer support
and focus product development in the Company's core business, BREED restructured
its business in three product divisions during the year.  The new structure
reflects the significant shift in BREED's product mix toward integrated occupant
safety systems.  The new business units are Electronics/Sensors, Steering Wheels
& Interiors, and Air Bags/Inflators.

     On August 27, 1997, BREED entered into an Asset Purchase Agreement with
AlliedSignal, Inc. to acquire its automotive safety restraint business.
AlliedSignal Safety Restraint Systems has annual sales in excess of $900 million
and employs 7,700 people in 14 plants in seven countries.  It is the largest
supplier of seatbelts and third largest supplier of airbags in the United
States.  Management believes that this strategic combination will make BREED an
even stronger global competitor in fully integrated occupant safety systems.
The transaction is expected to be completed following regulatory review, as well
as other legal requirements in various countries where these businesses operate.

                                       1

     
<PAGE>
 
PRODUCTS

ELECTRONIC PRODUCTS

     The Company's principal electronic product line consists of its component
products, including sensors for airbag and non-airbag applications and other
reed switch and reed relay products.

     In the airbag sensor market, the Company sells a range of electromechanical
(EMS) sensors, which are based on its proprietary technology.  These EMS sensor
products include both ball-in-tube designs and reed switch designs which are
used in vehicles sold in Europe and North America.  The Company has manufactured
and sold in excess of 90 million EMS sensors since 1987, and continues to
maintain a significant market position in EMS sensors.  These sensors are used
as both complete sensing systems (typically two or three EMS sensors coupled
with a diagnostic module) and in conjunction with electronic sensors (typically
one or two EMS sensors per vehicle).

     Many vehicle manufacturers are considering and/or commencing the use of
electronic sensing diagnostic systems (located in the occupant compartment of a
vehicle).  Increased use of electronic sensing diagnostic systems will reduce
the use of EMS components in the crash sensing market. In response to this
industry trend, the Company has completed development, and commenced marketing a
series of electronic airbag sensing diagnostic modules (SDM) which include
electronic discriminating sensors, electromechanical safing sensors and
diagnostic circuitry.  These SDM products are designed to meet vehicle
manufacturer requirements for passenger compartment electronic sensing. Planned
for this next model year is the 'next generation' BREED SDM, offering greater
functionality while reducing costs.  In order to maintain the Company's rigid
cost and quality standards, BREED has vertically integrated the next generation
of electronic sensors through Hamlin, VTI Hamlin and A2M (Enhanced Algorithm
Capabilities). This enables the Company to control sourcing for the most
critical components of its SDM.

     In non-airbag applications, the Company sells reed switch and silicon
capacitive sensors for use in an increasing number of automotive and non-
automotive (e.g., industrial and medical) products.  Reed switch sensor products
are used to sense position or proximity in a wide range of commercial equipment
(photocopy machines, exercise equipment, security systems, cellular phones,
etc.).  The Company's silicon sensor products, which include designs to sense
acceleration, pressure or angular rate changes, are used in automotive
applications such as electronically controlled suspension, antilock braking,
fuel vapor recovery and manifold absolute pressure products.

     In April 1996 the Company acquired Italtest.  This company has high-quality
electronics manufacturing capabilities and is currently making sensing
diagnostic modules for BREED Italia's airbag systems.

     In May 1996 the Company acquired Force Imaging Technologies, Inc. (FIT).
This company has a unique patented technology of variable force sensors that
have many applications, including multi-function steering wheel capabilities,
occupant sensing and automated seat belt tensioning.

     In November 1996 the Company acquired A/2/M.  This company specializes in
algorithm development and signal processing techniques.

AIRBAG SYSTEMS AND COMPONENTS (INFLATORS, MODULES AND AMS)

     The Company produces driver-side, passenger-side, and side impact airbag
systems.  The Company has been supplying mechanically initiated inflators and
modules since 1989, electronically initiated inflators and modules since 1994
and passenger side inflators and modules since 1995.  The Company offers
inflators for use in full size airbag systems (US requirement), its smaller
Facebag systems (European 

                                       2
<PAGE>
 
requirement) and side impact systems. These inflator products include inflators
using sodium azide-based propellants, hybrid(compressed gas and propellant),
"Eco-safe" non-sodium azide-based propellant, and stored gas designs.

STEERING WHEEL/LEATHER WRAPPING

     The Company acquired Gallino (July 1, 1996) and MOMO (April 15, 1996),
steering wheel suppliers to OEMs in Europe, Asia and the U.S. On October 25,
1996, the Company acquired the North American and United Kingdom steering wheel
business of United Technologies.  This acquisition allows the Company to supply
steering wheels to OEMs in the United States, Canada, Mexico and the United
Kingdom.  It further enhances the Company's ability to provide complete
integrated airbag steering wheels to OEMs.  Additionally, the Company acquired
the stock of BTI Investments, whose principal business is conducted under the
trade name of Custom Trim.  It primarily provides leather wrapping services for
steering wheels and other automotive accessories.

CUSTOMERS

     BREED's future success in the airbag business will depend in large part on
its ability to supply complete occupant protection systems (crash sensors,
airbag modules, steering wheels and integrated airbag/steering wheels) to meet
the changing requirements of automobile manufacturers.

     The Company's OEM customers typically award contracts to supply products
for a particular car model for the life of the model (which averages five years)
(a "program").  Such contracts are awarded two or three years prior to the start
of production of such model.  Such contracts do  not require the OEM to purchase
any specified quantities of products. The Company also competes for new business
to supply products for successor models and thus is subject to the risk that the
OEM will not select the Company to produce products for a successor model.
Consequently, the Company is required to bid for contracts on a continuous basis
in order to maintain stable revenues.  Because the Company supplies products for
a broad cross-section of both new and mature models, the Company is not
dependent on sales attributable to a single program and thus generally the loss
of any single program should not have a material adverse effect on the Company's
results of operations.  However, although the agreements with OEMs extend for
life of the model, such agreements may be terminable by the customer during the
term of the contract.

     Sales by the Company to Ford for fiscal 1995, 1996 and 1997 accounted for
37%, 33% and 25%, respectively, of the Company's total net sales for these
periods.  Sales by the Company to GM and Delphi (including Delco) for fiscal
1995, 1996 and 1997 accounted for 40%, 26% and 13%, respectively, of the
Company's total net sales for these periods.  Sales by the Company to the Fiat
Group for fiscal 1996 and 1997 accounted for 14% and 32%, respectively, of the
Company's sales.

     The Company supplies its sensor products primarily to vehicle OEMs, such as
Ford, Fiat, Nissan, Mazda, and to Tier 1 suppliers, such as Delphi (through
Delco).  Although the Company has multi-year EMS supply agreements with Ford and
Delphi (through Delco), these contracts do not commit such customers to purchase
any specified quantities of products from the Company, and each of the
agreements is subject to termination under certain conditions.  Ford and GM are
replacing EMS sensors with electronic sensors; however, BREED's EMS sensors are
being used as auxiliary sensors in certain vehicles.  BREED has expanded its
product lines to include down-sized EMS sensors, electronic SDMs and silicon
micro sensors, as well as additional EMS sensors designed for use in SDMs. In
order to meet the demands of the increasing electronic sensor market, the
Company has micro machining manufacturing, electronic assembly capabilities and
algorithm technology.  As the EMS sensor market shifts to electronic, BREED is
adversely affected since there can be no assurance that these new products will
achieve as broad a market position for the Company as it achieved with its
current EMS sensor products; however, additional product lines including
electronic sensing and steering wheels are favorably impacting BREED.

                                       3
<PAGE>
 
     The Company supplies Fiat, Ford of Australia, Chrysler, Jaguar, Proton, and
Ssangyong with airbag modules, and Delphi, Mazda and Suzuki with inflators.  The
Company has entered into a multi-year supply agreement with Fiat, Delphi, Proton
and Nihon Plast under which the Company supplies inflators and airbag modules;
these supply agreements are subject to termination under certain conditions.  In
addition, the Company supplies Fiat electronic sensing diagnostic modules.

