U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    Form 10-K


[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934 [Fee Required] For the fiscal year ended December 31, 1999

[ ] TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
    OF 1934 [No Fee Required]

    For the transition period from_______ to________

                          Commission File No. 0-22429


                             DHB CAPITAL GROUP INC.
                 (Name of small business issuer in its charter)


         Delaware                                           11-3129361
(State or other jurisdiction                (I.R.S. Employer Identification No.)
of incorporation)


                555 Westbury Avenue, Carle Place, New York 11514
                    (Address of principal executive offices)

               11 Old Westbury Road, Old Westbury, New York 11568
                 (Former Address of principal executive offices)


                    Issuer's telephone number: (516) 997-1155
       Securities registered under Section 12(b) of the Exchange Act: None
         Securities registered under Section 12(g) of the Exchange Act:

                         Common Stock, $0.001 Par Value
                                (Title of Class)

Check  whether the issuer (1) filed all reports  required to be filed by section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B  and  no  disclosure  will  be  contained,  to the  best  of the
registrant's  knowledge,  in the  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 ]

Issuer's revenues for the most recent fiscal year: $35,140,728

Aggregate  market value of the voting stock held by  non-affiliates  computed by
reference  to the price at which the stock  sold,  or the  average bid and asked
price of such stock, as of March 23, 2000: $15,296,076.

    Number of shares outstanding of the issuer's common equity, as of March
 23, 2000 (exclusive of securities convertible into common equity) : 32,332,181

<PAGE>
Item 1.  BUSINESS
                               Business - History

         DHB Capital Group, Inc. (the "Company") was originally  incorporated as
a New York  corporation  on  October  22,  1992,  by Mr.  David H.  Brooks,  the
Company's  Co-Chairman.  Effective April 17, 1995 (the "Reincorporation  Date"),
pursuant  to the  authorization  of the  security  holders of the  Company,  the
Company was reincorporated (the "Reincorporation") in Delaware.  Under the terms
of the Reincorporation, the Delaware Corporation is the successor in interest to
all the rights,  interests,  assets and liabilities of the New York Corporation.
Holders of certificates,  which, prior to the  Reincorporation  Date,  evidenced
securities of the New York corporation,  automatically  became holders of a like
number of securities of the Delaware corporation.

         DHB Capital Group Inc. is a holding company, which has three divisions,
DHB Armor Group,  DHB Sports Group,  and DHB Electronics  Group. DHB Armor Group
consists of Protective Apparel Corporation of America ("PACA"), Point Blank Body
Armor Inc. ("Point Blank"),  Point Blank  International  S.A. ("PB Int'l"),  and
Lanxide Armor Products Inc.  ("LAP").  DHB Sports Group consists of NDL Products
Inc. ("NDL") and Orthopedic Products Inc. ("OPI"). On March 10, 2000 the Company
sold the DHB Electronics Group, which consisted of Lanxide Electronic Components
Inc. ("LEC") and DHB KK. DHB Armor Group develops, manufactures, and distributes
bullet and projectile  resistant  garments,  bullet resistant and  fragmentation
vests, bomb projectile blankets, and related ballistic  accessories.  DHB Sports
Group  manufactures and distributes  protective  athletic apparel and equipment,
such as elbow, breast, hip, groin, knee, shin and ankle supports,  and braces, a
line of magnetic  therapy  products,  as well as,  orthopedic  products.  OPI is
engaged in the manufacture and sale of medical and orthopedic  products directly
to the  medical  industry,  including  hospitals,  sports  medicine  centers and
medical  practices.  DHB Electronics Group manufactures and markets metal matrix
composite materials (e.g. silicon carbide/aluminum  composites),  which function
as packaging and structural thermal management components for the electronics
industries.

Recent Developments

         Sale of DHB  Electronics  Group.  On March 10, 2000,  DHB Capital Group
Inc. (the "Company") sold its subsidiaries  Lanxide  Electronic  Components Inc.
and DHB KK to DMC2 Electronic Components Corporation (an unrelated third party).
The purchase price was $4,375,000 less the  outstanding  loan balance of Lanxide
Electronics'  Delaware  Economic  Loan of  $141,217.  The  proceeds of this sale
retired all of the  outstanding  bank debt of the  Company.  The sales price was
determined through arms length negotiations, at a price the Company believes was
fair.  The sale of the Lanxide  subsidiaries  reflects the  Company's  strategic
decision  to  refocus  on its  core  businesses,  the  design,  development  and
production of technologically advanced soft body armor for the U.S. Military and
Law Enforcement communities.



         NASDAQ Small Cap Listing.  On September 4, 1998,  the  Company's  stock
became listed on the NASDAQ Small Cap MarketTM listing.  The listing was granted
pursuant to satisfying  certain  conditions  the NASDAQ  Listing  Qualifications
Panel  required.  The Nasdaq Listing  Qualifications  Panel  determined that the
Company did not meet those conditions and delisted the Company's securities from
the NASDAQ Small Cap Market effective with the close of business on December 20,
1999.

                                       2
<PAGE>

         Exclusive license and trademark agreement with Magnesystems. On January
16,  1998,  the Company  signed an exclusive  (except for certain  rights in the
field of  products  for  horses)  licensing  agreement,  to  make,  use and sell
magnetic  products  covered by certain US and Canadian  patents,  along with the
technical  know how  related  to the  magnetic  products  in the  possession  of
Magnesystems.

         Buyback of Common Stock. On February 4, 1998, the board of Directors of
the Company  announced its  authorization  for the Company to purchase up to one
million  additional shares of its common stock on the open market,  from time to
time, at its  discretion.  The Board of Directors had previously  authorized the
repurchase  of one million  shares of its common stock in October 1996. To date,
the  Company  has  repurchased  and  retired  1,360,004  shares  at  a  cost  of
$6,514,308.

         The Company  has no specific  plans,  arrangements,  understandings  or
commitments  with respect to any future  acquisition,  and it is uncertain as to
when or if any acquisition  will be made. The Company is not currently  involved
in any substantive negotiations for purchasing any business or group of assets.

                                       3
<PAGE>
                                    BUSINESS


DHB Armor Group ("The Armor Group")

         Products.  Point Blank, PACA, and PB Int'l comprise the Armor Group and
they  manufacture  two basic types of body armor:  concealable  armor,  which is
designed to be worn beneath the user's  clothing,  and tactical armor,  which is
worn  externally  and is  designed to protect  against  more  serious  ballistic
threats.

         Both the concealable and tactical vests are manufactured using multiple
layers  and/or  a  combination  of  KevlarTM,   Gold  FlexTM,   SpectrashieldTM,
SpectraFlexTM,  Zylon(TM),  and  other  ballistic  fabrics,  covered  and  fully
enclosed in an outer carrier. Although some products of Point Blank and PACA are
competitive with each other, brand  recognition,  brand loyalty and distribution
channels  have and are  expected to  continue  to  minimize  the extent to which
products of the two companies may impact each other's sales.

         Concealable  vests are  contoured to closely fit the user's body shape.
The Armor Group also sells a line of vests  designed  specifically  for the body
shapes of women users.  Male vests are  manufactured  in standard  sizes and may
also be custom-made.  Vests are fastened using VelcroTM type elastic  strapping.
Concealable  vests may be  supplemented  for additional  protection and supplied
with an  additional  armor  plate,  which  consists  of either  metal or certain
composite  materials  to  withstand  greater  threat  levels  than  the  vest is
otherwise designed to protect against.

         During 1999, the Armor Group  introduced more than 12 new NIJ (National
Institute of Justice)  certified vests.  Among the more notable was the updating
of the original Hi-Lite line, which now provides law enforcement  customers with
exceptional  protection (under one pound per square foot). This was a remarkable
improvement  of an already  excellent  design and will  continue  to be an Armor
Group asset in the future.  In  addition,  the  introduction  of the Fusion line
provided  federal law  enforcement  officers with the highest level of ballistic
protection in all NIJ threat levels  available in the body armor industry today.
The Armor Group also introduced the New Beast  technology  decreasing the weight
by 45%,  the  thickness  by  50%,  and  increasing  the  V50  and  multiple  hit
capabilities.  In  addition,  the Armor Group  entered  into an  agreement  with
Gall's,  a  premier  Law  Enforcement  Catalog.   This  agreement  promotes  the
production  of low  cost,  high  performance,  private  label  body  armor as an
exclusive  product  manufactured by the Armor Group for Gall's . The Armor Group
also launched the KGS (Kevlar, Goldflex,  Spectraflex) Ballistic series of vests
in late  1998 and it hit full  stride  in 1999.  This  series  features  a soft,
comfortable  Level  IIIA  vest at .93 lbs.  psf,  making  it one of the  highest
performing, lightest weight, and advanced hybrid designs on the market today.

         DHB Armor's  Corrections  Division  also  introduced  the  CounterPoint
Fusion SLA, SLB, and SLC, a new series of stab / slash resistant panels that are
used
                                       4
<PAGE>
         independently  or in  conjunction  with  ballistic  panels  to  provide
previously  unavailable  soft  armor  protection.  In  addition,  TAC Pants were
developed  to provide the  corrections  professional  with the ultimate in lower
torso stab / slash protection. DHB Armor Group's full line of correctional vests
for anti-stab  protection is derived from extensive research and the realization
that  corrections  officers have specific needs unique to law  enforcement.  The
Armor Group's  correctional  department  provides complete  solutions for unique
requirements  by combining the Hit-ManTM  Training Suit with the  Thrust-GuardTM
Anti Stab technology to be utilized as a cell extraction suit.

         The Armor Group was awarded a $150 million "Interceptor"  contract from
the U.S. Army Soldier  Systems and the  Department of Defense.  The  Interceptor
System  increases  the level of  fragmentation  and ballistic  protection  while
dramatically  reducing the overall weight of the vest. Designed as a continually
up-gradable modular, soft body armor system, the Outer Tactical Vest consists of
a base  vest,  collar  assembly,  throat  protector  and  groin  protector.  The
Interceptor  Program,  the most  prestigious body armor contract ever awarded by
the U.S.  Military,  moved forward  during 1999. The Armor Group is currently in
full production of the Interceptor Body Armor. In addition, although Interceptor
has  already  been  accepted  by the  Marine  Corps,  with  the  cooperation  of
manufacturers  such  as  DuPont,  the  Armor  Group  is able  to  continue  with
unlimited, non-stop research and development to further optimize the Interceptor
project, increasing performance, reducing weight, and maximizing protection.

         In 1999 the Armor  Group was the first  company to  address  two unique
needs in the  marketplace  at the same time;  how to keep an officer  cool while
wearing  armor and making the  ballistic  panel more  comfortable  by giving the
wearer increased  features and adjustments to the garment.  At the International
Association  of Chiefs of Police  Conference  in October  1999,  the Armor Group
successfully  introduced  the Vector(TM)  garment system and Armor Ice(TM).  The
combination  of these  two  products  provides  the  wearer  with  substantially
increased  comfort.  The Armor  Group has long  recognized  that the single most
important  factor in officers  not  wearing  body armor is  excessive  body heat
buildup under the armor.  Working in  conjunction  with Frisby  Technology,  the
Armor Group  developed a system to keep an officer cool while wearing armor.  In
mid-1999, the Armor Group negotiated the exclusive worldwide distribution rights
to Frisby  Technology's  Comfortemp(TM)  for all body armor  applications and is
marketing  it under the brand name  Armor  Ice(TM).  Armor  Ice(TM) is the first
active cooling system proven to work under armor utilizing a patented  open-cell
foam technology that incorporates  microencapsulated phase change materials into
the structure of the foam.

         PACA's wholesale prices for concealable vests range from  approximately
$150 to approximately  $375. Point Blank's  wholesale prices for its concealable
vests range from  approximately  $215 to $540,  and PB Int'l's prices range from
$300 to $500. The Armor Group expects to continue these price levels.

                                       5
<PAGE>
         Tactical  vests are  designed to give  all-around  protection  and more
coverage around the neck,  shoulders and kidneys than concealable  vests.  These
vests contain pockets to incorporate small panels constructed from, for example,
hard composite  materials and  high-alumina  ceramic tiles, all of which provide
additional  protection  against high power rifle fire.  Tactical vests come in a
variety of styles,  including tactical assault vests,  high-coverage  armor, and
flak jackets,  each of which is  manufactured to protect against varying degrees
of ballistic  threats.  PACA's  wholesale  prices of these  products  range from
approximately $370 to approximately  $1,200.  Point Blank's wholesale prices for
its tactical garments range from  approximately  $500 to $1,350,  and PB Int'l's
prices range from  $700-$1,400.  The Armor Group expects to continue these price
levels.

         The Armor Group's other  body-armor  products include a tactical police
jacket,  military field jacket,  executive  vests,  NATO-style  vests, K-9 vests
fragmentation  vests and attack vests. Blast and fragmentation armor is designed
to  specifications in U.S.  government  contracts to offer full torso protection
against materials and velocities  associated with the fragmentation of explosive
devices such as grenades and artillery  shells.  In general,  concealable  vests
sold to law enforcement agencies and distributors are designed to resist bullets
from handguns.  Blast and  Fragmentation  gear utilizes a variety of designs and
materials and patterns slightly different from bullet-resistant vests. The Armor
Group also  manufactures  a variety of  accessories  for use with its body armor
products.

         Potential Product Liability.  The products  manufactured or distributed
by the Armor Group, e.g.,  bullet-resistant  vests, are used in situations which
could result in serious personal injuries or death, as a potential result of the
failure of such  products,  or  otherwise.  The Armor  Group  maintains  product
liability  insurance for PACA and Point Blank in the amount of $20,000,000  each
per occurrence, and $20,000,000 in the aggregate less a deductible of $5,000 for
each company.  PB Int'l maintains product  liability  insurance in the amount of
$2,000,000 for each  occurrence.  There is no assurance that these amounts would
be sufficient to cover the payment of any potential claim. In addition, there is
no  assurance  that this or any other  insurance  coverage  will  continue to be
available or, if available, that PACA, Point Blank and PB Int'l would be able to
obtain such insurance at a reasonable cost. Any substantial uninsured loss would
have to be paid out of the Armor Group's assets,  as applicable,  and may have a
material  adverse  effect on the  Company's  financial  condition and results of
operations on a consolidated basis. In addition, the inability to obtain product
liability  coverage would prohibit PACA, Point Blank, or PB Int'l as applicable,
from  bidding  for  orders  from  certain   governmental   customers,   as  many
governmental agencies require such coverage, and any such inability to bid would
have a material adverse effect on the Company's  financial condition and results
of operations on a consolidated basis.

         Raw  Materials  and   Manufacturing.   The  Armor  Group   manufactures
substantially  all of  their  respective  bullet-,  blast-,  fragmentation-  and
projectile-resistant   garments  and  other  ballistic-protection  devices.  The
primary  raw  material  used by the Armor Group in 55% of its  manufacturing  of
ballistic-resistant  garments is KevlarTM, a

                                       6
<PAGE>

patented product of E.I. Du Pont de Nemours & Co.  SpectrashieldTM,  GoldFlexTM,
and  SpectraFibreTM,  which are patented products of Honeywell  (formerly Allied
Signal),  are used in approximately 45% of all vests.  Utilizing Allied Signal's
patented,  non-woven  Shield  technology,  GoldFlexTM is softer and thinner than
traditional  ballistic  materials  while  offering the maximum in multi-hit  and
angled shot protective capabilities. In 1999, Point Blank became one of only two
companies  to  pioneer  the  development  of  ZylonTM  based  armor.   This  new
relationship  with Toyobo,  utilizing  ZylonTM,  facilitates the introduction of
lighter, more flexible, higher performance body armor. The Armor Group purchases
cloth woven from these materials from three independent  weaving companies.  The
woven  fabric  is placed on  tables,  layered  over  patterns  for a  particular
component of a garment  (for  example,  the front or back of a vest),  cut using
computerized  cutting  machines  and  electric  knives,  and then  are  stitched
together.  The Armor Group utilizes  several  hundred  patterns based upon size,
shape and style  (depending  upon  whether the  garment is a bullet-,  blast- or
fragmentation-resistant   garment).   KevlarTM,   GoldFlexTM,   SpectrashieldTM,
SpectraFibreTM,  TwaronTM, and ZylonTM differ in their pliability,  strength and
cost, such that the materials are combined to suit a particular application.  In
the opinion of management,  the Armor Group enjoys a good  relationship with its
suppliers of  KevlarTM,  SpectrashieldTM,  SpectraFibreTM,  and  Zylon(TM).  If,
however,  Du Pont, the manufacturer of Kevlar fibers,  or its European  licensee
were  to  cease,   for  any  reason,   to   manufacture   and   distribute   the
bullet-resistant  fabrics,  the Armor Group  would be required to utilize  other
fabrics, and the specifications of some of the Armor Group's products would have
to be  modified.  Until the Armor  Group  selected  an  alternative  fabric  and
appropriate  ballistic  tests were performed,  its operations  would be severely
curtailed  and the Armor Group's  financial  condition and results of operations
would be adversely affected.

         The Armor Group  purchases  other raw materials used in the manufacture
of their products from a variety of sources and believes  additional  sources of
supply for these materials are readily available.

         Research and  Development  DHB Armor Group's  research and  development
team has  combined  50 years  of  notable  ballistic  research  and  development
experience,  previously  retained in various positions of responsibility by H.P.
White  Laboratories,  for a total of 23 years experience in an NIJ certification
environment.  Allen Price who heads an eight-man  department that is responsible
for  certification  and  new  product   development  directs  the  research  and
development  department.  Each location/facility for DHB Armor Group has on-site
ballistic  laboratory  test  facilities,   where  percentages  of  certification
potentials are improved,  and in certain cases individual lots can be tested for
quality control purposes.  As soon as materials are received at these facilities
their  ballistic  integrity is assured which  provides a continuous  flow to the
manufacturing and production process.

         Customers.  The Armor Group's products are sold  domestically to United
States  law  enforcement  agencies  and  the  military  and  internationally  to
governments  and  distributors.  Sales to  domestic  law  enforcement  agencies,
security  and  intelligence  agencies,  police  departments,  federal  and state
correctional facilities, highway patrols and

                                       7
<PAGE>

sheriffs'  departments  accounted  for 55% and 66%,  respectively,  of the Armor
Group's  revenues in each of the years  ended  December  31, 1999 and 1998.  One
customer,  the New York City Police Department,  accounted for approximately 6%,
8% and 5 % of PACA's sales for the years ended December 31, 1999, 1998 and 1997,
respectively.  The  California  Highway  Patrol  accounted  for  14.6% of PACA's
revenue for the year ended  December 31, 1999.  New York City Police  Department
accounted  for  approximately  10% and 14% of Point  Blank's  sales for the year
ended  December  31,  1999 and  1998  respectively.  Also,  one  customer,  DFAS
Columbus,  accounted for 33 % of Point Blank's sales for the year ended December
31,  1999.  Besides  domestic  customers,  Point  Blank  also has  international
customers  that  accounted for 5 %, 6 %, and 17 % of Point Blank's sales for the
years ended December 31, 1999, 1998 and 1997  respectively.  The loss of any one
customer would not be expected to have a significant impact on the Armor Group's
continuing  financial results,  due to the Armor Group's constant  submission of
bids for new contracts. Sales to the United States armed forces directly or as a
subcontractor  accounted  for 19 %, 5 % and 8 % of revenues  for the years ended
December 31, 1999, 1998 and 1997, respectively.

         Substantially  all sales by the Armor Group to the armed  services  and
other  federal  agencies  are made  pursuant  to standard  purchasing  contracts
between  PACA or Point  Blank and the  General  Services  Administration  of the
Federal  Government,  commonly referred to as a "GSA Schedule".  The Armor Group
also responds to invitations by military branches and government agencies to bid
for particular orders.  GSA Schedule contracts  accounted for approximately 19%,
25% and 28 %,  respectively,  of the  Armor  Group's  sales  for the year  ended
December 31, 1999, 1998 and 1997.

         PACA and Point Blank, as GSA Schedule Contract  vendors,  are obligated
to make all sales  pursuant to such  contracts  at its lowest unit price.  Their
current GSA Contracts expires July 31, 2001.

         During the years ended  December  31, 1999,  1998 and 1997,  commercial
sales (i.e., sales to non-governmental entities) were 26 %, 44 % and 49 % of the
Armor Group's revenues.

         Marketing and  Distribution.  The Armor Group employs fifteen  customer
support representatives, five regional sales managers and in addition has twenty
independent  sales  representatives  who are paid solely on a commission  basis.
These personnel and distributors are responsible for marketing the Armor Group's
products to law enforcement agencies in the United States. These individuals and
entities often call upon personnel within these agencies who are responsible for
making purchasing decisions in order to provide information concerning the Armor
Group's   products.   Sales  are  made  primarily   through   independent  local
distributors. However, in areas in which there are no suitable distributors, the
Armor Group will fill orders directly.

         Government  and  Industry   Regulations   and  Standards.   Bullet  and
blast-resistant  garments  and  accessories  manufactured  and sold by the Armor
Group are not  currently  the subject of government  regulations.  However,  law
enforcement agencies and

                                      8
<PAGE>

the military publish  invitations for bidding which specify certain standards of
performance the bidders' products must meet. The National  Institute of Justice,
under the  auspices of the United  States  Department  of Justice,  has issued a
revised voluntary ballistic standard (NIJ0101.03) for bullet-resistant  vests of
several  categories.  The Armor Group regularly submits its vests to independent
laboratories for ballistic testing under this voluntary  ballistic  standard and
all of its  products  have,  at the time of  manufacture,  met or exceeded  such
standards  in their  respective  categories.  In  addition,  the  Armor  Group's
research and  development  team is actively  involved in the  development of NIJ
standard 0101.04 and the new stab standard.

         The  Armor  Group  regularly  submits  bullet-resistant   garments  and
hard-armor  inserts for rating by independent  laboratories in accordance with a
test commonly referred to as V50. This test involves exposing the tested item to
blasts of fragments of increasing  velocity until 50% of the fragments penetrate
the materials. The tested item is then given a velocity rating which may be used
by  prospective  purchasers  in assessing the  suitability  of the Armor Group's
products for a particular  application.  In addition,  PACA,  Point Blank and PB
Int'l perform similar tests internally.

         Competition.   The  ballistic-resistant   garment  business  is  highly
competitive  and the number of United  States  manufacturers  is estimated to be
less  than 20.  Management  is not aware of  published  reports  concerning  the
market,  and most companies are privately  held.  Nevertheless,  the Armor Group
believes,   based  upon  its  experience  in  the  industry,  that  the  largest
manufacturer of  ballistic-resistant  garments in the United States is the Armor
Group. In the future, the Company may face other and unknown  competitors,  some
of whom may have substantially greater financial,  marketing and other resources
than the Company.

         The Armor Group believes that the principal  elements of competition in
the sale of  ballistic-resistant  garments are its innovative design,  price and
quality. In dealings with law enforcement agencies and the military, PACA, Point
Blank,  and PB Int'l bid for orders in response to invitations for bidding which
set forth specifications for product  performance.  The Armor Group believes its
products are  competitive  as to both price and quality with the products of its
competitors having similar ballistic capabilities.  The Armor Group's ability to
remain  competitive  in  pricing  is due  to  its  relatively  lower  labor  and
production costs. In addition,  the Company believes that the Armor Group enjoys
a favorable  reputation in the industry with over 20 years of supplying federal,
state and municipal governments and agencies.  These factors,  combined with the
financial resources made available to the Armor Group by the Company,  which are
expected  to  continue  will  reduce  interest   expenses,   improve  production
efficiencies and capacity,  control  purchasing costs and permit the Armor Group
to viably compete.

         The Armor Group's Backlog. As of December 31, 1999, the Armor Group had
a backlog of  approximately  $32.7  million,  as compared to  approximately  $16
million  as of  December  31,  1998.  Backlog  at any one date is not a reliable
indicator of future sales or sales trends.

                                      9

         In addition to the  backlog,  which  represents  orders  believed to be
firm,  from time to time the Armor Group receives  contract awards for municipal
orders, which may be extended over a period of time. The actual dollar amount of
products  to be  delivered  pursuant  to this and  similar  contracts  cannot be
accurately predicted and is generally excluded from reported backlog.


Employees.  As of February 29, 2000, there were two officers of the Armor Group,
19  persons   employed  in   supervisory   capacities,   and  344  employed  for
manufacturing,   shipping  and  warehousing,  3  technical/research  development
personnel and 24 were office  personnel.  All of the Armor Group's employees are
employed  full time. In the opinion of  management,  the Armor Group enjoys good
relationships with its employees.

DHB SPORTS GROUP.

The Sports Group is a collection of brands that service specific segments of the
sporting  goods and health care  markets  with its sports  medicine,  protective
gear, orthopedic soft goods and magnetic therapy products. The Sports Group also
offers  private  label or house  brand  programs  to major  retailers  and large
wholesalers  along with specific OEM programs to outside brands that service the
same markets.

Currently,  the Sports Group  manufactures and markets products under the brands
NDL(TM),  GRID(TM),  MagneSystems(TM),  FLEX-AID(TM),  OPI(TM)  and Doctor  Bone
Savers(TM).  The Sports Group  markets its product to a variety of  distribution
points with an  emphasis  on major  retailers.  Mass  merchandisers,  chain drug
stores, food chains, independent sporting goods and pharmacy retailers, catalog,
wholesale and e-commerce  offer the various  brands to the consumer.  The Sports
Group  account  list  includes  retail  and  wholesale  establishments  such  as
Wal-Mart, Target, Rite Aid, Meijer and Phar Mor. Two customers accounted for 51%
of the Sports Group revenue.

During 1999, the Sports Group successfully negotiated and began to implement and
ship private label programs with three of the largest  wholesalers to the retail
trade:  Amerisource,  Cardinal  Health and CDMA.  These  wholesalers  have begun
servicing their 10,000 store networks with their Family Pharmacy(TM), Leader(TM)
and Quality Choice Brands(TM) of health support products.

In addition,  the Sports Group added  valuable  distribution  during 1999 in the
area of magnetic  therapy by securing  the Vitamin  Shoppes,  Vitamin  World and
Nature's Bounty's catalog as distribution partners.

The  Sports  Group is a member  of NACDS  (National  Association  of Chain  Drug
Stores),  PLMA (Private  Label  Manufacturers  Association),  and SGMA (Sporting
Goods Manufacturers Association).

The  Sports  Group  employs 4 sales  executives  who are  responsible  for sales
throughout the United States,  Western  Europe,  Asia, the Middle East and Latin
America.  These sales

                                      10
<PAGE>
executives also manage more than 50 independent sales  representatives  who call
on all classes of trade.  The Sports Group has in house sales  support and state
of the art EDI order/invoicing capabilities.

The  Sports  Group  manufactures  and  distributes  80%  of its  entire  product
domestically at its Oakland Park,  Florida  facilities.  The balance of products
sold  are  sourced  either   domestically  or  imported  from  various  contract
manufacturers around the world.

         DHB Sports Group's Potential Products  Liability.  Some of the products
manufactured  or  distributed  by the Sports Group are used in situations  where
serious personal injuries could occur,  whether on account of the failure of the
Sports  Group's  products  or  otherwise.  The Sports  Group  maintains  product
liability  insurance in the amount of $20,000,000 per occurrence and $20,000,000
in the aggregate,  including legal fees, subject to a $5,000  deductible.  There
can be no assurance  that these  amounts would be sufficient to cover payment of
potential claims, and there can be no assurance that this or any other insurance
coverage would continue to be available, or if available,  that the Sports Group
would be able to obtain it at reasonable  cost. Any  substantial  uninsured loss
would have to be paid out of the Sports Group's assets and could have a material
adverse effect on the Company's financial condition and results of operations.

         Employees. As of February 29, 2000, there was one officer of the Sports
Group,  8  persons   employed  in  supervisory   capacities,   67  employed  for
manufacturing,  shipping and warehousing, 8 in sales and customer service and 10
were office  personnel.  All of the Sports  Group's  employees are employed full
time. In the opinion of management,  the Sports Group enjoys good  relationships
with its employees.

DHB Electronics Group

LEC is a manufacturer of unique and patented thermal management,  packaging, and
structural components for the electronics industry.  LEC has over seven years of
experience in the design,  manufacture,  and sale of products in the electronics
industry.  On May 29, 1998, the Company acquired a Japanese subsidiary,  DHB KK,
for a cash payment of $375,000. This Company markets LEC's products in Japan. On
March 10, 2000 the Company  sold the  Electronics  Group to an  unrelated  third
party for approximately  $4.375 million less the outstanding LEC loan balance of
$141,217.

Products  - LEC's  current  products  are  based  on  silicon  carbide  particle
reinforced   aluminum  composite   technology  applied  to  thermal  management,
packaging,  and structural components for the electronics industry.  The silicon
carbide/aluminum   composites   provide  a  unique   combination   of  desirable
properties:  High thermal  conductivity,  low coefficient of thermal  expansion,
lightweight,  and high stiffness.  These properties are useful in a wide variety
of  electronic  applications:  Power  Module  and  Amplifier  Heat Sinks or Base
plates,  microprocessor  package lids and heat  spreaders,  printed wiring board
cores,  carriers,  package bases, and fluid cooled heat sinks.  Power Module and
Amplifier   Heat  Sinks   provide  heat   dissipation   and  thermal   expansion
characteristics, which minimize thermal stresses.

                                       11
<PAGE>

LEC's   lightweight   Printed  Wiring  Board  Cores  are  used  extensively  for
constraining surface mount assemblies,  where they provide improved reliability,
excellent  thermal   performance,   and  weight  reductions  of  up  to  70%  of
conventional  cores.  LEC's carriers  provide high heat  dissipation  and weight
savings,  while matching the thermal expansion of many semiconductor devices and
ceramic  substrates.  Major weight savings can be obtained by substituting LEC's
package  bases for those made of  conventional  materials  for  various  package
applications.  For applications requiring higher levels of heat dissipation, LEC
produces unique  flow-through  heat sinks with internal cooling passages for air
or  liquid   cooling.   LEC  markets  these   products  under  the  trade  names
PRIMECOOL(TM) and PRIMEFLO(TM) composite components.

LEC's products are fabricated using patented technologies.  Composites with high
loading of silicon  carbide are made using the  PRIMEX(TM)  pressure  less metal
infiltration technology ("infiltrated products"). Lower silicon carbide loadings
are achieved  using the PRIMEX  CAST(TM)  composite  casting  technology  ("cast
products").  Together these technologies provide a comprehensive range of SiC/A1
products to meet customer needs.