     BREED has positioned itself through the acquisitions of MOMO, Gallino and
United Steering Systems as the world's largest supplier of steering wheels.  The
Company's wood and leather steering wheels, light alloy wheels and other high-
end car accessories are sold primarily to OEMs such as Ferrari, Lamborghini,
Jaguar, Porsche, Honda, Fuji Heavy and Nissan. In addition, the Company sells
these products to the aftermarket through its distribution centers.  High-volume
steering wheel customers include Ford, the Fiat Group, Chrysler and Nissan.
Ford has changed their agreement structure from long-term agreements to Total
Cost Management ("TCM") agreements.  The major customers for the Company's
leather wrapping business are TRW, Delphi, Petri, Toyota Gosei and Centoco.

     The Company sells its reed switch and silicon sensor products to a large
number of manufacturers of equipment sold for automotive and non-automotive
applications.  Significant customers include Delphi (including Delco),
Morton/Autoliv, Siemens, Bosch, Temic, TRW, Xerox, SMP and Nordic Track, as well
as vehicle OEM customers, including Mitsubishi, Toyota and GM.

SALES AND ENGINEERING SUPPORT

     The Company's customers require early involvement of their suppliers in the
design and engineering aspects of product development.  Automobile manufacturers
seek the Company's assistance in airbag sensor and system design and calibration
and the Company has assumed engineering responsibility for the development of
certain components of these sensor airbag systems, including the performance
testing necessary to ensure compliance with the standards and specifications.
The Company has dedicated certain of its engineering staff to the support of its
major customers.

SUPPLIERS AND RAW MATERIALS

     The Company purchases many of the components for its products (including
certain plastic parts, certain stampings, magnets, precision steel balls,
contacts, certain electronic assemblies, certain wire harnesses, airbag
doors/covers, printed wire boards, certain ignitor assemblies, labels, aluminum
propellant cups, rubber/silicon seals, aluminum, leather) as finished
components, and purchases raw materials (including chemicals for the production
of inflator propellent, resin and hardener for potting compound, impacted
aluminum blanks, steel rod, raw stampings to be welded, airbag fabric, and wire
harnesses sub-components) from third parties pursuant to supply agreements.

     The Company has agreements to purchase most or all of its requirements for
certain components from single sources, typically when the tooling for such is
reimbursed by the OEM customer.  Examples include certain plastic parts, certain
stampings, magnets, contacts, certain electronic assemblies, certain
wireharnesses, airbag doors/covers, certain ignitor assemblies, aluminum
propellent cups and resin and hardener for the potting compound.  The Company
believes that alternative sources for these single source items are available at
competitive prices. No significant supply problems have been encountered in
recent years, and relationships with suppliers have generally been good.

PATENTS, TRADEMARKS AND LICENSES

     The Company currently owns a significant number of United States and
related foreign patents in certain countries, which expire on varying dates from
1997 through 2016.  It also has trademarked several corporate icons.  While the
Company considers its patents and trademarks to be valuable assets, it does not

                                       4
<PAGE>
 
believe that its competitive position is dependent on patent and/or trademark
protection or that its operations are dependent on any individual patent.

     The Company has granted licenses to specified portions of the Company's
technology in exchange for ongoing royalties and other payments.  The Company's
licensees include Sensor Technology Co. Ltd., Tokai Rika and Oki.  The Company
pays royalties to United Technologies Corporation in connection with the sale
and licensing of certain of the Company's EMS airbag sensor products.

BACKLOG

     The Company's automotive customers typically award contracts to supply
products for a particular car model for the life of the model (which averages
five years).  Such contracts do not require the OEM to purchase any specified
quantities of products. With respect to these customers, the Company generally
does not manufacture or ship products until it has received a purchase order and
material release which specifies the quantity ordered and specific delivery
dates.  Generally these orders are shipped within two weeks of receipt of the
final material release.  With respect to the Company's non-automotive customers,
products are produced for stock based on sales forecasts and historical demand.
The backlog at June 30, 1997 was not significant.

ENGINEERING RESEARCH AND DEVELOPMENT

     The Company places significant emphasis on new product and technology
development and has increased its research and development activities in each of
the last three years.  During fiscal 1995, 1996 and 1997, engineering, research
and development expenses were approximately $18.5 million, $23.6 million and
$36.1 million, respectively.

     The Company's research and development activities are focused on
development of new airbag sensor, inflator and module products including
integrated airbag, steering wheels with multifunction membrane sensors and
enhancements or cost improvements for existing products. New airbag sensor
products and technology which are subjects of this research and development
activity include a series of electronic sensing diagnostic modules, down-sized
spring-bias electromechanical sensors, and side impact and predictive sensing
systems.  New inflator and module products and technologies which are subjects
of this research and development activity include mechanically and electrically
initiated passenger-side systems, non-sodium azide-based products and side
impact systems.  The Company also is developing a new series of down-sized
silicon capacitive sensors for acceleration, pressure and angular rate
applications as well as membrane sensors for accessory function and occupant
detection systems.  In addition, the company is also working on developing micro
machined and ultrasonic sensors for occupant detection systems.

COMPETITION

     The Company competes with independent suppliers of steering wheels, airbag
sensors, systems and their components. In addition, many of the Company's
customers are integrated manufacturers which produce or could produce a
substantial portion of their own requirements for certain airbag components. The
Company competes primarily on the basis of its product quality, price,
reliability, engineering support and production capabilities.

     The Company principally competes for new steering wheel sensor, inflator
and leather wrapping business at the beginning of the development of new vehicle
models.  The Company also competes for new business upon the redesign of
existing models by its customers or, in the case of inflators and modules, as
are placement supplier for existing models.  The development of new models and
redesign of existing 

                                       5
<PAGE>
 
models generally begin three to five years and two to three years, respectively,
prior to the marketing of such models to the public.

AIRBAG SENSORS

     The Company's principal competitor in the market for electromechanical
sensors is TRW. The Company's sensors also compete with electronic sensors
currently offered or under development by competitors such as TRW, Robert Bosch
GmbH ("Bosch"), Siemens, Morton/Autoliv, Temic, Nippondenso and Delphi (through
Delco) and the internal electronics divisions of Ford.

INFLATORS

     The current market for airbag inflators is dominated by a small number of
companies, most of which have significant financial and other resources.  The
Company's principal competitors in the sale of inflators are Autoliv/Morton, TRW
and Takata, which offer inflator products on a worldwide basis, and Temic, which
offers inflator products in Europe.  In addition, a number of competitors,
including AlliedSignal, Inc., Magna, Morton/Autoliv and OEA Inc., have joint
ventures for the development and sale of alternative inflator technologies.  The
Company's ability to compete effectively in the sale of inflator products may be
limited by pre-existing contractual relationships between its competitors and
certain automobile manufacturers.

AIRBAG SYSTEMS

     The Company believes that its AMS systems are the only currently available
airbag system using mechanical sensing and initiation.  In selling these
systems, the Company competes with independent suppliers of electrically
initiated airbag systems and components and, in Japan, the Company's licensees,
STC and Tokai Rika.  The Company's competitors with respect to complete
electrically initiated airbag systems include TRW, Takata Inc., Morton/Autoliv,
AlliedSignal, Inc., Morton, Magna, Temic and manufacturers of airbag components
for customers assembling their own airbag systems.

REED SWITCH PRODUCTS

     The primary competition for the sale of reed switches are Phillips, N.V.
and Oki. In addition, there are a number of small regional reed switch producers
in North America, Europe and Asia.  For value-added reed switch products such as
position sensors, there are also several small regional competitors.  For reed
relay products, the primary competitors are C.P. Claire and Coto-Wabash.

SILICON SENSOR PRODUCTS

     There exists a significant number of competitors in the market for various
kinds of silicon microsensors, some of which have broad product offerings
comparable to or greater than those of the Company.  These include such
companies as Texas Instruments, Inc., Motorola, Inc., Analog Devices, Inc.,
E.G.& G/IC Sensors, Inc., Sensonor, and the internal operations of certain
vehicle and equipment manufacturers.  However, the Company's sensor designs are
proprietary and unique to the Company, and only a limited number of the
Company's silicon sensor competitors offer capacitive technology.

STEERING WHEELS AND ROAD WHEELS

     The North American steering wheel operations competes on sales to OEMs with
TRW, Petri, Centoco, Toyota Gosei and Neaton.  The European steering wheel
companies compete in OEM sales with Morton/Autoliv, Dalphi Metal, Delphi and
Petri.  The luxury steering wheels of the Company compete 

                                       6
<PAGE>
 
with NARDI. In Italy, competitors for road wheels include Fondmetal, OZ, and
Speedline. Other competitors include BBS and ATS in Germany, Boid in the United
States, and Taneisha in Japan.