LEC's original  business  strategy was initially to address the military markets
to  establish  a base  business  from which to attack the  commercial/industrial
markets.  This  sequence  offered a  natural  progression  from  low-to-moderate
volume,  high value products to high volume,  low cost products,  and compatible
with the need to develop  production  experience with a new process  technology.
The strategy has been only partially successful: while LEC has achieved numerous
product adoptions in military applications,  dramatic changes in DOD procurement
plans  during  the past  several  years  have  precluded  the  development  of a
profitable business based solely on this market segment.  LEC's current strategy
is to maintain and grow,  where possible,  its military  business on a selective
basis,  while directing its primary  attention toward the  commercial/industrial
markets. The commercial/industrial  business has shown strong growth in the past
two years and this trend is projected to continue.

Competition  and  Customers.  LEC has  established  itself as a market leader in
SiC/A1  products.  LEC estimates its current  business share to be approximately
50% of all SiC/A1  electronic  products sold. LEC's leadership  position will be
key in  maintaining  the level of growth  necessary to pursue  opportunities  in
areas currently dominated by lower cost incumbent materials,  such as copper and
aluminum, as well as competitively priced materials, such as copper/tungsten and
molybdenum/copper. LEC's position will also be critical in protecting its market
share from competitors attempting to "buy" new business as it develops.

                                       12
<PAGE>

LEC's Marketing and Distribution.  LEC employs a sales executive (along with two
customer  service  specialists)  who are  responsible  for sales  and  marketing
throughout the United States, Europe, and Japan.  Additionally,  LEC utilizes 17
independent  sales  representatives  who are  paid on a  commission  basis.  LEC
utilizes   a   website   to   market   its    products.    Their    address   is
http//www.LEC-Inc.com.

In addition, LEC has obtained strong access to the Japanese market through LEC's
affiliate,  DHB KK, in Japan. DHB KK has established  customer contacts with key
accounts  in Japan  that  taken  together  have  the  major  share of the  power
electronics  market;  these include  almost all of the major  electronic  and/or
electronic  components   manufacturers  in  Japan.  Product  adoption  has  been
achieved,  and most of the key customers are pursuing  additional  qualification
programs.

Segment Information

As described in detail above, the Company operates in three principal  segments:
Ballistic-resistant    equipment,    Electronic    Components   and   Protective
athletic/medical  equipment.  The Company  disposed of the Electronics  Group in
March 2000,  and closed its hard armor company,  LAP in October 1999.  These two
divestures are accounted for as discontinued  operations.  Financial information
on the Company's business segments was as follows:


                                       13
<PAGE>
<TABLE>
<CAPTION>

Net Sales                                                 1999               1998               1997
---------                                                 ----               ----               ----
<S>                                                   <C>                <C>                <C>
Ballistic-resistant equipment                         $30,358,537        $28,695,127        $26,805,471
Electronic components                                   8,441,393          8,398,107                  -
Protective athletic & medical equipment                 6,236,438          8,388,544          7,094,808
                                                        ---------          ---------          ---------
                                                       45,036,368         45,481,778         33,900,279
Less inter-segment sales                               (2,781,099)        (3,647,353)          (628,672)
Less discontinued operations (3)                       (7,524,541)        (8,761,007)
                                                      -----------        -----------
Consolidated Net Sales                                $35,140,728        $33,073,418        $33,271,607
                                                      ===========        ===========        ===========

Income from Operations
Ballistic-resistant equipment                         $(9,629,504)        $2,485,395         $2,017,281
Electronic components                                  (1,835,137)          (782,908)                 -
Protective athletic & medical equipment                (2,390,834)         1,207,743            498,062
Corporate and Other (1)                                (2,824,826)        (1,508,027)        (1,039,316)
                                                      -----------        -----------        -----------
     Sub-total                                        (16,680,301)         1,402,203          1,476,027
Less discontinued operations (3)                        6,809,082          1,451,216                  -
                                                      -----------          ---------         ----------
Consolidated Operating Income                         $(9,871,219)        $2,853,419        $ 1,476,027
                                                   ==============       ============         ==========


Identifiable Assets (2)
Ballistic-resistant equipment                         $14,283,739        $23,743,604        $17,572,698
Electronic components                                   6,177,019          5,749,438                  -
Protective athletic & medical equipment                 3,335,253          8,844,627          6,322,150
                                                        ---------          ---------          ---------
                                                       23,796,011         38,337,669         23,894,848
Corporate and Other                                       400,038          4,641,566          3,779,781
                                                          -------          ---------          ---------
Sub-total                                              24,196,049         42,979,235         27,674,629
Discontinued operations (3)                            (4,825,532)        (5,568,122)                 -
Assets held for sale                                    3,928,980          3,952,697                  -
                                                      -----------        -----------        -----------
Consolidated Net Assets                               $23,299,497        $41,363,810       $27,674,629
                                                      ===========        ===========        ===========
</TABLE>


     Foreign sales accounted for 17%, 12% and 10%, respectively of the total
<PAGE>

     revenues  for the years ended  December 31,  1999,  1998 and 1997.  Foreign
     identifiable  assets  accounted  for 13%, 5% and 2% of the total  assets at
     December 31, 1999, 1998 and 1997.

                                       14
<PAGE>

(1) Corporate and Other includes corporate general and  administrative  expenses
(2) Corporate assets are principally cash, marketable  securities,  and deferred
charges
(3) Discontinued  operations included the Companies sold, LEC and DHB KK
as well as the loss from the shut-down of the LAP plant.



Item 2.  PROPERTIES

         Corporate  Headquarters.  On January 1, 2000 the Company  relocated its
corporate  headquarters  to a 3,750  square foot office  located at 555 Westbury
Avenue,  Carle  Place,  NY 11514  pursuant  to a three year lease with an annual
rental  of  $44,250  and  5%  increases  each  year.  Previously  the  corporate
headquarters  were located in a one-story  building  bought January 17, 1996, on
two-acre lot located at 11 Old  Westbury  Road,  Old  Westbury,  New York;  this
building is currently for sale.

         PACA.  PACA  leases  23,400  square feet of office,  manufacturing  and
warehouse  space at 148 Cedar  Place,  Norris,  Tennessee  from  Leonard  Rosen,
President of PACA, at a present annual rental of $43,200, plus real estate taxes
of  approximately   $4,800  annually.   The  Company  leases  this  space  on  a
month-to-month  basis.  In the  opinion of  management,  PACA's  facilities  are
adequate  for its  current  needs and for its needs in the  foreseeable  future.
Management  believes that the terms of the lease are at the current market price
that would be obtained from an unrelated party.

         NDL/Point Blank/OPI Facility.  NDL Products leases a 67,000 square foot
office and manufacturing  facility (the "Oakland Park Facility") located at 4031
N.E.  12th  Terrace,  Oakland  Park,  Florida  33334,  from  V.A.E.  Enterprises
("V.A.E."),  a partnership controlled by Mrs. Terry Brooks, wife of Mr. David H.
Brooks,  and beneficially  owned by Mr. and Mrs. Brooks' minor children.  V.A.E.
purchased the Oakland Park  facility as of January 1, 1995.  Point Blank and OPI
entered  into a net-net  lease for a portion  of the space in the  Oakland  Park
facility.  Annual aggregate base rental is $480,000 and is scheduled to increase
by 4% per year. NDL Products,  Point Blank, and OPI, as lessees, are responsible
for all real estate taxes and other operating and capital  expenses.  Management
believes that the terms of the lease are at the current  market price that would
be  obtained  from an  unrelated  party.  In April 1997,  the Company  entered a
five-year lease for a 60,000 square foot warehouse adjacent to the Oakland Park,
Florida facility with an annual rental of approximately $210,000. This warehouse
is located at 1201 NE 38th Street Oakland Park, Florida.

         Point Blank International Facility. PB Int'l leases a 5,700 square foot
office and  warehouse  facility  located at Rue Leon  Frederiq,  14, 4020 Liege,
Belgium.  This space is occupied  pursuant to a three-year lease with options to
renew for six years and annual rentals of approximately, $42,000.

         Lanxide  Facility.  LAP and LEC lease an 82,000  square foot office and
warehouse  facility located at 1300 Marrows Road,  Newark,  Delaware and a 3,500
square foot ballistic

                                       15
<PAGE>

testing  range  at  Forge  Dr.,  Newark,  Delaware,  which  is  adjacent  to the
manufacturing facility. The Marrow's road space is occupied pursuant to a lease,
which provides for annual base rentals of $420,000 and expires in March 2001. In
January 1999 the sublessor  filed for bankruptcy  protection and the Trustee has
not yet decided on the  assumption  or rejection of the LAP or LEC leases.  This
premise was released in conjunction  with the sale of the  Electronics  Group on
March 10, 2000.


 Item 3.  PENDING LITIGATION

         On or about January 20, 1999, DL Cromwell  Investments,  Inc. commenced
an action  against DHB Capital  Group Inc. and David Brooks in the Supreme Court
of New York, County of Nassau. The Plaintiff claims it was fraudulently  induced
to enter into a consulting  agreement  with the  defendant and for breach of the
consulting agreement and a supplemental  agreement and for quantum merit for the
fair and reasonable value of services  rendered.  In September 1999, the Company
settled with DL Cromwell.

         The Company  initiated a lawsuit against Bioflex Medical  Magnetics for
patent  infringement,  unfair competition under federal and state law and breach
of contract.  Bioflex Medical Magnetics  commenced an action against NDL and DHB
Capital in the US District Court for the Southern  District of Florida.  Bioflex
claims patent and trademark  infringement,  as well as, breach of contract.  NDL
has  filed a claim  with  its  general  liability  insurance  carrier,  and they
acknowledge  that it is their  duty to  defend  this  action.  In June  1999 the
Company  reached a settlement  with  Bioflex.

         Thomas "Hitman" Hearns filed a complaint against NDL Products in the US
District court for the Eastern District of Michigan alleging unfair competition,
and  violation of Mr.  Hearn's right of publicity  and seeking  cancellation  of
NDL's  "Hitman"  trademark.  NDL has filed a claim  with its  general  liability
insurance carrier. Due to the preliminary status of this litigation,  counsel to
DHB is unable to predict the outcome of this  litigation.  In February 2000, the
case was settled.

         Barry Finn,  the former  president  of NDL  Products  Inc.,  obtained a
judgment  against NDL Products Inc. and DHB Capital Group Inc. on March 25, 1999
for breach of an employment  contract.  The Company settled this lawsuit in June
1999.

         The Company is involved  in other  minor  litigation,  none of which is
considered  by  management  to be  material  to its  business  or, if  adversely
determined,  would have a material  adverse  effect on the  Company's  financial
condition.

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

         There was no meeting of Security  Holders in 1999. There will a meeting
for 1999 and 1998 by June 30,2000.

                                       16
<PAGE>
                                     Part II

Item 5.  Market for Common Equity and Related Stockholder Matters.

         The Common Stock of the Company has been traded on the NASDAQ Small Cap
MarketTM  from  September  4, 1998 until  December 20, 1999 and traded under the
symbol "DHBT".  Before and after that it was traded on  over-the-counter  market
("OTC Bulletin  Board") since  September 22, 1993.  Prior thereto,  there was no
public market for the  Company's  securities.  Commencing  on June 8, 1994,  the
Company  was listed on the Boston  Stock  Exchange  and traded  under the symbol
"DHB."

                                                       Low          High
1997:       1st Quarter                                1.75         3.00
            2nd Quarter                                1.75         4.25
            3rd Quarter                                3.31         6.00
            4th Quarter                                3.25         4.375
1998        1st Quarter                                3.88         5.063
            2nd Quarter                                4.00         4.500
            3rd Quarter                                4.00         4.9375
            4th Quarter                                4.5625       5.6875
1999        1st Quarter                                3.25         5.25
            2nd Quarter                                3.25         5.1875
            3rd Quarter                                3.0625       4.5625
            4th Quarter                                 .25         3.0625
2000        1st Quarter (through March 23, 2000)        .75         1.75

                  No cash dividend  were  declared for the last three years.  If
the Company  generates  earnings,  the Company  will  retain such  earnings  for
further development of its business. The payment of cash dividends in the future
will depend upon the earnings and financial  requirements of the Company and all
other  relevant  factors,  including  approval of such dividends by the Board of
Directors.

         The number of holders of record of the Company's  Common Stock on March
28,  2000 was 144;  however,  the number of holders of record  includes  several
brokers  and  depositories  for the  accounts  of their  customers.  The Company
estimates  that  approximately  1,600  beneficial  owners  hold shares of Common
Stock.

Recent Sales of Unregistered Securities

         In January and May 1999,  the Company sold 25,000 and 344,000 shares of
common stock in a private  placement  to  accredited  investors  for proceeds of
$1,197,000.  These proceeds were used for general working capital  requirements.
The offering price per common share was $4.00 in January and $3.00 in May.

                                       17
<PAGE>
Commissions  of $20,000  was paid and the  Company  relied on the  exemption  to
registration provided by Regulation D pursuant to the Securities Act of 1933, as
amended.

         In December 1999,  the Company sold 6,150,000  shares and 66,700 shares
of common stock in a private  placement to accredited  investors for proceeds of
$3,125,000.  These proceeds were used for general working capital  requirements.
The  offering  price per  common  share was  $0.50  and  $0.75  respectively.  A
commission  of  $43,700  was paid and the  Company  relied on the  exemption  to
registration provided by Regulation D pursuant to the Securities Act of 1933, as
amended.
         Item 6. SELECTED FINANCIAL INFORMATION

         The selected  consolidated  financial data set forth below for the year
ended December 31, 1999,  1998,  1997,  1996, 1995 were derived from the audited
consolidated  financial  statements  of the  Company.  The data set forth  below
should be read in  conjunction  with  "Management's  Discussion  and Analysis of
Financial  Condition and Results of Operations" and the  Consolidated  Financial
Statements and related Notes appearing elsewhere in this 10-K.
<TABLE>
<CAPTION>
                                           1999              1998              1997              1996             1995
                                           ----              ----              ----              ----             ----
<S>                                   <C>                   <C>             <C>             <C>                  <C>
Income Statement Data
Net Sales                               $35,140,728      $33,073,418       $33,271,607       $23,378,698      $14,494,094
Cost of Sales                            27,566,278       20,441,663        22,153,925        19,027,741        9,088,617
                                         ----------       ----------        ----------        ----------        ---------
Gross Profit                              7,574,450       12,631,755        11,117,682         4,350,957        5,405,477
Selling, General and
Administrative expenses                  17,445,669        9,778,336         9,641,655         8,668,950        5,140,399
                                         ----------        ---------         ---------         ---------        ---------
Operating income (loss)                 (9,871,219)        2,853,419         1,476,027       (4,317,993)          265,078
Interest expense                        (2,908,495)      (1,095,553)         (339,754)         (327,347)        (303,615)
                                         ----------       ----------          --------          --------         --------
Other income (expense)                  (9,560,523)         (21,957)           801,126       (1,054,723)          774,934
                                        -----------         --------           -------       -----------          -------
Income   before    discon-tinued
operations                             (22,340,237)        1,779,823         1,937,399       (5,700,063)          736,397
Discontinued operations                 (9,714,291)      (1,628,371)                --                --               --
                                        -----------      -----------                --                --               --
Income before income taxes
                                       (32,054,528)          151,452         1,937,399       (5,700,063)          736,397
Income taxes                                 67,385           21,650           396,509         (834,191)          491,922
                                             ------           ------           -------         ---------          -------
Net income (loss)                     $(32,121,913)         $129,802        $1,540,890      $(4,865,872)         $244,475
                                      =============         ========        ==========      ============         ========
Earnings per share
    Basic                                   $(1.24)           $0.005             $0.06           $(0.20)            $0.01
    Diluted                                 $(1.09)           $0.005             $0.05           $(0.20)            $0.01