GOVERNMENT REGULATIONS

AUTOMOTIVE REGULATIONS

     Airbag systems installed in automobiles sold in the United States must
comply with government regulations.  The Company's customers are required to
self-certify that airbag systems installed in vehicles sold in the United States
satisfy these requirements.

ENVIRONMENTAL REGULATIONS

     The Company uses various hazardous and toxic substances in its
manufacturing processes including certain solvents, lubricants, sodium azide and
other pyrotechnic materials.  The Company's operations are subject to numerous
Federal, state and local laws, regulations and permit requirements relating to
the handling, storage, disposal and transportation of certain of these
substances. The Company's foreign operations are also subject to various
environmental and transportation-related statutes and regulations. Generally,
these foreign requirements tend to be no more restrictive than those in effect
in the United states.  The Company believes that it is in substantial compliance
with existing laws and regulations and has obtained or applied for the necessary
permits to conduct its business operations.  Compliance by the Company with
applicable environmental laws has not had a material adverse effect on the
Company's financial condition or competitive position to date.  Although no
assurances can be given, the Company does not believe that compliance with
existing environmental or other governmental laws or regulations will have a
material adverse effect in the future.

PRODUCT LIABILITY

     The sale of airbag systems and components entails an inherent risk of
product liability claims. Although the Company maintains product liability
insurance, there can be no assurance that the coverage limits of the Company's
insurance policies will be adequate.  Such insurance can be expensive and in the
future may not be available on acceptable terms, if at all.  A successful claim
brought against the Company resulting in a recovery in excess of its insurance
coverage could have a material adverse effect on the Company's financial
condition and results of operations.  However, there are no lawsuits pending
against the Company which the Company believes at this time, to be material.
With regard to the pending acquisition of AlliedSignal's Safety Restraint
Systems Division, the company will not be responsible for any pending product
liability matters.

EMPLOYEES

     As of September 1, 1997, the Company has approximately 11,100 full time
employees worldwide. The Company's United States employees are unionized in two
locations, representing approximately 26% of the domestic workforce.  The
Company's hourly employees in Mexico, Italy and Finland are represented by labor
unions.  The Company has not experienced any legal work stoppages and considers
its relations with its employees to be good.  Wages are negotiated under the
Company's Mexican union agreements in December of each year, with the full
contract negotiation every two years.

                                       7
<PAGE>
 
EXECUTIVE OFFICERS OF THE REGISTRANT

     Information regarding the Executive Officers of the Company are set forth
as follows:

Allen K. Breed                     70   Chairman of the Board of Directors
Johnnie Cordell Breed              53   Co-Chairman and Chief Executive Officer
Charles J. Speranzella, Jr.        41   Vice Chairman
Fred J. Musone                     53   President,  
                                        Chief Operating Officer
Robert M. Rapone                   14   Executive Vice President,  
                                        Operations Worldwide
Frank J. Gnisci                    47   Executive Vice President,
                                        Chief Financial Officer
Arthur R. Schauffert, Jr.          46   Treasurer
Lizanne Guptill                    42   Secretary

     Mr. Breed, founder of the Company, has been Chairman of the Company since
its inception. Mr. Breed served as Chief Executive Officer through August, 1997.
Mr. Breed is also Chairman, President and owner of BREED Corporation, a real
estate holding Company.  Mr. Breed is the husband of Johnnie Cordell Breed.

     Mrs. Breed was elected Co-Chairman of the Board and Chief Executive Officer
of the Company on August 27, 1997 and has been a director of the Company since
its inception.  Mrs. Breed served as President and Chief Operating Officer from
September, 1995.  Mrs. Breed also serves as Vice President of BREED Corporation.
In 1982, Mrs. Breed co-founded Transcor, Inc., a provider of transportation
travel services.  She is currently the Secretary, Treasurer and sole stockholder
of Transcor, Inc. Mrs. Breed is the wife of Allen K. Breed.

     On August 27, 1997, Mr. Speranzella was elected Vice Chairman of the
Company. Mr. Speranzella joined the Company as General Counsel and Assistant
Secretary in September, 1994. He became Managing Senior Vice President, General
Counsel and Assistant Secretary in February, 1995. Mr. Speranzella was elected
Corporate Secretary in May, 1995. He was promoted to Executive Vice President,
General Counsel and Secretary in July, 1995. Mr. Speranzella became President of
BREED European Holdings, Inc. in June 1996 and Executive Vice President of World
Wide Operations of the Company in January 1997. From 1979 until joining the
Company, he held various senior positions at Matra Hachette's Fairchild Space
and Defense Corporation and Martin Marietta.

     Mr. Musone joined the Company on September 2, 1997 as President and Chief
Operating Officer. Prior to joining the Company, Mr. Musone was President and
Chief Operating Officer of Morton International ASP/Autoliv, Inc., a
manufacturer of automotive safety products, since 1995.  He held various
management positions with Federal Mogul Corporation from 1972 through 1995, the
most recent position being President of Worldwide Manufacturing Operations.

     Mr. Rapone joined the Company as Executive Vice President, Operations
Worldwide on September 2, 1997.  Since 1995, Mr. Rapone was Vice President of
Operations for Morton International ASP/Autoliv, Inc., a manufacturer of
automotive safety products. From 1989-1995, Mr. Rapone was employed by Federal
Mogul Corporation, serving most recently as Director of Connectivity.  From
1983-1989, Mr. Rapone was employed by Texas Instruments in various management
positions.

     Mr. Gnisci joined the Company as Executive Vice President, Chief Financial
Officer on September 8, 1997.  Prior to joining the Company, Mr. Gnisci was Vice
President of Finance for Terex Corporation, a manufacturer of heavy duty
construction vehicles and equipment, since 1994.  From 1991-1994, Mr. Gnisci was
Vice President of Finance for Babcock Industries, Inc., a manufacturer of
conveyor 

                                       8
<PAGE>
 
systems. Mr. Gnisci was employed by Gold Fields Mining Corporation from 1987-
1991 as Vice President and Controller. From 1979-1987, Mr. Gnisci was employed
by Chicago Pneumatic Tool Company in various financial positions, including
Assistant Controller and Director of Corporate Audit.

     Mr. Schauffert joined the Company in 1993 as Treasurer.  Prior to that
time, hews Treasurer and Assistant Secretary of Moog Automotive, Inc. He joined
Moog in 1988 from St. Joe Minerals Corporation, where he held various positions,
including Treasurer, from 1980 until 1987.

     Ms. Guptill joined the Company in 1993 as a Legal Assistant to the General
Counsel, specializing in corporate and business law.  Prior to joining The
company, Ms. Guptill was a Legal Assistant with the Corporate Legal Department
of Marriott International, Inc. since 1990.  Ms. Guptill was employed as a Legal
Assistant with the General Corporate division of Hayt, Hayt & Landau in Miami
from 1984-1990.

FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES

     The information required by this Item is contained in the Company's
financial statement footnote 9 under the heading "Information Related to
Customers and Operations in Different Geographic Areas" on page 20 appearing
elsewhere in this report.