Balance Sheet Data

Working capital                          $2,047,312      $21,634,389       $13,621,014        $8,900,398       $6,526,004
Total Assets                             23,299,497       41,363,810        27,674,629        19,160,419       19,465,208
Short-term debt                           5,152,815        4,334,607         2,740,192         1,461,664        2,550,000
Long-term debt                           16,280,051       11,915,116         1,411,258         1,444,091              ---
Stockholders' equity                   (10,186,322)       18,172,267        17,741,619        12,980,086       11,801,968
</TABLE>

                                       18
<PAGE>



     SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>

                                         First Quarter      Second         Third Quarter        Fourth Quarter
                                                            Quarter
<S>                                          <C>            <C>                   <C>                 <C>
Fiscal 1999

Net Sales                                    $7,370,132     $8,347,387           $11,993,788          $7,429,421
Cost of sales                                 4,697,820      4,667,251             7,552,182          10,649,025
                                              ---------      ---------             ---------          ----------
Gross profit                                  2,672,312      3,680,136             4,441,606          (3,219,604)
                                              1,941,518      2,605,673             3,023,836           9,874,642
                                              ---------      ---------             ---------           ---------
Selling, general and admin expense
Operating income                                730,794      1,074,463             1,417,770         (13,094,246)
Other income (expense)                         (322,546)      (323,392)             (478,194)        (11,344,886)
                                              ---------       --------             ---------         -----------
Income before discontinued operations
                                                408,248        751,071               939,576         (24,439,132)
                                               (333,871)      (612,597)             (619,765)         (8,148,058)
                                              ---------      --------              ---------         -----------
Discontinued operations
Income before income taxes                       74,377        138,474               319,811         (32,587,190)
Income taxes                                     42,967          9,410                10,523               4,485
                                                 ------          -----                ------         -----------

Net income                                       31,410        129,064               309,288         (32,591,675)
                                                 ======        =======               =======        ============
Earnings per share
Basic                                             0.001          0.005                 0.012              (1.242)
                                                  =====          =====                 =====             =======
Diluted
                                                  0.001          0.004                 0.010              (1.199)
                                                  =====          =====                 =====             =======

Weighted average shares outstanding
Basic shares                                 25,555,440     25,660,833            26,013,541          26,244,905
                                             ==========     ==========            ==========          ==========
Diluted shares                               30,074,496     30,135,176            30,319,931          27,175,515
                                             ==========     ==========            ==========          ==========
</TABLE>
                                       19
<PAGE>
<TABLE>
<CAPTION>

                                                       First              Second           Third            Fourth
         Fiscal 1998                                  Quarter             Quarter         Quarter           Quarter
                                                      -------             -------         -------           -------
<S>                                                  <C>                <C>             <C>               <C>
Net Sales                                            $8,600,681         $8,045,467      $7,585,125        $8,842,125
                                                      5,859,642          4,963,208       3,816,378         5,802,415
                                                      ---------          ---------       ---------         ---------
Cost of sales
Gross profit                                          2,741,039          3,082,259       3,768,747         3,039,710

                                                      2,718,509          2,411,404       2,872,816         1,775,607
                                                      ---------          ---------       ---------         ---------
Selling, general and admin expense
Operating income                                         22,530            670,855         895,931         1,264,103
Other income (expense)                                 (93,559)          (139,617)       (367,480)         (472,940)
                                                       --------          ---------       ---------         ---------
Income before discontinued operations
                                                       (71,029)            531,238         528,452          791,163
                                                      (406,092)          (419,014)       (265,157)         (538,108)
                                                      ---------          ---------       ---------         ---------
Discontinued operations
Income before income taxes                            (477,121)            112,224         263,294           253,055
                                                          7,950              3,534           7,469             2,697
                                                          -----              -----           -----             -----
Income taxes
Net income                                            (485,071)            108,690         255,825           250,358
                                                      =========            =======         =======           =======


Earnings per share
Basic                                                   (0.017)              0.004           0.010             0.009
                                                        =======              =====           =====             =====
Diluted
                                                        (0.017)              0.003           0.008             0.008
                                                        =======              =====           =====             =====

Weighted average shares outstanding
Basic shares                                         27,137,331         24,774,376      24,832,394        25,160,628
                                                     ==========         ==========      ==========        ==========
Diluted shares                                       28,053,959         29,227,939      29,505,594        30,345,085
                                                     ==========         ==========      ==========        ==========
</TABLE>

                                       19
<PAGE>
         Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS

         The following analysis of the Company's financial condition and results
of  operations  should be read in  conjunction  with the  financial  statements,
including the notes thereto,  contained  elsewhere in this  document.  Except as
otherwise  noted  herein,  this  discussion  relates  to  the  Company  and  its
subsidiaries on a consolidated basis.

General

         The Company is a holding company,  which conducts  business through its
wholly owned subsidiaries  organized in three divisions.  The Armor Group, which
develops, manufactures and distributes bullet and projectile resistant garments,
out DHB Sports  Group,  which engages in the  manufacture  and  distribution  of
protective  athletic  equipment  and apparel and the  manufacture  of orthopedic
products and is a distributor  of general  medical  supplies and the  Electronic
Group,   which  engages  in  the  manufacture  and  distribution  of  electronic
components.  The Company sold the Electronics Group on March 10, 2000. The Armor
Group's  products  are sold  both  nationally  and  internationally.  Sales  are
directed primarily to law enforcement  agencies and military services.  Sales to
domestic  law  enforcement   agencies,   including   government,   security  and
intelligence  agencies,  police  departments,  federal  and  state  correctional
facilities,  highway  patrol and  Sheriff's  departments,  comprise  the largest
portion of the Armor Group's business. Accordingly, any substantial reduction in
governmental  spending  or change in  emphasis  in defense  and law  enforcement
programs could have a material adverse effect on the Armor Group's business. The
Company also owns a minority interest in several other companies, some privately
held and some publicly held, including the telecommunications,  health care, and
electronics. The management of the Company is engaged in the review of potential
acquisitions and in providing management assistance to the Company's operating
subsidiaries.

         The Company  commenced  operations  in November  1992 by acquiring  the
outstanding  common stock of PACA, a manufacturer and distributor of bulletproof
garments and  accessories.  From the  acquisition  of PACA through  December 20,
1994, PACA was the Company's only source of revenue from operations. Thereafter,
the Company  purchased a business each year and thus to date,  NDL, Point Blank,
OPI, PB Int'l, LEC and DHB KK are also sources of revenue from operations.

                                       20
<PAGE>

The Company closed LAP in October 1999 and sold LEC and DHB KK in March 2000.

Results of Operations

Year Ended  December  31,  1999,  compared  to year  ended  December  31,  1998.
Consolidated  net sales of the  Company  for the year ended  December  31,  1999
increased  from  $33,073,418  to  $35,140,728  as a result  of  increased  sales
volumes.  The  sales  numbers  do not  include  the  revenue  from  discontinued
operations of  approximately  $7.5 million for the year ended  December 31, 1999
and $8.7  million for the year ended  December 31, 1998.  In October  1999,  the
Company  announced  its plan to divest  its  "Lanxide  subsidiaries".  This plan
included  the  closure of the LAP plant and to enter into  negotiations  for the
sale of the Electronics Group. The sale of the Electronics group was consummated
on  March  10,  2000 for a cash  payment  of  approximately  $4.2  million.  The
divestiture  of  the  Lanxide  subsidiaries  reflects  the  Company's  strategic
decision  to refocus and  rededicate  is efforts  and  resources  on the design,
development  and  production of  technologically  advanced soft body armor.  All
revenue  and  expenditures  associated  with LAP and the  Electronics  Group are
presented as a loss from  discontinued  operations.  The year ended December 31,
1998 has been  restated  to reflect  the  discontinued  operations.  The Company
believes  that by divesting the Company of these  subsidiaries  it will increase
profitability and cash flow in 2000.

         Gross profit in 1999 was a $7,574,450  as compared to  $12,631,755  for
1998.  Impacting a lower gross profit in 1999 was the  write-off  of  additional
research and development costs. Previously,  the Company's ballistic testing for
a contract was a prepaid expense and expensed to the cost of goods sold over the
life of the contract.  This change resulted in approximately $200,000 additional
expenditures  in 1999.  Also  impacting  the gross  profit was the  write-off of
certain obsolete inventory.

         The Company's selling, general and administrative expenses ("S, G & A,"
expenses")  for 1999  increased to $ 17,445,669  from  $9,778,336  in 1998.  The
reason for the increase is S,G, & A expenses is by-fold.  Professional fees were
increased approximately $5 million in 1999. The increase in professional fees is
associated  with  winning the  interceptor  contract  award,  the defense of the
protest of the  award,  the  professional  fees  associated  with  becoming  Y2K
compliant and ISO9000 certified, and the legal fees associated with the lawsuits
against the company.  Most of the professional  fees are non-recurring in nature
and the  majority  of the cases were  settled in 1999.  The Company had one year
where their liability  insurance  deductible was $100,000,  now it is $5,000 per
year.  A claim was made  during  the year under  that  insurance  policy and the
Company  expensed  $100,000  in legal  fees in the  defense  of the  claim.  The
insurance  company will pay the balance of the claim. The second reason selling,
general and  administrative  expenses is higher during 1999 is that  advertising
expenditures  increased  from  approximately  $640,000 in 1998 to  approximately
$1,062,000 in 1999. The Sports group  successfully  negotiated  agreements  with
some large  retail  companies,  which  required a one-time  advertising  rebate.
Included  in  expense  for  1999  is   approximately   $400,000  in  advertising
incentives.  The Sports Group also produced an infomercial for $250,000 in 1999.
Also  the  construction  of  DHB  and  subsidiaries  website  cost  the  company
approximately $70,000. Also included in

                                       21
<PAGE>

expense was promotional  samples given to promote our various new lines of vests
to our  numerous  distributors  and salesman  resulting in a $600,000  charge to
expense during 1999.

         Other income  (expense)  also increased in 1999 to  ($12,469,018)  over
(1,073,596)in  1998. The primary reason was the Company suffered a dollar was on
October 15, 1999, the office and manufacturing facility located in Oakland Park,
Florida  suffered  extensive  damage,  $7.7  million  due  to  Hurricane  Irene.
Substantial  damage was done to the building as well as inventory.  The loss was
primarily  inventory and the corresponding  overhead expenses on that inventory.
The Company  currently has a lawsuit with their  insurance  companies to recover
some of the loss,  but as of today no agreement  has been  reached.  The Company
expensed the entire loss in October  1999 and has not recorded a receivable  for
any amount,  which may be due from the  insurance  companies.  Interest  expense
increased  due  to  an  increase  in  borrowing  of  approximately   $11,000,000
associated  with the  purchase of LAP and LEC.  The  Company  also wrote off the
goodwill  associated  with their  investment  in Belgium  Company as well as the
write down of their non-marketable securities, which resulted in a $688,000
expense.

         Year Ended December 31, 1998, compared to year ended December 31, 1997.
Consolidated  net sales of the  Company  for the year ended  December  31,  1997
increased by  $8,562,818  to  $41,834,425.  This  increase was the result of the
acquisitions  made this year, as well as,  increased  growth in sales volume for
Point Blank and NDL. Gross profit in 1998 increased  $3,349,932 to  $14,467,614.
The Company's gross profit percentage  increased from 33% in 1997 to 35% in 1998
due to increased sales volumes as well as a change in the product mix being sold
that  yield  higher  margins.  The  Company  had a  consolidated  net  income of
approximately  $130,000  for 1998 as  compared to a  consolidated  net income of
approximately  $1,541,000  for  1997.  The  decrease  in net  income in 1998 was
primarily  due  to  the  acquisition  of  Lanxide  Armor  Products  and  Lanxide
Electronic  Components.  The Company has cut their operating cost  significantly
throughout  1998 and  believes  these  companies  will not  impact net income as
negatively in 1999.

         The Company's selling, general and administrative expenses ("S, G & A,"
expenses")  for 1998  increased to  $13,065,411  from  $9,641,655  in 1997. As a
percentage of net sales,  the S,G, & A expenses were 31% in 1998 compared to 28%
in 1997.  This  increase  of  approximately,  $3,424,000  was due  mainly to the
acquisitions made during 1998.

         Interest  expense,  net  of  interest  income  for  1998  increased  to
$1,278,867  for 1998 from  $339,754 in 1997 due to an increase in  borrowing  of
approximately $11,000,000 associated with the purchase of LAP and LEC.

         Year Ended December 31, 1997, compared to year ended December 31, 1996.
Consolidated  net sales of the  Company  for the year ended  December  31,  1997
increased  by  $9,892,909  to  approximately  $33,271,607.   This  increase  was
primarily  due to the  increased  sales volume for Point Blank,  PACA,  and NDL.
Gross profit in 1997 increased  $6,766,725 to  $11,117,682.  The Company's gross
profit  percentage  increased from 19% in 1996 to 33% in 1997. This increase was
the result of improved  production  efficiencies,  as well as,  increased  sales
volume.  The Company had a consolidated net income of  approximately  $1,541,000
for 1997 as compared to a consolidated net loss of approximately  $4,866,000 for
1996.

         During the last quarter of 1996, the Company  instituted  major changes
at their Florida facility, which houses Point Blank, NDL and OPI. New management
was put in place in October 1996,  including a new production  manager.  Pricing
was reviewed  and better  controls  where put into place to yield higher  profit
margins.  The  Company  had net income for the year ended  December  31, 1997 of
$1,540,809 as compared to a net loss of $4,865,872  for the year ended  December
31,  1996.  This turn  around was due to the  successful  implementation  of the
Company's strategic plan put in place in late 1996.

                                       22
<PAGE>

         The Company's  selling,  general and  administrative  expenses ("S, G&A
expenses")  for 1997,  increased to  $9,641,655  from  $8,668,950  in 1996. As a
percentage of net sales,  the S, G & A expenses were 28% in 1997 compared to 37%
in 1996. This increase of approximately $1.5 million was due mainly to increased
selling  costs   including  sales   commissions,   show  expenses  and  increase
advertising and travel expenses associated with sales.

         In 1997, the Company continued aggressive measures to regain its market
share by  increasing  its marketing  efforts.  This amounted to 8% of the S, G&A
expenses for 1996 as compared 20 % of the S, G&A expenses for 1997.

         Interest  expense,  net of  interest  income,  for 1997,  increased  to
$339,754  from  $327,347  in 1996 due to a  decline  of  interest  income on the
Company's cash balances.

Liquidity and Capital Resources.

         The Company's primary capital  requirements over the next twelve months
are to  assist  PACA,  Point  Blank,  NDL,  PB  Int'l,  LAP,  LEC and DHB KK, in
financing their working capital  requirements.  PACA, Point Blank, PB Int'l, LEC
and NDL sell the majority of their  products on 60 - 90 day terms,  and OPI, LAP
and DHB KK sells the  majority of its  products on 30-60 day terms,  and working
capital  is  needed  to  finance  the  receivables,  manufacturing  process  and
inventory.  Working  capital at December 31, 1999, 1998 and 1997 was $(912,766),
$19,103,841 and $13,621,014,  respectively.  Without the Electronics Group which
was subsequently sold in March 2000, the working capital as of December 31, 1999
would be $4,831,970.

         Cash, cash  equivalents  and marketable  securities  totaled  $473,441,
$1,048,445 and $2,586,690 at December 31, 1999, 1998 and 1997 respectively.  The
cash  generated  by the net income for the year ended  December  31,  1997,  was
utilized to  repurchase  the  Company's  common stock in the open market,  which
amounted to  approximately  $2,145,000 for the year ended December 31, 1997. The
Company has repurchased  and retired an additional  700,995 shares of its common
stock in the open market for approximately  $2,770,002 in 1998. During 1999, the
Company  repurchased 75,150 shares in the open market for $315,320.  At December
31, 1999 the Company  had a loan of  $5,000,000  from the Bank of New York which
was due in April 1999, bearing a default interest of approximately 12% per year.
Even  thought the line had  expired,  the bank was working with the Company on a
repayment  schedule.  The assets of the Company are held as collateral  for this
loan. The loan was repaid in March 2000, utilizing the proceeds from the sale of
the Electronics Group.

         The Company's  principal  commitments at December 31, 1999 consisted of
obligations under its operating leases for its facilities.

         The  Company's  capital  expenditures  for  1999,  1998,  and 1997 were
$707,374,  $1,423,267,  $801,150 respectively.  The Company sold the Electronics
Group in March  2000 for a cash  payment  of  approximately  $4,375,000  less an
outstanding loan balance to LEC for $141,216.  The Company purchased LAP and LEC
in February 1998 for $4.8 million  dollars,

                                       23
<PAGE>

DHB KK in May 1998 for $375,000 and PB Int'l in February  1997 by issuing  stock
in lieu of cash payment.

Special Note Regarding Forward-Looking Statements

This Annual Report contains certain  forward-looking  statements and information
relating to the Company that is based on the beliefs of the Company's management
as well  as  assumptions  made by and  information  currently  available  to the
Company's  management.  When  used in this  document,  the  words  "anticipate,"
"believe," "estimate",  "expect",  "going forward", and the similar expressions,
as they relate to the Company or Company  management,  are  intended to identify
forward-looking  statements.  Such  statements  reflect the current views of the
Company  with  respect  to future  events  and are  subject  to  certain  risks,
uncertainties   and   assumptions.   Should  one  or  more  of  these  risks  or
uncertainties materialize, or should the underlying assumptions prove incorrect,
actual results may vary materially  from those described  herein as anticipated,
believed,  estimated  or  expected.  The Company does not intend to update these
forward-looking statements.

Item 7A.  Qualitative and Quantitative Disclosures About Market Risks

         There has not been a  material  change  in the  Company's  exposure  to
interest rate and foreign currency risks since the date of the 1998 Form 10-K.

         Interest Rate Risk:  The Company's  exposure to market risk for changes
in interest  rate relates  primarily to its  investment  portfolio.  The Company
ensures the safety and preservation of the invested principal funds by investing
in safe and  high-credit  quality  securities,  which  includes only  marketable
securities  with  active   secondary  or  resale  markets  to  ensure  portfolio
liquidity.

         Foreign  Currency  Exchange  Risk:  The Company  transacts  business in
various foreign countries.  Its primary foreign currency cash flows are in Japan
and Western Europe.  Currently,  the Company does not employ a foreign  currency
hedge  program  utilizing  foreign  currency  exchange  contracts as the foreign
currency transactions and risks to date have not been significant.

Item 8. Financial  Statements:  See Index to Consolidated  Financial  Statements
Appearing in the Consolidated Financial Statement Annexed Hereto.

Item 9.  Changes  In and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure.


                                    Part III

Item  10.  Directors,   Executive  Officers,   Promoters  and  Control  Persons;
Compliance with Section 16(a) of the Exchange Act.

         The Directors  serve for a term of one year following their election at
the Annual Meeting of Shareholders, and until their successors have been elected
and qualified. The officers serve at the discretion of the Board of Directors.

Directors and Executive Officers
<PAGE>

         David H. Brooks, age 45, has served as the Chairman and Chief Executive
Officer of the Company  since its  inception  in 1992.  In September  1998,  Mr.
Brooks  resigned  his  position  as CEO and COB as a  condition  for  listing on
NASDAQ. He is currently serving as Co-Chairman of the Board. Mr. Brooks has been
the  Chairman of the Board,  President  and a Director of Brooks  Industries  of
L.I., Inc. ("Brooks Industries"),  since October 1988, a New York corporation of
which he is the sole shareholder and through which he makes investments.  Brooks
Industries  engages in the venture capital  business and in securities  trading.

                                       24
<PAGE>

Mr. Brooks  received a Bachelor of Science  degree in  accounting  from New York
University  in 1976.  Since  that  time he has been  engaged  principally  as an
investor for his own account.

         Morton A. Cohen,  age 64, is a director of the Company and has over ten
years experience in venture capital and over twenty-five years experience in the
public  securities  industry,  both as a  securities  analyst  and a  investment
banker. Also, he has successfully managed several emerging growth companies. Mr.
Cohen has been  Chairman,  President  and Chief  Executive  Officer  of  Clarion
Capital  Corp.  since 1982.  Mr. Cohen served as Governor of the Montreal  Stock
Exchange,  is a  Chartered  Financial  Analyst  and holder of a M.B.A.  from the
Wharton  School of Business of the University of  Pennsylvania.  Mr. Cohen was a
member of the Small Business  Investment  Advisory of Small Business  Investment
Companies and is a member of the Small Business  Investment Advisory Council. He
is the Chairman of Monitek  Technologies,  Inc.  (NASDAQ),  Chairman of Cohesant
Technologies  (NASDAQ) and Director of Gothic Energy  (NASDAQ) and a director of
Zemex Corp (NYSE).  Mr. Cohen has been a director of the Company  since 1996. He
presently serves on the audit committee.

         Joseph Giaquinto,  age 36, has been President of NDL since March, 1995.
For more  than 7 years  prior  thereto,  he was a Vice  President  of Sales  for
Tru-Fit  Marketing,  of  Boston,  Massachusetts.  He  has  more  than  12  years
experience in the selling,  marketing & production  of successful  manufacturing
programs to mass merchandisers, chain stores and food retailers.

         Sandra  Hatfield,  age 46,  has been  President  of Point  Blank  since
October 1996. For more than 5 years prior thereto, she was the Vice President of
Production at PACA. She has over twenty-five  years experience in all aspects of
the apparel industry,  with specialties in quality assurance and control as well
as manufacturing engineering and job flow systems.

         Gary  Nadelman,  age 48, as been the president of Synari,  Inc., of New
York, NY, a privately held  manufacturer  and distributor of women's  sportswear
and other apparel,  for more than 5 years.  Mr.  Nadelman has been a director of
the Company  since 1995 and he became  Co-Chairman  of the Company in  September
1998. He presently serves on the audit committee.

         Leonard  Rosen,  age 62,  is a  founder  of PACA and has  served as its
President since its inception in 1975. He is actively  involved in all facets of
PACA's  operations,  from  production to sales.  Mr. Rosen has experience in the
apparel  industry  for over 35 years.  He worked  closely  in the  research  and
development of ballistic-resistant  soft body armor and helmets with the Federal
Government,  including  serving  as a  charter  member  of  the  committee  that
conceived the National  Institute of Justice "0l"  Standard for  ballistic  body
armor.

                                       25
<PAGE>

         Dawn M.  Schlegel,  age  30,  is the  Chief  Financial  Officer  of the
Company.  She has also served as Treasurer  and  Secretary of the Company  since
September  1999.  She has functioned in various  positions  within the Company's
operations  and finances since 1996.  Mrs.  Schlegel  became a Certified  Public
Accountant  in 1993.  She worked for  Israeloff,  Trattner & Co.  CPA's P.C.,  a
certified public accounting firm, for five years prior thereto.
         Because  of the  relatively  small size of the  Company,  the loss of a
senior  executive may have a materially  adverse effect upon the Company until a
suitable replacement can be found.


Item 10.  Executive Compensation.


         Summary  Compensation  Table.  The  following  table sets forth certain
summary  information  regarding the compensation of the executive officers whose
total salary and bonus for the year ended  December 31,  1999,  1998,  and 1997,
exceeded $100,000:


                                       26
<PAGE>
<TABLE>
<CAPTION>
                                                                                                       Long-term
                                                                                                     Compenstation
                                                                     Annual Compensation                 Awards

                                                                                  Other Annual      Securities
        Name and Principal Position                                               Compensa-         underlying
                                            Year               Salary(1)  Bonus   tion              Options/SAR's(4)
<S>                                         <C>                           <C>            <C>               <C>
                                            1999             $143,750
      David Brooks,(2)                      1998               50,000      0             0                 0
      Co-Chairman                           1997              191,917      0             0                 0

                                            1999             $ 58,333      0             0                 0
      Mary Kreidell                         1998              100,000      0             0                 0
      Chief Financial Officer               1997              100,000      0             0                 0

      Sandra Hatfield                       1999             $149,196      0             0                 0
      President of Point Blank              1998              149,080      0             0                 0
                                            1997              100,330      0             0                 0

                                            1999             $118,841      0             0                 0
      Joseph Giaquinto President of         1998              107,886      0             0                 0
      NDL                                   1997              100,000      0             0                 0


      Leonard Rosen,(3) President of        1999             $165,400                    0                 0
      PACA                                  1998              163,750      0             0                 0
                                            1997              147,596      0             0                 0
                                                                           0
</TABLE>
      -------------------------
(1)      Although  certain  officers  receive  certain  benefits,  such  as auto
         allowances and expense  allowances,  the value of such  perquisites did
         not exceed the  lesser of  $50,000 or 10% of the  respective  officers'
         salary and bonus.

(2)      Certain  warrants  were  awarded to Mrs.  Terry  Brooks in 1994 and Mr.
         David  Brooks  in  1996;  see  "Employment   Agreements"  and  "Certain
         Transactions."

(3)      Mr. Rosen is the lessor of PACA's  premises in Norris,  Tennessee.  See
         "Properties" and "Certain  Transactions." The Company does not consider
         the lease payments to be  compensation,  because they are not in excess
         of the fair market value of the lease.

(4)      In October  1995,  the Company  adopted a plan (the "1995 Stock  Option
         Plan" or the  "Plan")  pursuant  to which the Board of  Directors  or a
         committee (the  "committee")  of the Board is authorized to award up to
         3,500,000 shares of Common Stock,  after giving effect to the 50% stock
         dividend  paid on July  16,  1996,  to  selected  officers,  employees,
         agents,  consultants  and other  persons  who  render  services  to the
         Company.  The  options  may be issued on such terms and  conditions  as
         determined  by the  Board  or  Committee,  and may be  issued  so as to
         qualify as incentive stock options under Internal  Revenue Code Section


                                       27
<PAGE>

         422A.  The  directors  who are  authorized  to  award  options  are not
         eligible  to receive  options  under the Plan.  The Company has filed a
         registration  statement with respect to the Plan,  and shares  ("Option
         Shares")  of Common  Stock  acquired  under the Plan are  eligible  for
         resale by non-affiliates  without further  registration  under the Act;
         Option Shares  acquired by affiliates of the Company are subject to the
         registration requirements of the Act.

         Employment  Agreements.  Mr.  Brooks,  Co-Chairman  of the Board of DHB
Capital  Group Inc. is employed  pursuant to a five-year  employment  agreement,
which was entered  into April 1, 1996.  Pursuant  to the  agreement  Mr.  Brooks
receives an annual salary of $250,000  through April 2001, with annual increases
of $25,000.  The terms of Mr. Brooks' contract provides for 750,000 warrants per
year  exercisable  at $2.33 for five years.  As the Company  has  businesses  in
Florida and requires Mr. Brooks to spend  considerable time there, this contract
includes  provisions  for certain of his Florida living  expenses.  In September
1998,  Mr. Brooks'  employment  agreement was amended to reflect his position as
Co-chairman. There were no other changes to Mr. Brooks' employment agreement.

         Stock  Warrants.  The Board of Directors  granted during the year ended
December 31, 1997,  50,000 warrants  exercisable at $2.00 for three years to the
president of Point Blank, Sandra Hatfield. No additional stock options, warrants
or similar securities,  rights or interests were granted to any of the executive
officers  of the Company  listed in the Summary  Compensation  Table  above,  no
options,  warrants or similar securities,  rights or interests were exercised by
any such  executive  officers  with  the  exception  of  Joseph  Giaquinto,  who
exercised 49,500 warrants in 1998.

         Section  16(a) of the  Securities  Exchange  Act of 1934  requires  the
Company's  directors and executive  officers,  and persons who own more than ten
percent of a registered  class of the Company's  equity  securities to file with
the Securities and Exchange  Commission initial reports of ownership and reports
of changes of  ownership  of Common  Stock and other  equity  securities  of the
Company.

         To the  Company's  knowledge,  based  solely on review of the copies of
such reports furnished to the Company and written  representations that no other
reports  were  required  during the fiscal year ended  December  31,  1999,  all
Section 16(a) filing  requirements  applicable  to its  officers,  directors and
greater-than-ten-percent beneficial owners were complied with.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

         The  following  table  sets  forth  the  beneficial  ownership  of  the
Company's  Common Stock as of March 23,  2000,  for (i) each person known by the
Company to beneficially  own more than five percent of the shares of outstanding
Common  Stock,  (ii)  each  of the  executive  officers  listed  in the  Summary
Compensation  Table in "Executive  Compensation"  and (iii) all of the Company's
executive officers and directors as a group. Except as otherwise indicated,  all
shares  are  beneficially  owned,  and the  persons  named  as the  owners  hold
investment and voting power.


                                       28
<PAGE>
<TABLE>
<CAPTION>
                                                               Number of Shares
          Name                       Address                  Beneficially Owned        Percent Owned1
          ----                       -------                  ------------------        --------------
<S>                       <C>                                     <C>                          <C>
David Brooks 2,3          11 Old Westbury Rd                      19,275,6002                  49%
                          Old Westbury, NY 11568

Jeffrey Brooks 3          1500 South Ocean Blvd.                   1,595,758                    4%
                          Boca Raton, FL 33234

Morton Cohen 4            11 Old Westbury Rd                        790,3007                    *
                          Old Westbury, NY

Joseph Giaquinto 5        4031 NE 12th Terrace Oakland              63,800                      *
                          Park, Fl 33334

Sandra Hatfield 6         4031 NE 12th Terrace Oakland              50,0006                     *
                          Park, Fl 33334

Gary Nadelman 7           11 Old Westbury Rd                        260,000                     *
                          Old Westbury, NY

Leonard Rosen 8           148 Cedar Place                           45,1425                     *
                          Norris, TN
Dawn Schlegel 9           555 Westbury Ave.
                          Carle Place, NY 11514                      5,000                      *

All officers and Directors as a group 10                          20,989,842                   53%
</TABLE>

-------------------------
1.       Based upon 32,332,181 shares outstanding as of March 23, 2000 increased
         by the currently  exercisable  options and warrants of 7,417,000 shares
         of common stock held by directors  and officers for an aggregate  total
         of 39,747,181  shares.  Currently  exercisable  options or warrants are
         those, which are exercisable within 60 days after the date of this form
         10-KSB.

2.       Consists of 7,500,600 shares owned by Mr. Brooks and 4,500,000 owned by
         his wife as custodian  for his minor  children,  and  4,250,000  shares
         which may be  acquired  by Mrs.  Brooks  upon  exercise  of a currently
         exercisable  warrant and 3,000,000  shares which may be acquired by Mr.
         Brooks  at $2.33  per share and  25,000  which may be  acquired  by Mr.
         Brooks at $3.25 per share  upon  exercise  of a  currently  exercisable
         warrant.