                                       9
<PAGE>
 
ITEM 2.  FINANCIAL STATEMENTS

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                 JUNE 30,
In thousands                                                  1997       1996
------------------------------------------------------     ---------  --------
<S>                                                        <C>        <C>
ASSETS
CURRENT ASSETS
   Cash and cash equivalents                               $ 18,707    $ 95,830
   Accounts receivable, principally trade                   207,951     110,656
   Inventories                                               75,347      52,890
   Prepaid expenses                                          13,519       7,247
------------------------------------------------------     --------    --------
Total Current Assets                                        315,524     266,623
------------------------------------------------------     --------    --------
PROPERTY, PLANT AND EQUIPMENT
   Land                                                      15,206      10,805
   Buildings                                                106,122      73,342
   Machinery and equipment                                  212,542     126,947
   Construction in progress                                  28,013      14,417
------------------------------------------------------     --------    --------
                                                            361,883     225,511
   Less accumulated depreciation                            (85,433)    (53,858)
------------------------------------------------------     --------    --------
                                                            276,450     171,653
------------------------------------------------------     --------    --------
INTANGIBLE ASSETS                                           220,956      45,053
NET ASSETS HELD FOR SALE                                     52,620          --
INVESTMENTS AND OTHER ASSETS                                 11,603      20,473
------------------------------------------------------     --------    --------
TOTAL ASSETS                                               $877,153    $503,802
======================================================     ========    ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
   Notes payable and current portion of long-term debt     $191,744    $120,688
   Accounts payable                                         121,505      33,940
   Employee compensation and benefits                        16,818      13,844
   Accrued expenses                                          32,661       7,980
------------------------------------------------------     --------    --------
Total Current Liabilities                                   362,728     176,452
LONG-TERM DEBT                                              231,700      42,123
OTHER LONG-TERM LIABILITIES                                  16,306      10,147
------------------------------------------------------     --------    --------
TOTAL LIABILITIES                                           610,734     228,722
------------------------------------------------------     --------    --------
STOCKHOLDERS' EQUITY
   Common stock                                                 317         316
   Additional paid-in capital                                77,470      76,652
   Retained earnings                                        207,964     201,981
   Foreign currency translation adjustments                 (18,843)     (2,927)
   Unearned compensation                                       (489)       (942)
------------------------------------------------------     --------    --------
TOTAL STOCKHOLDERS' EQUITY                                  266,419     275,080
------------------------------------------------------     --------    --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                 $877,153    $503,802
======================================================     ========    ========
</TABLE> 

See Notes to Consolidated Financial Statements

                                      10
<PAGE>
 
                      CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
                                                  YEAR ENDED JUNE 30,
In thousands, except for per share data       1997        1996        1995
----------------------------------------    ---------  ---------   ---------
<S>                                        <C>         <C>         <C>
NET SALES                                   $794,880    $431,689    $400,972
Cost of sales                                631,283     277,044     244,551
----------------------------------------    ---------  ---------   ---------
Gross profit                                 163,597     154,645     156,421
----------------------------------------    ---------  ---------   ---------
Selling, general and administrative           70,583      38,243      33,098
Engineering, research and development         36,121      23,588      18,506
Amortization of intangibles                    6,310       2,001         286
----------------------------------------    ---------  ---------   ---------
Operating income                              50,583      90,813     104,531
Interest income (expense), net               (24,460)     (1,137)        704
Other income (expense), net                    3,524       8,662       4,898
----------------------------------------    ---------  ---------   ---------
Earnings before income taxes                  29,647      98,338     110,133
Income taxes                                  14,800      35,300      37,800
NET EARNINGS                                $ 14,847    $ 63,038    $ 72,333
========================================    ========   =========   =========
EARNINGS PER SHARE                             $0.47       $2.00       $2.30
========================================    ========   =========   =========
Cash Dividends per Share                       $0.28       $0.24       $0.20
========================================    ========   =========   =========
Average Shares Outstanding                    31,648      31,550      31,434
========================================    ========   =========   =========
</TABLE>


See Notes to Consolidated Financial Statements

                                      11
<PAGE>
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION> 
                                                                                                      FOREIGN  
                                                                      ADDITIONAL                      CURRENCY     
                                                    COMMON STOCK       PAID-IN     RETAINED          TRANSLATION          UNEARNED
                                                   ---------------
In thousands, except for per share data            SHARES   AMOUNT     CAPITAL     EARNINGS          ADJUSTMENTS        COMPENSATION
-----------------------------------------        -----------------------------------------------------------------------------------
<S>                                              <C>        <C>       <C>         <C>               <C>                 <C>
Balance at June 30, 1994                         31,342,033    $313   $71,395     $ 80,477          $  (937)            $        --
   Shares issued under Stock Option Plans            52,024    $  1   $   686           --               --                      --
   Shares sold under Employee Stock
     Purchase Plan                                   51,843      --     1,054           --               --                      --
   Shares terminated under Stock Incentive
     Plan, net of granted shares                     69,490       1     1,927           --               --                  (1,927)

   Compensation expense                                  --      --        --           --               --                     296
   Net Earnings                                          --      --        --       72,333               --                      --
   Translation adjustments                               --      --        --           --             (606)                     --
   Cash dividends--$.24 per share                        --      --        --       (6,292)              --                      --
------------------------------------------       ----------   -----    ------     --------          --------               ---------
Balance at June 30, 1995                         31,515,390     315    75,062      146,518           (1,543)                 (1,631)

   Shares issued under Stock Option Plans            67,561       1       786           --               --                     --
   Shares sold under Employee Stock
     Purchase Plan                                   60,906      --     1,038           --               --                     --
   Shares terminated under Stock Incentive
     Plan, net of granted shares                    (17,200)     --      (459)          --               --                    459
   Compensation expense                                  --      --        --           --               --                    230
Tax benefit from exercise of stock options               --      --       225           --               --                     --
   Net earnings                                          --      --        --       63,038               --                     --
   Translation adjustments                               --      --        --           --           (1,384)                    --
   Cash dividends--$.24 per share                        --      --        --       (7,575)              --                     --
------------------------------------------       ----------   -----    ------     --------          --------               ---------
Balance at June 30, 1996                         31,626,657     316    76,652      201,981           (2,927)                  (942)
   Shares issued under Stock Option Plans            38,695       1       537           --              --                      --
   Shares sold under Employee Stock                  27,082      --       529           --              --                      --
     Purchase Plan
Shares terminated under Stock Incentive             (12,992)     --      (364)          --             --                      364
 Plan, net of granted shares
   Compensation expense                                  --      --        --           --             --                       89
   Tax benefit from exercise of stock options            --      --       116           --             --                       --
   Net earnings                                          --      --        --       14,847             --                       --
   Translation adjustments                               --      --        --           --        (15,916)                      --
   Cash dividends--$.28 per share                        --      --        --       (8,864)            --                       --
------------------------------------------       ----------   -----    ------     --------       --------               ----------
Balance at June 30, 1997                         31,679,442    $317   $77,470     $207,964       $(18,843)              $     (489)
==========================================       ==========   =====   =======     ========       =========              ===========
</TABLE>


Preferred stock: Authorized 5,000,000 shares, par value $.001 per share.  To
date, none of these shares has been issued.
Common stock: Authorized 50,000,000 shares, par value $.01 per share.

See Notes to Consolidated Financial Statements

                                      12
<PAGE>
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                               YEAR ENDED JUNE 30,
In thousands                                               1997         1996       1995
-----------------------------------------------------------------------------------------
<S>                                                      <C>          <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings...........................................  $  14,847    $ 63,038   $ 72,333
Adjustments:
  Depreciation of plant and equipment..................     42,224      18,090     13,609
  Amortization of intangible assets....................      6,310       2,001        286
  Deferred income taxes................................      1,157       1,665     (1,550)
  Loss (gain) from sale of assets......................        634      (1,517)    (1,349)
  Compensation related to stock plan...................         89         230        296
  Changes in operating assets and liabilities,
     net of effects from acquisitions:
     Accounts receivable...............................    (16,284)    (30,667)    (5,473)
     Inventories.......................................      2,234      (1,548)    (6,526)
     Prepaid expenses..................................       (720)       (717)      (334)
     Accounts payable..................................     37,047         843      1,915
     Accrued expenses..................................     (7,597)     (9,215)    (3,173)
     Other assets and liabilities......................      9,418      (1,000)      (891)
-----------------------------------------------------------------------------------------
Net cash provided by operating activities..............     89,359      41,203     69,143
-----------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment.............    (75,851)    (45,370)   (69,268)
Sale (purchases) of short-term investments, net........         --      10,601     12,386
Cost of acquisitions, net of cash acquired.............   (291,922)    (48,507)    (6,941)
Deposit on Gallino acquisition.........................         --     (10,299)        --
Investment in and advances to affiliates...............       (874)         --     (6,376)
Proceeds from sale of assets...........................      1,382       2,742      1,349
-----------------------------------------------------------------------------------------
Net cash used in investing activities..................   (367,265)    (90,833)   (68,850)
-----------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings....................    577,688      86,957      5,486
Repayments of long-term debt and other borrowings......   (412,830)     (6,356)    (9,333)
Proceeds from long-term debt...........................     45,441      45,000         --
Cash dividends paid....................................     (8,861)     (6,938)    (4,715)
Common stock issued--options and stock plans...........      1,182       2,050      1,741
-----------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities....    202,620     120,713     (6,821)
EFFECT OF EXCHANGE RATE CHANGES ON CASH................     (1,837)     (1,608)      (587)
-----------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents...    (77,123)     69,475     (7,115)
Cash and cash equivalents at beginning of year.........     95,830      26,355     33,470
-----------------------------------------------------------------------------------------
Cash and cash equivalents at end of year...............  $  18,707    $ 95,830   $ 26,355
=========================================================================================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
  Interest.............................................  $  20,776    $  2,347   $  1,794
  Income taxes.........................................     12,914      32,230     39,520
                                                       
Cost of Acquisitions:                                  
  Working capital (deficiency), net of cash acquired...  $ (23,534)   $    125   $  6,824
  Property, plant and equipment........................   (144,995)    (18,021)    (4,483)
  Patents..............................................    (16,000)         --     (5,272)
  Cost in excess of net assets of businesses acquired..   (158,073)    (35,718)    (3,634)
  Other assets.........................................     (2,231)     (3,066)      (451)
  Long-term debt and other long-term liabilities.......     52,911       8,173         75
---------------------------------------------------------------------------------------
  Net cost of acquisitions.............................  $(291,922)   $(48,507)  $ (6,941)
=========================================================================================
</TABLE>
 
See Notes to Consolidated Financial Statements

                                      13
<PAGE>
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of BREED
Technologies, Inc. (the Company) and its wholly-and majority-owned subsidiaries.
All intercompany balances and transactions have been eliminated in
consolidation.  The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes.  Actual results could differ from those estimates.

REVENUE RECOGNITION

     The Company recognizes revenue when title and risk of loss transfers to its
customers, which is generally upon shipment of products to customers. The
Company generally enters into agreements with its customers at the beginning of
a given vehicle's life to produce products.  Once such agreements are entered
into by the Company, fulfillment of the customers' purchasing requirements is
generally the obligation of the Company for the entire production life of the
vehicle (which generally averages five years).

INVENTORIES

     Inventories are stated at the lower of cost or market.  Cost is determined
primarily using the first-in, first-out method for inventories in North America
and primarily using the average cost method for inventories in Europe.

PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment are stated at cost.  Depreciation is computed
using the straight-line method applied to individual items based on estimated
useful lives of the assets which range from 5 to 40 years for buildings and
improvements, and 3 to 10 years for machinery, computer and office equipment.
Replacements and betterments that extend the lives of assets are capitalized,
while maintenance and repairs are expensed as incurred.

INTANGIBLE ASSETS

     Cost in excess of net assets of businesses acquired (goodwill) is being
amortized on a straight-line basis over a period of 3 to 40 years and is stated
net of accumulated amortization of $6,247,000 and $895,000 at June 30, 1997 and
1996, respectively.  Goodwill is reevaluated when business events and
circumstances indicate that the carrying amount may not be recoverable.
Reevaluation is based on projections of undiscounted future cash flows.

     Patents are stated at cost less accumulated amortization of $1,271,000 and
$527,000 at June 30, 1997 and 1996, respectively.  These items, which were
acquired in connection with the VTI Hamlin OY (VTI) and USS acquisitions, as
discussed in Note 3, are capitalized and amortized on a straight-line basis over
the average remaining life of the related patents.

                                      14
<PAGE>
 
TRANSLATION OF FOREIGN CURRENCIES AND
FOREIGN EXCHANGE CONTRACTS

     All assets and liabilities in the balance sheets of foreign subsidiaries
whose functional currency is other than the U.S. dollar are translated at year-
end exchange rates except stockholders' equity which is translated at historical
rates.  Translation gains and losses are accumulated as a separate component of
stockholders' equity.  Foreign currency transaction gains and losses are
included in determining net earnings.

     The Company uses foreign exchange contracts to hedge certain foreign
denominated payables and receivables and also to hedge firm sales and purchase
commitments.  Realized and unrealized gains and losses are deferred and
recognized as the related transactions are settled.  The Company does not enter
into foreign exchange contracts for trading purposes.  At June 30, 1997, the
Company had outstanding Canadian contracts to buy $43 million, maturing through
January 1999 and to sell $9 million, maturing through August 1997.  At June 30,
1996, the Company had outstanding contracts to sell 10.5 million German marks,
maturing through June 1997.

EARNINGS PER SHARE

     Earnings per share is computed by dividing net earnings by the weighted
average shares of common stock outstanding during the year.  The effect on
earnings per share resulting from the assumed exercise of outstanding options is
not material.

RECLASSIFICATIONS

     Certain amounts in the prior years' Consolidated Financial Statements have
been reclassified to conform to the current year's presentation.

2.   FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK

     Financial instruments consist primarily of cash equivalents, short-term
investments, accounts receivable, accounts payable and bank debt.  At June 30,
1997, the fair value of these financial instruments approximates the carrying
amount because of the short-term maturity of these items.

     The Company has entered into various agreements with three major customers
to secure certain long-term sales contracts, however these do not commit the
customers to purchase specific quantities of products from the Company.  The
agreement with Ford expires at the end of the 1999 model year.  The Company is
in the process of negotiating its long-term contract through the model year 2000
with Delco-GM.  In addition, a long-term sales agreement with Fiat expires on
December 31, 1999.  Sales by the Company to Fiat in 1997 and 1996, accounted for
32% and 14%, respectively, of the Company's sales for such years.  Sales by the
Company to Ford in 1997, 1996 and 1995, accounted for 25%, 33% and 37%,
respectively, of the Company's sales for such years.  Sales by the Company to
Delco-GM in 1997, 1996 and 1995, accounted for 13%, 26% and 40%, respectively,
of the Company's sales for such years.

     Concentrations of credit risk with respect to trade accounts receivable are
limited due to the strong financial condition of the Company's customer base.
However, as of June 30, 1997, the Company's receivables from Fiat, Ford, and
Delco-GM amounted to 38%, 12% and 8% respectively, of total trade accounts
receivable.

                                      15
<PAGE>
 
3.   ACQUISITIONS

     During the three years ended June 30, 1997, the Company made the
acquisitions set forth below. The Hamlin merger was accounted for as a pooling
of interests.  All of the other acquisitions were accounted for by the purchase
method of accounting; accordingly, the purchased assets and liabilities have
been recorded at their estimated fair value at the date of acquisition, and the
consolidated financial statements include the operating results of each business
from the date of acquisition.

FISCAL 1995

HAMLIN

     On August 31, 1994, the Company completed a merger with Hamlin,
Incorporated (Hamlin), a manufacturer of crash sensors and reed switch products,
with operations in the United States, Mexico and Europe.  The Company issued
838,324 shares of common stock for all of the outstanding common stock of
Hamlin.  There were no adjustments necessary to conform the companies' methods
of accounting. There were no significant transactions between the companies
prior to the merger.

VTI

     In June 1995, the Company acquired VTI, a Finnish company that designs and
manufactures silicon capacitive micro machined acceleration, angular rate and
differential pressure sensors, for $1.7 million in cash.  Additionally, the
Company issued stock warrants to certain of the former stockholders of VTI which
enable the holders to purchase up to 100,000 shares of common stock between
July 1, 1998 and June 30, 2000, at a purchase price of $25.75 ($2 above the
market value of the Company's common stock at the date of acquisition).  The
purchase price exceeded the fair value of the net assets acquired by
approximately $4.5 million.  The resulting goodwill is being amortized on a
straight-line basis over seven years. Concurrent with the purchase, the Company
acquired, for $5.3 million in cash, technology rights to use awarded and pending
patents and related intellectual property.

FISCAL 1996

MOMO

     On April 15, 1996, the Company acquired all of the outstanding shares of
MOMO S.p.A. and G. Holding, S.r.l. (collectively "MOMO"), an original equipment
manufacturer and aftermarket supplier of luxury steering wheels and alloy
wheels, for $45.2 million in cash.  The purchase price exceeded the fair value
of the net assets acquired by $31.1 million.  The resulting goodwill is being
amortized over 40 years.

ITALTEST

     On April 22, 1996, the Company acquired all of the outstanding shares of
Italtest S.r.l., an Italian manufacturer of printed circuit boards for the
automotive, computer and telecommunications markets for $1.8 million in cash.
The purchase price exceeded the fair value of the net assets acquired by $1.8
million. The resulting goodwill is being amortized over 10 years.

                                      16
<PAGE>
 
FORCE IMAGING TECHNOLOGIES, INC.