3.       Messrs. Jeffrey Brooks and David H. Brooks are brothers. Each disclaims
         beneficial ownership of the shares owned by the other.

4.       Clarion  Capital  Corporation,  Clarion  Offshore Fund LTD. and Clarion
         Partners of which  Morton  Cohen is the  executive  and or director own
         1,265,300  shares and 25,000  shares which may be acquired by Mr. Cohen
         at $3.25 per share upon exercise of a currently exercisable warrant for
         serving on the Board.

5.       Includes 33,000 shares acquirable under currently  exercisable warrants
         awarded  to Mr.Giaquinto.

                                       29
<PAGE>

6.       Includes 50,000 shares acquirable under currently  exercisable warrants
         awarded to Mrs. Hatfield.

7.       Includes 25,000 shares acquirable under currently  exercisable warrants
         awarded to Mr. Nadelman.

8.       Does not  include  4,350 shares  owned by Mr.
         Rosen's wife, as to which Mr. Rosen disclaims beneficial ownership.

9.       Includes 5,000 shares acquirable under currently exercisable warrant.

10.      Includes 7,417,000 currently  exercisable warrants of common stock held
         by directors and officers.


Item 12.  CERTAIN  RELATIONSHIPS AND RELATED TRANSACTIONS

         The Company has funded certain of its  acquisitions  through the use of
term loans from Mr. David H. Brooks,  Chairman of the Board of the Company,  and
Mrs.  Terry Brooks,  his wife. On February 6, 1998 Mr. Brooks loaned the Company
$6 million,  $4.8 million of which was connection  with the purchases of LAP and
LEC. The balance of the  shareholder  loans at December 31, 1999 is  $16,046,469
These  shareholders  loans  expire  in  November  2001.  The  interest  paid  on
shareholder loans to date is $475,447.  In 1998, the Company granted warrants to
purchase  500,000  shares  of  Common  Stock,  at a price of $3.50 per share and
expiring  in 2001,  to Mrs.  Brooks in  consideration  for the  outstanding  and
additional  loans lent to the Company in February 1998. The Company entered into
an  employment  agreement  in April  1996  with Mr.  Brooks,  See -  "Employment
Agreements".

         NDL,  Point  Blank and OPI  operate at a 67,000  square foot office and
manufacturing  facility (the "Facility") located at 4031 N.E. 12th Terrace, Fort
Lauderdale, Florida 33334, which it leases from V.A.E. Enterprises ("V.A.E."), a
partnership  controlled by Mrs.  Brooks and  beneficially  owned by Mr. and Mrs.
Brooks'  minor  children,  which  purchased  the Facility on or about January 1,
1995.  The lease is a 5-year  net-net lease  expiring in 2000;  with annual base
rental is $480,000 and is scheduled to increase by 4% per year. The Company,  as
lessee, is responsible for all real estate taxes and other operating and capital
expenses. In the opinion of management, the rental is fair and reasonable and is
approximately  at the same  rate that  could be  obtained  from an  unaffiliated
lessor for property of similar type and location.

         PACA leases 23,400 square feet of office,  manufacturing  and warehouse
space at 148 Cedar Place,  Norris,  Tennessee from Leonard  Rosen,  President of
PACA,  at a  present  annual  rental  of  $43,200,  plus  real  estate  taxes of
approximately $4,800 annually.  The Company is currently leasing this space on a
month-to-month  basis.  In the  opinion  of  management,  the rental is fair and
reasonable and is  approximately at the same rate that could be obtained from an
unaffiliated lessor for property of similar type and location. In the opinion of
management,  PACA's  facilities  are adequate for its current  needs and for its
needs in the foreseeable future.


                                       30
<PAGE>

Item 13. Exhibits and Reports on Form 8K: See Exhibits  annexed hereto after the
financial statements.

Form 8-K, March 10, 2000 - Sale of the DHB Electronics Group


<PAGE>
Item 13 (a) Exhibits.

<TABLE>
<CAPTION>

Exhibit           Description
-------           -----------
<S>         <C>                                                                           <C>
3.1         Certificate of  Incorporation  of DHB Capital Group Inc., a New York
            corporation (hereinafter, "DHB-New York")                                      1

3.2         Certificate  of Amendment to the  Certificate  of  Incorporation  of
            DHB-New York filed November 5, 1992                                            1

3.3         Restated and amended  Certificate of  Incorporation  of DHB New York
            dated February 10, 1993                                                        1

3.4         By-laws of DHB-New York                                                        2

3.5         Certificate of  Incorporation  of DHB Capital Group Inc., a Delaware
            corporation (hereinafter,  "DHB Delaware"),  filed with the Delaware
            Secretary of State on or about September 1, 1994                               2

3.5         (a) Certificate of Amendment to Certificate of  Incorporation of DHB
            Capital Group Inc. filed December 31, 1996 Note 10

3.6         By-laws of DHB Delaware                                                        2

3.7         Plan of merger of DHB-New York into DHB-Delaware                               2

3.8         Certificate  of  Ownership  and Merger,  Merging  DHB-New  York into
            DHB-Delaware, pursuant to Section 253 of the General Corporation Law
            of the State of  Delaware,  filed in the Office of the  Secretary of
            State of Delaware on or about April 17, 1995                                   2

4.3         Form of Warrant  Agreement  with respect to the  Redeemable  Warrant
            together with list of purchasers                                               1

10.1        Employment  Agreement  dated  November  6, 1992  between  Protective
            Apparel Corporation of America and Leonard Rosen                               1

10.2        Lease dated November 6, 1992, between Protective Apparel Corporation
            of America and Leonard Rosen in Norris, Tennessee                              1

10.3        Domestic and International Non-Competition Agreement dated March 12,
            1990 between the Company and American  Body Armor & Equipment,  Inc.
            (the "American Body Armor Non-competition Agreement")                          1
</TABLE>
                                       31

<PAGE>
<TABLE>
<CAPTION>
<S>         <C>                                                                           <C>
10.4        GSA Contracts dated January 21, 1991 and March 19, 1992                        1

10.10       Promissory  Note between the Company and David Brooks dated November
            6, 1992                                                                        1

10.23       Order Determining  Successful Bidder, etc., dated December 20, 1994,
            In Re N.D.L.  Products,  Debtor,  of the  United  States  Bankruptcy
            Court,  Southern  District  of  Florida,  Case No.  9421458-BKC-RBR,
            Chapter 11 (Lead Case), jointly administered with Case Nos. 94-21459
            through 94-21463                                                               6

10.24       Term  loan  to  the  Registrant  in the  amount  of  $1,150,000  due
            September  19, 1995,  from The Chase  Manhattan  Bank,  N.A., of New
            York, New York (the "Secured Lender"),  bearing interest at 7.2% per
            year                                                                           7

10.25       Collateral  Agreement  [Third Party] dated October 18, 1994, made by
            Mr. David H. Brooks in favor of the Secured Lender                             7

10.26       Agreement dated August 4, 1995,  terminating the American Body Armor
            Non-Competition Agreement                                                      9

10.27       Bill of sale dated August 3, 1995, made by the Trustee in Bankruptcy
            of Point Blank Body Armor, L.P.                                                8

10.28       Order  Authorizing  Sale at Auction dated July 25, 1995, In Re Point
            Blank Body Armor,  L.P.,  Debtor,  of the United  States  Bankruptcy
            Court,  Eastern  District of New York,  Case Nos.  895-83336-2D  and
            895-83335-2D                                                                   8

10.29       1995 Stock Option Plan                                                         9

10.30       Stock  Purchase  Agreement with respect to the  outstanding  capital
            stock of Orthopedic Products, Inc., dated as of March 22, 1996                11

10.31       Definitive  Merger  Agreement  with The Lehigh Group Inc and Plan of
            Reorganization                                                                12

10.33       Assignment Agreement dated as of February 6, 1998 by and between DHB
            Capital Group, Inc. and E.I. Du Point Nemours and Company.

10.34       Transfer  Agreement,  dated  as of  February  6,  1998 by and  among
            Lanxide   Corporation,   DHB  Capital  Group,  Inc.,  Lanxide  Armor
            Products,  Inc.  Lanxide  Electronic  Components,  Inc.  and Lanxide
            Technology company, L.P.

10.35       Notification  Letter  from  Lanxide  Corporation  of E.I. Du Pont de
            Nemours and Company dated February 6, 1998.

10.36       Negotiable  Promissory Note form DHB Capital Group, Inc. to David H.
            Brooks dated February 9, 1998. Notes to Exhibit Table:

10.37       Asset Purchase Agreement dated March 10, 2000.

10.38       Agreement on Transfer of Business dated March 10, 2000.
</TABLE>

                                       32
<PAGE>
<TABLE>
<CAPTION>
<S>         <C>
1.          Incorporated by reference to the Company's Registration Statement on
            Form SB-2, No. 33-59764, which became effective on May 14, 1993.

2.          Incorporated by reference to the Company's Definitive Proxy Material
            filed with the Commission in connection  with the Special Meeting in
            Lieu of  Annual  Meeting  of  Shareholders  of the  Company  held on
            February 15, 1995.

3.          Incorporated by reference to the Company's Registration Statement on
            Form SB-2,  No.  33-70678,  which  became  effective on December 29,
            1993.

4.          Incorporated by reference to the Company's  Quarterly Report on Form
            10-QSB for the quarter ended June 30, 1993.

5.          Incorporated by reference to  Post-Effective  Amendment No. 1 of the
            Company's two  Registration  Statements on Form SB-2, Nos.  33-59764
            and 33-70678, which became effective on October 17, 1994.

6.          Incorporated  by reference  to the Current  Report on Form 8-K dated
            December 20, 1994.

7.          Incorporated by reference to Amendment No. 1 dated March 2, 1995, of
            the Current Report on Form 8-K dated December 20, 1994.

8.          Incorporated  by reference  to the Current  Report on Form 8-K dated
            August 3, 1995.

9.          Incorporated  by  reference  to  Registration  Statement on Form S-8
            filed on or about October 1, 1995.

10.         Incorporated by reference to Post-Effective  Amendment No. 33-59764,
            on Form SB-2, File # filed on Jan 31, 1997.

11.         Incorporated  by reference  to the Current  Report on Form 8-K dated
            March 22, 1996, including the amendments thereof.

12.         Incorporation  by reference to Registration  Statement on Form SB-2,
            File No. 333-31383 Filed on July 24, 1997.

13.         Incorporated  by  reference  to  Current  Report  on Form 8-K  filed
            February 25, 1998.
</TABLE>
--------
                                       33
<PAGE>

                    DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
                     CONSOLIDATED FINANCIAL STATEMENTS INDEX



                                    CONTENTS

                                                                           Page
                                                                           ----


INDEPENDENT AUDITORS' REPORT                                               F-1


Consolidated Balance Sheets as of December 31, 1999 and 1998               F-2


Consolidated Statements of Operations for the years ended December 31,
     1999, 1998 and 1997                                                   F-3


Consolidated  Statements of  Stockholders'  Equity for the years ended
     December 31, 1999, 1998 and 1997                                      F-4


Consolidated Statements of Cash Flows for the years ended December 31,
     1999, 1998 and 1997                                                   F-5


Consolidated  Statements of  Comprehensive Income for the years ended
     December 31, 1999, 1998 and 1997                                      F-6


Notes to the Consolidated Financial Statements                        F-7 - F-18

Schedule II Valuation and Qualifying Accounts                               F-19

Pro  Forma Balance at December 31, 1999                                     F-20


                                       34
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------



The Board of Directors of
DHB Capital Group Inc.

We have  audited the  accompanying  consolidated  balance  sheets of DHB Capital
Group Inc.  and  Subsidiaries  as of December  31, 1999 and 1998 and the related
consolidated  statements  of  operations,  stockholders'  equity,  comprehensive
income  and cash flows for each of the years in the period  ended  December  31,
1999. These  consolidated  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements based on our audits.

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  consolidated  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  consolidated
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of DHB
Capital  Group Inc.  and  Subsidiaries  as of December 31, 1999 and 1998 and the
consolidated  results of its operations and its cash flows for each of the three
years in the  period  ended  December  31,  1999 in  conformity  with  generally
accepted accounting principles.




/s/Paritz and Company P.A.
--------------------------
Paritz and Company P.A.
Hackensack, New Jersey
March 13, 2000



                                 F-1


<PAGE>
<TABLE>
<CAPTION>
                            DHB CAPITAL GROUP INC. AND SUBSIDIARIES
                                  CONSOLIDATED BALANCE SHEETS

                                                                        December 31,
                                                              -------------------------------
                       ASSETS                                      1999              1998
                       ------                                 ------------       ------------
<S>                                                           <C>                <C>
CURRENT ASSETS
Cash and cash equivalents                                     $    473,441       $    519,117
Marketable securities                                                   --            529,328
Accounts receivable, less allowance for doubtful
   Accounts of $757,741and $507,739                              5,208,365          7,913,767
Inventories                                                      9,045,853         18,063,616
Net assets held for sale                                         3,928,980          3,952,697
Prepaid expenses and other current assets                          596,441          1,932,291
                                                              ------------       ------------

Total Current Assets                                            19,253,080         32,910,816
                                                              ------------       ------------

PROPERTY AND EQUIPMENT                                           2,252,693          4,629,041
                                                              ------------       ------------

OTHER ASSETS
Intangible assets, net                                              14,353          1,248,231
Investments in non-marketable securities                         1,000,000          1,688,750
Deferred tax assets                                                444,000            334,000
Deposits and other assets                                          335,371            552,972
                                                              ------------       ------------

Total Other Assets                                               1,793,724          3,823,953
                                                              ------------       ------------

TOTAL ASSETS                                                  $ 23,299,497       $ 41,363,810
                                                              ============       ============

       LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Notes payable                                                 $  5,000,000       $  4,175,000
Accounts payable                                                 9,495,663          5,129,147
Accrued expenses and other current liabilities                   2,557,290          1,812,673
Current maturities of long term debt                               152,815            159,607
                                                              ------------       ------------

Total Current Liabilities                                       17,205,768         11,276,427
                                                              ------------       ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                           <C>                <C>
LONG TERM LIABILITIES
Long term debt, net of current maturities                          233,582            387,512
Note Payable - stockholder                                      16,046,469         11,527,604
                                                              ------------       ------------

Total Long Term Debt                                            16,280,051         11,915,116
                                                              ------------       ------------

Total Liabilities                                               33,485,819         23,191,543

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY (DEFICIENCY)                              (10,186,322)        18,172,267
                                                              ------------       ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)                                                  $ 23,299,497       $ 41,363,810
                                                              ============       ============
</TABLE>

            See accompanying notes to financial statements.