     On May 31, 1996, the Company acquired all of the outstanding shares of
Force Imaging Technologies, Inc., a manufacturer of thin-profile variable force
sensors for multi-function automotive capabilities for $3 million in cash.  The
purchase price exceeded the fair value of the net assets acquired by $2.8
million.  The resulting goodwill is being amortized over 5 years.

     The pro forma unaudited results of operations for the years ended June 30,
1996 and 1995, assuming the purchase of the acquisitions had been consummated as
of July 1, 1994, are as follows:

<TABLE>
<CAPTION>
In thousands, except per share data             1996                1995    
---------------------------------------      ----------          ------------
<S>                                          <C>                 <C>       
Net sales                                     $ 493,845            $ 482,885 
Net earnings                                  $  59,768            $  65,377 
Net earnings per share                        $    1.89            $    2.08  
</TABLE>

FISCAL 1997

GALLINO

     On July 1, 1996, the Company completed the acquisition of Gallino
Plasturgia, S.r.l. and affiliates ("Gallino") from IAO Industrie Riunite S.p.A.
Gallino manufactures steering wheels, instrument panels, bumpers and other
plastic trim components used in automotive original equipment and aftermarket
applications.  The aggregate purchase price was $126 million, comprised of cash
of $74 million and liabilities assumed of $52 million.  The acquisition was
financed through borrowings on the Company's revolving credit agreements.  The
purchase price exceeded the fair value of net assets acquired by approximately
$40 million.  The resulting goodwill is being amortized on a straight-line basis
over 40 years.

UNITED STEERING SYSTEMS (USS)

     On October 25, 1996, the Company completed the acquisition of certain
assets and the assumption of certain liabilities of the "North American Steering
Wheels Operation" of United Technologies and all of the shares of United
Technologies Automotive Clifford Limited.  USS produces steering wheels, airbag
covers, horn pads and related molded products in the U.S., Mexico and England.
The purchase price was $154 million, financed through borrowings under the
Company's Revolving Credit Agreements.  The purchase price exceeded the fair
value of net assets acquired by approximately $75 million.  The resulting
goodwill is being amortized on the straight-line basis over 40 years.

CUSTOM TRIM

     On February 25, 1997, the Company completed the acquisition of the stock of
BIT Investments, Inc. ("BIT"), a holding company that owned the Custom Trim
group of companies, for $70 million. Additionally, up to $5 million may be paid
on September 1, 2002, contingent upon BIT attaining certain operating profit
targets for each of the years subsequent to the acquisition date.  The acquired
operations produce leather-wrapped steering wheels, shift knobs and shift boots,
injection molded levers and leather/vinyl cloth sewing of armrests, headrests
and seating in Canada and Mexico.  The funds used by the Company to acquire BIT
were obtained from borrowings under the Company's Revolving Credit Agreements.
The purchase price exceeded the fair market value of net assets acquired by $48
million. 

                                      17
<PAGE>
 
The allocation of the purchase price is subject to change pending completion of
the Company's integration plans. The resulting goodwill is being amortized on a
straight-line basis over 40 years.

     The pro forma unaudited results of operations for the years ended June 30,
1997 and 1996, assuming the purchase of the acquisitions had been consummated as
of July 1, 1995, are as follows:

<TABLE>
<CAPTION>
In thousands, except per share data            1997             1996
-----------------------------------------   ----------      -----------
<S>                                         <C>             <C>
Net sales                                    $ 901,058      $ 1,056,588
Net earnings                                 $  20,965      $    45,897
Net earnings per share                       $     .66      $      1.45
</TABLE>


4.   NET ASSETS HELD FOR SALE

     The Company acquired Gallino in July 1996 primarily for the steering wheel
business.  However, in order to acquire the steering wheel business it was
necessary to also acquire Gallino's instrument panel, bumper and other plastic
trim component business (non-steering wheel business).  In 1997, the Company
evaluated whether the non-steering wheel business of Gallino could be integrated
into the core business of the Company.

     During the fourth quarter of fiscal 1997, the Company committed to a plan
to dispose of Gallino's instrument panel, bumper and other plastic trim
component business (non-steering wheel business).  In July 1997, the Company
signed a letter of intent to sell approximately 65 percent of substantially all
of the net assets of Gallino's non-steering wheel business.  The Company is
negotiating with other prospective buyers for the remaining portion of Gallino's
non-steering wheel business.  For financial reporting purposes, the assets and
liabilities attributable to all of Gallino's non-steering wheel business, which
are recorded at amounts approximating their net realizable value, have been
classified in the consolidated balance sheet as "Net assets held for sale" and
consist of the following at June 30, 1997:

<TABLE>
In thousands
----------------------------------------------         ------------- 
<S>                                                    <C>     
Current Assets                                         $    42,221
Property, plant and equipment, net                          62,739
Other noncurrent assets                                        977
----------------------------------------------         ------------- 
   Total assets                                            105,937
----------------------------------------------         ------------- 
Current liabilities                                         31,661
Other liabilities                                           21,656
----------------------------------------------         ------------- 
   Total liabilities                                        53,317
----------------------------------------------         ------------- 
Net assets held for sale                               $    52,620 
==============================================         =============
</TABLE>

5.    INCOME TAXES

     The components of earnings before income taxes are as follows:

<TABLE>
<CAPTION>
In thousands                    1997           1996           1995      
----------------------------  --------       --------       --------- 
<S>                           <C>            <C>            <C>         
Domestic                       $23,699        $98,285        $107,521   
Foreign                          5,948             53           2,612   
----------------------------  --------       --------       --------- 
</TABLE> 

                                      18
<PAGE>
 
<TABLE> 
<S>                           <C>            <C>            <C> 
============================
                               $29,647        $98,338        $110,133
                              ========       ========       =========
</TABLE> 

     The components of income tax expense are as follows:

<TABLE>
<CAPTION>
In thousands                    1997            1996          1995    
-------------------------     ----------     ---------     --------- 
Current                                                               
<S>                           <C>            <C>           <C>       
   Federal                     $ 6,442         $30,818       $37,214  
   Foreign                       6,434           2,001           750  
   State                           767             816         1,386  
-------------------------     ----------     ---------     ---------  
   Total current                13,643          33,635        39,350  
Deferred                                                              
   Federal                       1,501           1,665        (1,550) 
   Foreign                        (344)             --            --  
-------------------------     ----------     ---------     ---------  
   Total deferred                1,157           1,665        (1,550) 
-------------------------     ----------     ---------     ---------  
Income taxes                   $14,800         $35,300       $37,800   
=========================     ==========     =========     =========
</TABLE>


     A provision for income taxes has not been made for the undistributed
earnings of foreign subsidiaries of approximately $10 million at June 30, 1997,
which have been or are intended to be permanently reinvested in expanded foreign
business operations.

     The provision for income taxes differs from the expected federal tax
provision as follows:

<TABLE>
<CAPTION>
In thousands                                   1997           1996       1995
-------------------------                   ----------     ---------  --------- 
<S>                                         <C>            <C>        <C>
Tax at U.S. statutory rate                  $  10,260       $34,418    $38,547
State taxes, net of Federal tax benefit           498           530        900
Change in valuation allowance                   1,816         2,161     (2,115)
Amortization of goodwill,                       
   without tax benefit                          1,300            --         --
Foreign rate differential                         677            --         --
Reduction of taxes provided                       
   in prior years                                  --        (1,154)        --
Other                                             249          (655)       468
-------------------------                   ----------     ---------  --------- 
                                            $  14,800       $35,300    $37,800
                                            ==========     =========  =========
</TABLE>

                                      19
<PAGE>
 
     The temporary differences that give rise to significant portions of the
deferred tax assets and liabilities as of June 30, 1997 and 1996, respectively,
are presented below.

<TABLE>
<CAPTION>
In thousands                                          1997         1996
-------------------------                         ----------     ---------   
<S>                                               <C>            <C>      
Deferred tax assets                                                       
   Accrued expenses                                $ 5,132        $ 1,842 
   Net operating losses                              3,977             -- 
   Other                                               923            961 
   Valuation allowance                              (3,977)            -- 
-------------------------                         ----------     --------- 
                                                     6,055          2,803 
                                                  ----------     --------- 
Deferred tax liabilities                                                  
   Depreciation and amortization                    (7,845)          (892)
   Acquisition related asset basis differences          --         (2,544)
-------------------------                         ----------     --------- 
                                                    (7,845)        (3,436)
                                                  ----------     --------- 
                                                   $(1,790)       $  (633) 
                                                  ==========     =========
</TABLE>


     Management has determined, based on the Company's history of domestic
taxable income and its expectation of the future, that domestic operating income
of the Company will likely be sufficient to fully recognize the net deferred tax
assets.