                                      F-2
<PAGE>
<TABLE>
<CAPTION>
                                    DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
                                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                      For The Years Ended December 31,
                                                             --------------------------------------------------
                                                                 1999               1998              1997
                                                             ------------       ------------       ------------
<S>                                                          <C>                <C>                <C>
Net sales                                                    $ 35,140,728       $ 33,073,418       $ 33,271,607

         Cost of Goods Sold                                    27,566,278         20,441,663         22,153,925
                                                             ------------       ------------       ------------

Gross Profit                                                    7,574,450         12,631,755         11,117,682

Selling, general & administrative expenses                     17,445,669          9,778,336          9,641,655
                                                             ------------       ------------       ------------

Income (Loss) before other income (expense)                    (9,871,219)         2,853,419          1,476,027
                                                             ------------       ------------       ------------

Other Income (Expense)
Interest expense, net of interest income                       (2,908,495)        (1,095,553)          (339,754)
Hurricane Loss                                                 (7,740,231)                --                 --
Other income                                                      255,844             34,835             51,599
Settlement of employment contract                                (270,000)          (220,000)
Income (Loss) on holding of equity investments                   (688,000)                --            372,000
Write down of investment in subsidiary                         (1,000,000)                --                 --
Realized gain (loss) marketable securities                        (16,050)           154,155            (72,175)
Unrealized gain (loss) on marketable securities                  (102,086)            52,967            449,702
                                                             ------------       ------------       ------------

Total Other Income (Expense)                                  (12,469,018)        (1,073,596)           461,372
                                                             ------------       ------------       ------------


Income (Loss) from Continuing Operations before
   income taxes                                               (22,340,237)         1,779,823          1,937,399
Income taxes                                                            0            612,000            396,509
                                                             ------------       ------------       ------------
Income (Loss) from Continuing Operations                      (22,340,237)         1,167,823         15,410,890

Discontinued Operations
Loss from discontinued operations                              (4,238,800)        (1,016,371)                --
Loss on disposal of discontinued operations                    (5,475,491)                --                 --
                                                             ------------       ------------       ------------
Total discontinued operations                                  (9,714,291)        (1,016,371)                --

Income (loss) before income taxes                             (32,054,528)           151,452          1,540,890

Income taxes                                                       67,385             21,650                 --
                                                             ------------       ------------       ------------

Net Income (Loss)                                            $(32,121,913)      $    129,802       $  1,540,890
                                                             ============       ============       ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                          <C>                <C>                <C>
Earnings (loss) per common share (Note 11)
    Continuing Operations                                           (0.86)            $0.046              $0.06
    Discontinued Operations                                         (0.38)            (0.041)              0.00
                                                                    -----             ------               ----
     Net earnings (loss) per common Share                          $(1.24)            $0.005              $0.06
                                                                   ======             ======              =====

</TABLE>


                 See accompanying notes to financial statements

                                       F-3

<PAGE>
<TABLE>
<CAPTION>
                                                            DHB CAPITAL GROUP INC. AND SUBSIDIARIES
                                                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                                     FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                                                       Number of                  Additional       Common Stock       Foreign
                                                        Common         Par          Paid-in        Subscription       Currency
                                                        Shares        Value         Capital         Receivable      Translation
                                                        ------        -----         -------         ----------      -----------
<S>                                                  <C>            <C>          <C>                 <C>             <C>
Balance January 1, 1997                              23,146,008     $23,146      $17,956,030         $(227,500)      $      0
Net Income for the year ended 12-31-97                        -           -                -
Issuance of stock to purchase subsidiary                666,000         666          999,334                  -             -
Stock issued to purchase lease                          144,200         144          209,856                  -             -
Sale of common stock                                  1,825,000       1,825        3,639,004            227,500             -
Stock issued for services                                13,500          13           67,487                  -             -
Exercise of warrants                                    100,000         100          149,900                  -             -
Stock issued in settlement of a lawsuit                  75,000          75          149,925                  -             -
Stock returned in settlement of a lawsuit               (38,625)        (38)         (73,596)                 -             -
Effect of foreign currency translation                        -           -                -                  -        (6,135)
Purchase of treasury stock                             (583,859)       (584)      (2,144,833)                 -             -
                                                     ----------     -------      -----------         ---------       --------
Balance December 31, 1997                            25,347,224    $ 25,347     $ 20,953,107                  0      $ (6,135)

Net Income for the year ended 12-31-98
Sale of common stock                                    686,500         687        2,705,313
Stock issued for services                                65,211          64          260,780
Exercise of warrants                                     49,500          50           65,950
Effect of foreign currency translation                                                                                 38,004
Purchase of treasury stock                             (700,995)       (701)      (2,769,301)                 -             -
                                                     ----------     -------      -----------         ---------       --------
Balance December 31, 1998                            25,447,440    $ 25,447     $ 21,215,849                  0      $ 31,869

Net Loss for the year ended 12-31-99
Sale of common stock                                  6,714,700       6,715        4,241,609           (700,025)
Stock issued for services                               204,214         204          390,777
Exercise of warrants                                     40,977          41           83,709
Effect of foreign currency translation                                                                                (19,461)
Purchase of treasury stock                              (75,150)        (75)        (240,170)                 -             -
                                                     ----------     -------      -----------         ---------       --------
Balance December 31, 1999                            32,332,181    $ 32,332     $ 25,691,774         $ (700,025)A    $ 12,408
                                                     ==========    ========     ============         ==========      ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                         Retained
                                                         Earnings
                                                        (Deficit)          Total
                                                        ---------          -----
<S>                                                    <C>             <C>

Balance January 1, 1997                               $(4,771,590)     $12,980,086
Net Income for the year ended 12-31-97                  1,540,890        1,540,890
Issuance of stock to purchase subsidiary                        -        1,000,000
Stock issued to purchase lease                                  -          210,000
Sale of common stock                                            -        3,868,329
Stock issued for services                                       -           67,500
Exercise of warrants                                            -          150,000
Stock issued in settlement of a lawsuit                         -          150,000
Stock returned in settlement of a lawsuit                       -          (73,634)
Effect of foreign currency translation                          -           (6,135)
Purchase of treasury stock                                      -       (2,145,417)
                                                      -----------      -----------
Balance December 31, 1997                             $(3,230,700)     $17,741,619

Net Income for the year ended 12-31-98                    129,802          129,802
Sale of common stock                                                     2,706,000
Stock issued for services                                                  260,844
Exercise of warrants                                                        66,000
Effect of foreign currency translation                                      38,004
Purchase of treasury stock                                      -       (2,770,002)
                                                      -----------      -----------
Balance December 31, 1998                             $(3,100,898)     $18,172,267

Net Loss for the year ended 12-31-99                  (32,121,913)     (32,121,913)
Sale of common stock                                                     3,548,299
Stock issued for services                                                  390,981
Exercise of warrants                                                        83,750
Effect of foreign currency translation                                     (19,461)
Purchase of treasury stock                                      -         (240,245)
                                                      -----------      -----------
Balance December 31, 1999                             $(35,222,811)   $(10,186,322)
                                                      ============    ============
</TABLE>
A    - The  subscription  receivable  at December 31, 1999 was repaid in January
       2000.

See  accompanying notes to financial statements.

                                      F-5
<PAGE>
<TABLE>
<CAPTION>
                                             DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
                                                     STATEMENTS OF CASH FLOWS
                                                 FOR THE YEARS ENDED DECEMBER 31,

CASH FLOWS FROM OPERATING ACTIVITIES                                  1999                 1998                1997
                                                                 ------------       ------------       ------------

<S>                                                              <C>                <C>                <C>
Net Income (Loss)                                                $(32,121,914)      $    129,802       $  1,540,890
Adjustments to reconcile net income to net
  cash  provided  by  operating activities:
Depreciation and amortization                                         592,213            644,046            440,650
Valuation allowances/reserves                                       4,017,806                 --           (372,000)
Stock issued for services                                             200,981            260,844             67,500
Stock issued in settlement of a lawsuit                               190,000                 --            150,000
Stock returned in settlement of a lawsuit                                                                   (73,596)
Stock issued to purchase a lease                                                                            210,000
Unrealized gain on transfers from non-marketable securities                                                (598,900)
Deferred income taxes                                                (110,000)                --            364,000
Changes in assets and liabilities (Increase) Decrease in:
Accounts receivable                                                 2,705,402           (910,080)        (2,663,565)
Marketable securities                                                 529,328          1,174,478          1,237,121
Inventories                                                         9,017,763         (4,146,468)        (5,018,686)
Assets held for sale                                                   23,717         (3,952,697)
Prepaid expenses and other current assets                           1,335,850         (1,192,632)          (472,203)
Deposits and other assets                                             217,601           (136,900)           (86,972)
Increase (decrease) in:
Accounts payable                                                    4,366,516         (1,101,290)         2,013,134
Accrued expenses and other current liabilities                        768,988            531,064            439,377
State income taxes payable                                            (24,371)            39,173            (14,134)
                                                                 ------------       ------------       ------------
Net cash used by operating activities                              (8,290,120)        (8,660,660)        (2,837,384)
                                                                 ------------       ------------       ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Payments for purchase of assets of subsidiary, net of cash
acquired                                                                   --         (2,884,360)           134,356
Payments made for property and equipment                             (311,043)          (819,870)          (801,150)
                                                                 ------------       ------------       ------------
Net Cash used by investing activities                                (311,043)        (3,704,230)          (666,794)
                                                                 ------------       ------------       ------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of note payable- bank                                        825,000          1,500,000          1,275,000
Proceeds of note payable- shareholder                               4,518,865         10,227,604                 --
Proceeds from the issuance of long term debt                               --            250,000                 --
Principal payments on long-term debt                                 (160,722)           (16,483)           (45,657)
Proceeds from the exercise of warrants - common stock                  83,750             66,000            150,000
Foreign Currency Translation                                          (19,461)            38,004             (6,135)
Purchase of treasury stock                                           (240,245)        (2,770,002)        (2,145,417)
Net proceeds from sale of common stock                              3,548,300          2,706,000          3,909,616
                                                                 ------------       ------------       ------------
Net cash provided by financing activities                           8,555,487         12,001,123          3,137,407
                                                                 ------------       ------------       ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                              <C>                <C>                <C>
NET DECREASE IN CASH AND EQUIVALENTS                                  (45,676)          (363,767)          (366,771)

CASH AND CASH EQUIVALENTS - BEGINNING                                 519,117            882,884          1,249,655
                                                                 ------------       ------------       ------------

CASH AND CASH EQUIVALENTS - END                                  $    473,441       $    519,117       $    882,884
                                                                 ============       ============       ============
</TABLE>
                 See accompanying notes to financial statements

                                      F-6
<PAGE>
<TABLE>
<CAPTION>

                      DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)



                                            For the years ended December 31,
                                  -------------------------------------------------
                                      1999               1998             1997
                                  ------------       ------------      ------------
<S>                               <C>                <C>               <C>
Net Income (Loss)                 $(32,121,914)      $    129,802      $  1,540,890

Other comprehensive
income (loss)
Foreign currency translation           (19,461)            38,004            (6,135)
                                  ------------       ------------      ------------

Comprehensive Income (Loss)       $(32,141,375)      $    167,806      $  1,534,755
                                  ============       ============      ============
</TABLE>


                 See accompanying notes to financial statements

                                      F-7
<PAGE>
                             DHB CAPITAL GROUP INC.
                          NOTES TO FINANCIAL STATEMENTS

Note 1       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

             Principles of consolidation

                  The consolidated  financial statements include the accounts of
            DHB Capital Group Inc. and its  subsidiaries  ("DHB"),  all of which
            are wholly owned.  DHB has three major  divisions,  DHB Armor Group,
            DHB  Electronics  Group,  and DHB  Sports  Group.  DHB  Armor  Group
            consists of Protective  Apparel  Corporation  ("PACA"),  Point Blank
            Body Armor Inc., Lanxide Armor Products Inc. ("LAP") and Point Blank
            International  S.A ("PB  Int'l").  DHB Sports Group  consists of NDL
            Products Inc.  ("NDL") and  Orthopedic  Products Inc.  ("OPI").  DHB
            Electronics Group consists of Lanxide Electronic  Components ("LEC")
            and DHB KK. All material  inter-company  balances  and  transactions
            have been eliminated.

            Business description

                  DHB Armor Group develops, manufactures, and distributes bullet
            and   projectile   resistant   garments,    bullet   resistant   and
            fragmentation  vests,  bomb  projectile  blankets,  aircraft  armor,
            bullet   resistant   plates  and  shields   and  related   ballistic
            accessories.   DHB  Sports  Group   manufactures   and   distributes
            specialized protective athletic apparel and equipment and orthopedic
            products.  DHB Electronics  Group  manufactures  and markets thermal
            management,  packaging and structural  components for the electronic
            industry within the United States and Japan.

            Uses of estimates in the preparation of financial statements

                  The  preparation  of financial  statements in conformity  with
            generally accepted accounting principles requires management to make
            estimates and assumptions that affect the reported amounts of assets
            and liabilities and disclosure of contingent  assets and liabilities
            at the date of the financial  statements and the reported amounts of
            net  revenue  and  expenses  during each  reporting  period.  Actual
            results could differ from those estimates.

            Revenue recognition

                  Revenue  from  product  sales  is  recognized  at the time the
            product is shipped.

            Inventories

                  Inventories are valued at the lower of cost (determined on the
            first-in, first-out basis), or market.

            Property, plant and equipment and depreciation

                  Property,  plant  and  equipment  are  stated  at cost.  Major
            additions,  improvements, and renewals, which substantially increase
            the useful lives of assets, are capitalized.  Maintenance,  repairs,
            and minor renewals are expensed as incurred.

                                      F-8
<PAGE>
Note 1        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

                  Depreciation  is provided  for both  financial  reporting  and
            income tax purposes using the straight-line and accelerated methods.

            Marketable/Non-Marketable Securities

                  Investments   in  marketable   securities  are  accounted  for
            according to the  provisions  of  Statement of Financial  Accounting
            Standards No. 115,  "Accounting for Certain  Investments in Debt and
            Equity Securities" (SFAS 115).  Management of DHB classified all its
            marketable   securities  as  trading  securities  and,  accordingly,
            unrealized gains and losses are reflected in earnings.

                  Non-marketable securities are valued at historical cost and if
            necessary,  reduced by a valuation  allowance to the net  realizable
            value.

            Intangible assets

                  Intangible  assets are stated at cost and are  amortized  over
            their estimated useful lives (see Note 7).

            Income taxes

                  DHB and its domestic  subsidiaries file a consolidated Federal
            income tax return and separate state income tax returns.

                  DHB accounts for deferred income taxes in accordance with SFAS
            Statement  No.  109 which  requires  that  deferred  tax  assets and
            liabilities   be   recognized   for  the  future   tax   consequence
            attributable to differences  between  financial  statement  carrying
            amounts of existing assets and liabilities and their  respective tax
            bases. In addition,  SFAS No. 109 requires recognition of future tax
            benefits,  such as net operating loss  carryforwards,  to the extent
            that realization of such benefits is more likely than not and that a
            valuation allowance be provided when it is more likely than not that
            some portion of the deferred tax asset will not be realized.

            Research and development expenses

                  Research  and  development  expenses are expensed as incurred.
            The Company  expensed  approximately  $825,000 in 1999,  $523,000 in
            1998 and $278,000 in 1997 for research and development costs.

             Advertising expenses

                  The cost of advertising  is expensed as incurred.  The Company
            incurred  approximately   $1,062,000,   $642,000,  and  $904,000  of
            advertising costs in 1999, 1998, and 1997 respectively.


<PAGE>
Note 1        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

              Earnings per share

                  In 1997,  the  Company  adopted  SFAS no. 128,  "Earnings  Per
            Share"  which  required  retroactive  adoption.   The  new  standard
            simplifies  the  computation  of earnings per share and requires the
            presentation of basic and diluted  earnings per share.  Basic income
            per share amounts are based on the weighted average number of shares
            of common  stock  outstanding  during the years  presented.  Diluted
            income per share amounts are based on the weighted average number of
            shares of common  stock and stock  options  outstanding  during  the
            years presented.

            Comprehensive income (loss)

                  Effective  January 1, 1998, the Company  adopted the provision
            of statement No. 130, Reporting  comprehensive income which modifies
            the  financial   presentation  of   comprehensive   income  and  its
            components.  In  accordance  with  this  Statement,  a  Consolidated
            Statement of  Comprehensive  Income is included in the  Consolidated
            financial  statements to present all changes in Stockholders' equity
            in  the  periods   presented  other  than  changes   resulting  from
            transactions relating to the Company's stock.