     At June 30, 1997, the Company has foreign net operating loss carryforwards
(NOLs) for tax purposes of $11.7 million of which $6.1 million expires in the
year 2006 and $1.7 million expires in the year 2007.  The remaining NOLs have no
expiration date.  For financial reporting purposes, a valuation allowance of
$4.0 million has been recognized to reduce the deferred tax assets related to
those NOLs.

6.   NOTES PAYABLE AND LONG-TERM DEBT

     During 1997, the Company replaced its $200 million unsecured domestic
credit agreement.  The Company now maintains two multi-currency credit
agreements totaling $450 million that expire on April 29, 1998 ($250 million)
and April 30, 2002 ($200 million).  The amount outstanding under the new
agreements at June 30, 1997, was $358 million of which $200 million is due April
30, 2002.  The interest rate under the agreements is at or below the prime rate
or, at the Company's option, LIBOR plus a margin. The weighted average interest
rate on the outstanding borrowings at June 30, 1997, was 6.7%.  A commitment fee
of between .125% and .3% per year is paid on the unused portion of the
commitment dependent upon the Company's level of leverage as set forth in the
agreements.  Under the terms of the agreements, the Company must maintain
acceptable ratios, such as leverage ratio, minimum net worth, and interest
coverage ratio.  At June 30, 1997, the Company was in compliance with all
covenants.

     The Company's subsidiaries outside of the United States have short-term
lines of credit aggregating approximately $100 million from various banks
worldwide.  Most of these arrangements are reviewed periodically for renewal.
The amounts outstanding under these lines of credit with banks at June 30, 1997
and 1996 were $27.3 million and $34.1 million, respectively.  Interest rates are
generally based on the prevailing bank prime rate in the various countries in
which the Company has operations.  Additionally, the subsidiaries have
outstanding mortgage and equipment financing loans amounting to $38.1 million.

                                      20
<PAGE>
 
7.   OTHER FINANCIAL DATA

     The components of inventories consist of the following:

<TABLE>
<CAPTION>
In thousands                               1997      1996  
-------------------------------------  ---------- ---------
<S>                                    <C>        <C>     
Finished goods                            $24,832   $19,439
Work in process                            23,385    14,417
Raw materials                              27,130    19,034
-------------------------------------  ---------- ---------
                                          $75,347   $52,890 
                                       ========== =========
</TABLE>

     Other income (expense), net consists of the following:

<TABLE>
<CAPTION>
In thousands                                1997      1996     1995
---------------------------------------  ---------  -------- --------
<S>                                      <C>        <C>      <C>
Foreign exchange gain (loss), net           $2,161    $2,385   $ (352)
Gain (loss) on disposition of property,       
   plant and equipment                        (634)    1,517    1,349  
Royalty income                                  93     3,976    3,483
Government grant                             1,000        --       --
Other, net                                     904       784      418
---------------------------------------  ---------  -------- --------
                                            $3,524    $8,662   $4,898
                                         =========  ======== ========
</TABLE>

8.   EMPLOYEE BENEFIT PLANS

     The Company's Omnibus Stock Plan provides for the granting of 2,500,000
shares of Common Stock for awards of options under the Company's 1992 Stock
Option Plan, the 1992 Employee Stock Purchase Plan, and the 1994 Stock Incentive
Plan.

     Under the 1992 Stock Option Plan, options to purchase up to 1,500,000
shares of common stock may be granted to officers, employees and consultants to
the Company.  The Company may grant options that are either qualified (Incentive
Stock Options) or nonqualified under the Internal Revenue Code of 1986, as
amended.  Options under the Plan will generally vest over a three-year period
and the option term may not exceed ten years.  Total options granted under this
plan amounted to 48,313 in 1997 and 45,000 in 1996.

     The Company's 1992 Employee Stock Purchase Plan provides that eligible
employees may contribute up to 10% of their base earnings toward the semiannual
purchase of the Company's common stock, at a price equal to 85% of the lower of
the market value of the common stock on the first and last day of the applicable
period.  There are limitations on the number of shares that can be purchased in
any period.  Total shares issued under this plan were 27,082 in 1997 and 60,906
in 1996.  Since the plan is noncompensatory, no charges to operations have been
recorded.

     The 1994 Stock Incentive Plan permits the issuance of options of common
stock in the form of incentive stock options, nonstatutory stock options, stock
appreciation rights, performance shares, restricted stock or unrestricted stock
to selected employees of the Company.  Options under the plan vest over a four-
year period.  Stock appreciation rights entitle recipients to receive an amount
determined in whole or in part by appreciation in the fair market value of the
stock between the date of the award and the date of 

                                      21
<PAGE>
 
exercise. Performance share awards entitle recipients to acquire shares of stock
upon attainment of specified performance goals. Restricted stock awards entitle
recipients to acquire shares of stock, subject to the right of the Company to
repurchase under certain circumstances all or part of the shares at their
purchase price (or to require forfeiture of such shares if purchased at no cost)
from the recipient. Restricted shares vest over a five-year period. Unearned
compensation, representing the fair market value of the shares at the date of
issuance, is charged to earnings over the vesting period. Total options granted
under this plan amounted to 63,744 in 1997 and 648,873 in 1996. No stock
appreciation rights or performance shares were granted in 1997 or 1996.

     In addition to the above plans, the Company's 1992 Director Stock Option
Plan provides for the grant of nonqualified stock options to the Company's
nonemployee directors.  The total number of shares to be issued under this plan
may not exceed 50,000 shares.  Options granted under the 1992 Director Stock
Option Plan have an exercise price equal to the fair market value of the common
stock on the date of the grant and a term equal to ten years.  Total options
granted under this plan amounted to 5,310 in 1997 and 14,600 in 1996.

     Following is a summary of the option and warrant transactions for the years
1997 and 1996:

<TABLE>
<CAPTION>
                                                      SHARES            PRICE          
----------------------------------------------   ---------------  ------------------
<S>                                              <C>              <C>                   
Balance at June 30, 1995                             $  622,028   $  3.14  - $ 32 1/4   
   Granted                                              708,473    16 3/4  -   20 3/8   
   Exercised                                            (67,561)     3.14  -   24       
   Canceled                                            (113,704)       12  -   28 3/8   
----------------------------------------------   ---------------  ------------------
Balance at June 30, 1996                              1,149,236        12  -   32 1/4   
   Granted                                              117,367    21 3/8  -   28 1/4   
   Exercised                                            (38,695)   19 3/4  -   28       
   Canceled                                            (127,547)   16 3/4  -   28 5/8   
----------------------------------------------   ---------------  ------------------
Balance at June 30, 1997                              1,100,361        12  -   32 1/4   
----------------------------------------------   ---------------  ------------------
Exercisable at June 30, 1997                            318,996        12  -   32 1/4   
----------------------------------------------   ---------------  ------------------
Shares reserved for future issuance                   2,175,262                          
==============================================   ===============  ==================
</TABLE>


     The Company maintains a 401(k) retirement plan which covers substantially
all full-time U.S. employees.  Under the plan, the Company will match employee
contributions at rates which are determined annually by management.  Employer
contributions for the years ended June 30, 1997, 1996 and 1995 amounted to
$762,000, $911,000 and $669,000, respectively.

     The Company adopted Statement of Financial Accounting Standard 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 Opinion No 25 ("APB 25"), "Accounting for Stock
Issued to Employees." Accordingly, no compensation cost for stock options has
been recognized.  If compensation cost had been determined based on the
estimated fair value of options granted in 1997 and 1996, consistent with the
methodology in SFAS 123, the pro forma effects on the Company's net earnings and
income per share would not have been material.

                                      22
<PAGE>
 
9.   INFORMATION RELATED TO CUSTOMERS AND OPERATIONS IN DIFFERENT GEOGRAPHIC
     AREAS

     The Company operates in one principal industry segment: the design,
manufacture, and sale of automotive occupant safety systems--which represents
more than 90% of consolidated net sales.  The following financial information
relates to operations in different geographic areas.  Net sales to unaffiliated
customers is based on the location of Company's operating entity.  Transfers
between geographic areas are recorded at amounts above cost and in accordance
with the rules and regulations of the respective governing tax authorities.
Identifiable assets of geographic areas are those assets used in the Company's
operations in each area.  Corporate assets include cash and cash equivalents,
intangibles, long-term investments, and deferred income taxes.

<TABLE>
<CAPTION>
In thousands                                                     1997        1996        1995     
------------------------------------------------------      ------------ ----------- ---------- 
<S>                                                         <C>          <C>         <C>
Net Sales to unaffiliated customers:                                                             
   North America                                                $379,270    $324,565   $345,640  
   Europe                                                        415,610     107,124     55,332  
------------------------------------------------------      ------------ ----------- ---------- 
Total net sales                                                 $794,880    $431,689   $400,972  
------------------------------------------------------      ------------ ----------- ---------- 
Transfers between geographic areas                                                               
   (eliminated in consolidation):                                                                
   North America                                                $ 42,809    $ 51,057   $ 27,018  
   Europe                                                         35,043      21,832     22,689  
------------------------------------------------------      ------------ ----------- ---------- 
Total transfers                                                 $ 77,852    $ 72,889   $ 49,707  
------------------------------------------------------      ------------ ----------- ---------- 
Earnings before income taxes                                                                     
Operating income:                                                                                
   North America                                                $ 46,597    $ 90,372   $100,800  
   Europe                                                          3,986       2,442      4,017  
Other income (expense), net                                      (20,936)      7,525      5,602  
------------------------------------------------------      ------------ ----------- ---------- 
Earnings before income taxes                                    $ 29,647    $ 98,338   $110,133  
------------------------------------------------------      ------------ ----------- ---------- 
Identifiable assets:                                                                             
   North America                                                $447,076    $196,776   $185,574  
   Europe                                                        410,577     219,340     38,410  
   Corporate assets                                               19,500      87,686     54,714  
------------------------------------------------------      ------------ ----------- ---------- 
Total assets                                                    $877,153    $503,802   $278,698   
======================================================      ============ =========== ==========  
</TABLE>

     The Company also had foreign export sales from the United States amounting
to $34,559,000, $27,354,000 and $24,515,000 for the years ended June 30, 1997,
1996 and 1995, respectively.

     The Company operates its Mexican manufacturing facilities under the
"Maquiladora" program. Pursuant to this program, materials and components owned
by the Company are transferred to the Mexican subsidiaries where they are used
to produce finished goods.  The finished goods are returned to the United States
and the Company reimburses the Mexican subsidiaries for their manufacturing
costs without any intended significant profit or loss of consequence.
Accordingly, the Mexican sales, transfers, and income amounts are excluded from
the above geographic area information.

                                      23
<PAGE>
 
10.  COMMITMENTS AND CONTINGENCIES

     The Company is the subject of various lawsuits, claims and environmental
contingencies.  In the opinion of management, the expected liability resulting
from these matters is adequately covered by amounts accrued, and will not have a
material adverse effect on the Company's consolidated financial position or
future results of operations.

11.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

     The following tables set forth selected quarterly financial information.

<TABLE>
<CAPTION>
                                           First            Second            Third          Fourth           Total
In thousands, except per share data       Quarter           Quarter          Quarter         Quarter           Year
------------------------------------    ----------       -----------      -----------     -----------       --------
<S>                                    <C>                <C>          <C>             <C>             <C>
1997
Net sales............................  $      158,671     $   182,567  $      209,409  $      244,233    $   794,880
Gross profit.........................          41,648          36,690          37,955          47,304        163,597
Operating income.....................          18,210           9,330           7,128          15,915         50,583
Net earnings.........................           7,846           3,150           1,501           2,350         14,847
Earnings per share...................             .25             .10             .05             .07            .47
Cash dividends per share.............             .07             .07             .07             .07            .28
Market price range...................   18 1/2-27 1/8   22 5/8-28 1/2   19 1/4-27 1/4       17 3/8-23  17 3/8-28 1/2

1996
Net sales............................  $       92,601     $   105,655  $      103,927  $      129,506    $   431,689
Gross profit.........................          34,864          42,844          35,841          41,096        154,645
Operating income.....................          19,446          26,854          19,671          24,842         90,813
Net earnings.........................          12,601          17,842          14,892          17,703         63,038
Earnings per share...................             .40             .57             .47             .56           2.00
Cash dividends per share.............             .05             .05             .07             .07            .24
Market price range...................   19 1/2-24 1/4       17-20 1/4   16 3/8-19 5/8   18 3/4-24 1/4  16 3/8-24 1/4

1995
Net sales............................  $       87,359     $    99,001  $      109,876  $      104,736    $   400,972
Gross profit.........................          28,999          39,016          44,846          43,560        156,421
Operating income.....................          17,538          26,488          31,759          28,746        104,531
Net earnings.........................          11,231          18,191          21,984          20,927         72,333
Earnings per share...................             .36             .58             .70             .66           2.30
Cash dividends per share.............             .05             .05             .05             .05            .20
Market price range...................   25 1/4-33 3/4   25 1/2-36 3/8       20 1/4-29   18 3/8-24 1/4  18 3/8-36 3/8
</TABLE>

     The Company recognized a charge during the fourth quarter of 1997 which
decreased net income by $2.2 million.  This charge increased income tax expense
to reflect an increase in the effective tax rate for the year due to loss
carryforwards in foreign countries that could not be utilized as management had
originally anticipated.  This adjustment reduced fourth quarter net income per
share by $.07.

                                      24
<PAGE>
 
12.  SUBSEQUENT EVENT

     On August 27, 1997, the Company entered into an Asset Purchase Agreement
with Allied Signal, Inc. ("Allied") to acquire substantially all of the assets
and certain liabilities of Allied's worldwide automotive occupant restraint
products and systems (the "Division").  These products include seat belt and
airbag assemblies and components.  The purchase price is $710 million in cash
and is subject to post-closing adjustments based on the net asset value of the
Division as of the closing date.  Consummation of the acquisition is subject to
several conditions, including clearance of the transaction by appropriate
government agencies, consent of certain customers, and customary conditions to
closing.  Management is confident that the contingencies will be resolved
favorably.  The Company is considering various methods of financing the
transaction, including additional bank borrowings and the private placement of
equity and/or debt securities.  For the year ended December 31, 1996, the
Division had unaudited revenues of $951 million and unaudited operating income
of $86 million.


REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
BREED Technologies, Inc.

     We have audited the accompanying consolidated balance sheets of BREED
Technologies, Inc. and subsidiaries as of June 30, 1997 and 1996, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for the years then ended.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.  We did not audit the
financial statements of MOMO S.p.A., a wholly-owned subsidiary acquired April
15, 1996, which statements reflect total assets of $106,398,000 as of June 30,
1997 and net sales of $73,093,000 for the year then ended.  Those statements
were audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to data included for MOMO S.p.A., is based solely
on the report of the other auditors.  The consolidated financial statements of
BREED Technologies, Inc. and subsidiaries for the year ended June 30, 1995, were
audited by other auditors whose report dated July 21, 1995, expressed an
unqualified opinion on those statements.

     We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, based on our audits and the report of other auditors, the
1997 and 1996 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of BREED
Technologies, Inc. and subsidiaries at June 30, 1997 and 1996, and the

                                      25
<PAGE>
 
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.

/s/Ernst & Young LLP



July 31, 1997, except for Note 12,
as to which the date is August 27, 1997
Tampa, Florida

                                    PART IV

 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

3.   Exhibits. The Registrant hereby files the following exhibits within this 
     Form 10-K/A:

     23.1  Consent of Ernst & Young LLP, Independent Auditors

     23.2  Consent of KPMG Peat Marwick LLP, Independent Auditors

     23.3  Consent of KPMG Peat Marwick LLP, Milan, Independent Auditors

     99.1  Report of KPMG Peat Marwick LLP, Independent Auditors

     99.2  Report of KPMG Peat Marwick LLP, Milan, Independent Auditors

                                      26
<PAGE>
 
                                  SIGNATURES


   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                     BREED TECHNOLOGIES, INC.
 


Date: September 28, 1998             By: /s/ Frank J. Gnisci
                                         __________________________
                                         Frank J. Gnisci
                                         Executive Vice President and
                                         Chief Executive Officer