            Stock based compensation

                  Statement  of   Financial   Accounting   Standards   No.  123,
            "Accounting for Stock Based Compensation" (SFAS 123) encourages, but
            does  not  require   companies  to  record   compensation  cost  for
            stock-based employee  compensation at fair value. DHB has chosen not
            to  adopt  SFAS  123 and to  continue  to  account  for  stock-based
            compensation   using  the  intrinsic  value  method   prescribed  in
            Accounting  Principles  Board Opinion No. 25,  "Accounting for Stock
            Issued to  Employees,"  and  related  interpretations.  Accordingly,
            compensation  cost for stock  options is measured as the excess,  if
            any, of the quoted market price of the  Company's  stock at the date
            of the grant over the  amount an  employee  must pay to acquire  the
            stock.

            Impairment of long-lived assets

                  DHB  accounts  for the  impairment  of  long-lived  assets  in
            accordance with SFAS No. 121 which requires that  long-lived  assets
            and identifiable  intangibles held and used by a company be reviewed
            for possible  impairment whenever events or changes in circumstances
            indicate   that  the  carrying   amount  of  an  asset  may  not  be
            recoverable.

Note 2        SUPPPLEMENTAL CASH FLOW INFORMATION

                      Cash paid for:          1999          1998         1997
                                              ----          ----         ----
                           Interest        355,160       308,282      269,450
                             Taxes          63,933        78,877       11,971


                  During the year ended December 31, 1998, the Company purchased
            LEC and LAP for a cash payment of $4.8 million less cash acquired of
            $250,927.  The Company also  purchased  DHB KK for a cash payment of
            $375,000.  The total cash paid for acquisitions  during 1998, net of

<PAGE>

            cash acquired total  $4,924,073.  During the year ended December 31,
            1997, the Company had non-cash  investing  activities when it issued
            common stock to acquire all of the outstanding stock of PB Int'l.

                                      F-10
<PAGE>
Note 3        BUSINESS ACQUISITIONS

                On February 9, 1998,  the Company  purchased the common stock of
              two privately held Delaware  corporations,  Lanxide Armor Products
              Inc.  (LAP) and Lanxide  Electronic  Components  Inc.  (LEC).  The
              purchase price was approximately $4.8 million and was funded by an
              additional  loan  from the  Company's  majority  shareholder.  LAP
              specializes  in  the  design,   development   and  manufacture  of
              ceramic/metal matrix composites for protective armor applications.
              LEC is a leading supplier of silicon carbide / aluminum composites
              for heat management applications in the electronics industry. This
              transaction was accounted for as a purchase.  On May 28, 1998, the
              Company acquired a Japanese subsidiary, DHB KK, for a cash payment
              of $375,000. This company markets LEC's products in Japan.

                  In  February,  1997  DHB  acquired  100%  of  the  issued  and
              outstanding   common   stock  of   Zunblindage   S.A.,  a  Belgian
              corporation,  in exchange  for 666,000  shares of DHB common stock
              valued at an aggregate of $1,000,000. In January 1999, Zunblindage
              S.A.'s name was changed to Point Blank International ("PB Int'l").
              PB Int'l manufactures and distributes bullet resistant  equipment,
              apparel and related  products  generally  in Europe and the Middle
              East.

                  The above  acquisitions  were accounted for using the purchase
              method of  accounting,  pursuant to which the  purchase  price was
              allocated  based  upon the  estimated  fair  values of the  assets
              acquired as of the dates of acquisition.  The purchase of PB Int'l
              resulted in goodwill of $541,000.  The  purchases of LAP, LEC, and
              DHB KK resulted in goodwill of approximately $500,000.

                  In the opinion of management,  if the results of operations of
              the  acquired  businesses  had been  included in the  consolidated
              financial statements since the beginning of the year, it would not
              have a material effect on the results of operations.

Note 4        MARKETABLE SECURITIES/NON-MARKETABLE SECURITIES

                The  following is a comparison of the cost and market value of
              marketable securities included in current assets:


                                                             1999        1998
                                                             ----        ----

                           Cost                               $0     $476,361
                           Unrealized gain                    --       52,967
                                                              --     --------
                           Market Value                       $0     $529,328
                                                              ==     ========


                  The Company has acquired minority  interests in non-marketable
          securities,  at December 31, 1997 the  historical  cost was $2,316,750
          reduced by a valuation  allowance  of  $628,000 to bring the  carrying
          value of these securities to the net realizable value of $1,688,750 at
          December 31, 1998. An additional  valuation  allowance of $688,750 was
          realized  during 1999 to bring the carrying value of the securities to
          $1,000,000 at December 31, 1999.

                                      F-11

<PAGE>

Note 5        INVENTORIES

              Inventories consist of the following:

                                                      1999             1998
                                                   ----------       ----------
                  Finished goods                   $3,376,747       $7,901,221
                 Work in process                    1,889,701        5,533,648
                  Raw materials and supplies        5,001,428        6,566,678
                                                   ---------        ----------
                      Sub-total                    10,267,876       20,001,547
                  Discontinued Operations          (1,222,023)      (1,937,931)
                                                  -----------      -----------
                                                  $ 9,045,845      $18,063,616
                                                  ===========      ===========

Note 6    PROPERTY, PLANT AND EQUIPMENT

              A summary of property,  plant and  equipment and the estimated
              lives used in the computation of depreciation is as follows:
<TABLE>
<CAPTION>
                                                                                        Estimated
                                                            1999            1998        useful life
                                                         ---------       ----------     -----------
<S>                                                     <C>              <C>            <C>
              Land                                         $47,500          $47,500         --
              Buildings                                    427,500          427,500        39 years
              Machinery and equipment                    5,012,360        6,709,810      5-30 years
              Furniture, fixtures and
              computer equipment                           828,552          796,049       5-7 years
              Transportation equipment                     234,270          231,579       3-5 years
              Leasehold improvements                       688,560          549,746    5-31.5 years
                                                           -------          -------
                                                         7,238,742        8,762,184
              Less accumulated depreciation and
              amortization                               2,119,578        1,657,951
                                                         ---------        ---------
              Sub-total                                  5,119,164        7,104,233
              Discontinued Operations                    2,866,471        2,475,192
                                                         ---------        ---------
                                                        $2,252,693       $4,629,041
</TABLE>

Note 7        INTANGIBLE ASSETS

              A summary of intangible assets and the estimated lives used in
              the computation of amortization is as follows:
<TABLE>
<PAGE>
<CAPTION>
                                                                              Estimated
                                                  1999          1998        useful life
                                                  ----          ----
<S>                                                <C>         <C>            <C>
                Goodwill                           $ -         $1,194,473     15 years
                On-going
                government                            -           612,106    1-5 years
                contracts
                Other                              163,261        178,261    1-7 years
                                                   -------        -------
                                                   163,261      1,984,840
                Less accumulated amortization
                                                   131,210        713,172
                Sub-total                           32,051      1,271,668
                Discontinued Operations             17,698         23,437
                                                  --------     ----------
                                                  $ 14,353     $1,248,231
                                                  ========     ==========
</TABLE>

                                      F-12
<PAGE>
Note 8         NOTES PAYABLE - BANK

               Notes payable - bank was due in April 1999 and is  collateralized
               by the assets of the Company.  The weighted average interest rate
               on these borrowings was  approximately  12% at December 31, 1999.
               The entire note was repaid in March 2000 using the proceeds  from
               the sale of the DHB Electronics Group.

Note 9         NOTES PAYABLE STOCKHOLDER

               These  notes  bear  interest  at 12% per  annum  and are due,  as
               extended, in November 2001

Note 10        LONG-TERM DEBT

<TABLE>
<CAPTION>
                            Long-term debt consists of the following:                    1999         1998
                                                                                         ----         ----
<S>                                                                                  <C>          <C>
                 Notes  payable in  monthly  principal  installments  of $3,600.      $29,998      $65,998
                 Interest  at the rate of 9% per annum  accrues  and is  payable
                 upon maturity in 2001.

                 Capital  lease  obligation   payable  in  monthly  payments  of      169,519      238,390
                 $5,281  this  note  is   collateralized  by  certain  equipment
                 originally costing $250,000

                 Note  payable in monthly  installments  of $4,729  inclusive of      153,500      201,097
                 interest at 5.1%.
                 Other                                                                 33,380       41,634
                                                                                       ------       ------
                                                                                      386,397      547,119
                 Less Current Portion                                                 152,815      159,607
                                                                                      -------      -------
                                                                                     $233,582     $387,512
                                                                                     ========     ========
</TABLE>

               Long-term debt matures as follows:

                            2000                            $152,815
                            2001                             130,487
                            2002                              97,237
                            2003                               5,857
                                                            --------
                                Total                       $386,397
                                                            ========

Note 11   STOCKHOLDERS' EQUITY

          Common and preferred stock

              DHB has  100,000,000  shares  authorized  of its  $.001  par value
              Common.  In addition,  DHB is authorized to issue 1,500,000 shares
              of Class A 10%  convertible  Preferred  Stock,  none of which  was
              issued and outstanding at December 31, 1999 and 1998.


                                      F-13
<PAGE>
Note 11   STOCKHOLDERS' EQUITY - Continued

        Earnings Per share

         Earnings  per  common  share  calculations  are  based on the  weighted
         average  number  of  common  shares  outstanding  during  each  period;
         25,866,880,  24,982,394 and 24,837,771 for the years ended December 31,
         1999, 1998, and 1995,  respectively.  Calculations for diluted earnings
         per share  are  based on the  weighted  average  number of  outstanding
         common  shares  and  common  share  equivalents   during  the  periods;
         29,511,115, 29,685,262, and 28,053,959 for the years ended December 31,
         1999, 1998 and 1997, respectively.
<TABLE>
<CAPTION>

                                                        Income (loss)         Shares         Per Share
                                                         (numerator)       (denominator)       Amount
                                                         -----------       -------------       ------
<S>                                                     <C>                  <C>              <C>
        Basic EPS
          Loss from continuing operations-1999          $(22,340,237)        25,866,880       $ (1.24)
                                                          -----------        ----------        ------
        Diluted EPS                                     $(22,340,237)        25,866,880       $ (1.24)
                                                        =============        ==========         =====

        Basic EPS
          Earnings from continuing operations-1998       $ 1,779,823         24,982,394        $0.005
                                                         -----------         ----------        ------
        Diluted EPS                                      $ 1,779,823         24,982,394        $0.005
                                                         ===========         ==========        ======

        Basic EPS
          Earnings from continuing operations-1997       $ 1,937,399         24,837,771         $0.06
                                                         -----------         ----------        ------
        Diluted EPS                                      $ 1,937,399         24,837,771         $0.06
                                                         ===========         ==========         =====
</TABLE>

              Stock  options   outstanding  of  3,644,236,   and  4,704,868  and
              3,216,188 at December 31, 1999, 1998, and 1997, respectively, have
              not been included in diluted  earnings per common share because to
              do so would have bee antidilutive for the periods presented.

              Stock option plan

                       In October,  1995, the Company  adopted a plan (the "1995
              Stock Option  Plan" or the "Plan")  pursuant to which the Board of
              Directors  was  authorized  to award  options  to  purchase  up to
              3,500,000 shares of Common Stock to selected officers,  employees,
              agents,  consultants  and other persons who render services to the
              Company. The options may be issued on such terms and conditions as
              determined by the Board or  Committee,  and may be issued so as to
              qualify as incentive  stock  options under  Internal  Revenue Code
              Section 422A. No options have been granted under the plan.
<PAGE>

              Stock warrants

                      During 1999,  the three  members of the board were awarded
            25,000 warrants  exercisable at $3.25 for three years for serving as
            a board member.  During 1997, the Board of Directors  granted 50,000
            stock  warrants  exercisable  at $2.00 per  share to a key  employee
            expiring in June 2000.  Pursuant to employment  agreements (See Note
            14),  the  Company  has   1,549,500   stock   warrants   outstanding
            exercisable  at $1.33 per share and expiring in 2003.  In A relative
            of the majority  stockholder,  stock warrants to purchase  3,750,000
            shares of common stock for $1.33 per share  expiring in 1999,  which
            were extended until September 2003.

Note 12 DISCONTINUED OPERATIONS.

                     In  October  1999,  the  Company  announced  its  strategic
            decision to discontinue the operations of its Lanxide  Subsidiaries,
            LAP and the Electronics Group (LEC and DHB KK). LAP operations where
            shut down while the Electronics  Group was put up for sale. The sale
            price of the division would be $4.275 million,  less the outstanding
            long-term  debt. The transaction was closed on March 10, 2000. See -
            Note 19 - Subsequent  Events.  The results of the closure of LAP and
            the Electronics Group have been reported  separately as discontinued
            operations.  Prior year financial  statements  have been restated to
            present LAP and the Electronics Group as a discontinued operation.


                                      F-14
<PAGE>
Note 12 DISCONTINUED OPERATIONS.

             The  components  of net  assets  of the  discontinued  operations
             included in the balance sheet are as follows:
<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                                   1999            1998
                                                                               ----------      ----------
<S>                                                                            <C>             <C>
             Current assets (mainly trade receivables and inventory)           $1,865,454      $3,037,574
             Accounts payable and accrued expenses                                896,552       1,615,425
                                                                               ----------      ----------
             Net current assets                                                   968,902       1,422,149
                                                                               ----------      ----------

             Property, plant and equipment, net                                 2,866,471       2,475,192
             Other non-current assets                                              93,607          55,356
                                                                               ----------      ----------
              Net Long-term assets                                              2,960,078       2,530,548
                                                                               ----------      ----------
</TABLE>
             The condensed statements of operations relating to the discontinued
             operations are presented below
                                                     1999            1998

              Net Sales                          $7,514,541      $8,761,007
             Cost and expenses                   11,753,701      10,390,038
                                                 ----------      ----------
             Loss before income taxes           (4,239,160)     (1,629,031)
             Provision for taxes                        ---             660
             Net Loss                           (4,239,160)     (1,628,371)
                                                -----------     -----------

Note 13 HURRICANE LOSS

              On October 15, 1999, the office and manufacturing facility located
              in  Oakland  Park,   Florida  suffered  extensive  damage  due  to
              hurricane  Irene.  Substantial  damage was done to the building as
              well as inventory.  The Company currently has a lawsuit with their
              insurance  companies to recover some of the loss,  but as of today
              no agreement  has been  reached.  The Company  expensed the entire
              loss in October  1999 and has not  recorded a  receivable  for any
              amount, which may be due from the insurance companies.


Note 14 RELATED PARTY TRANSACTIONS

              A summary  of  related  party  transactions  for the  years  ended
              December 31, 1999, 1998 and 1997 is as follows:
<PAGE>
<TABLE>
<CAPTION>
                                                                    1999           1998           1997
                                                                  --------       --------       --------
<S>                                                               <C>            <C>            <C>
              Rental expense accrued to the
                 relatives of the majority stockholder            $711,858       $753,235       $546,000

              Rental expense accrued to the President
                 of a subsidiary of DHB                             48,000         48,000         48,000

              Interest,   rental,   professional  and  other
              expenses accrued on a loan from
                 DHB's majority stockholder                      5,064,765        992,359        177,340
</TABLE>
              See Note 14 for details of the lease with a related party

                                      F-15
<PAGE>
Note 15   RISKS AND UNCERTAINTIES

                  The  Company  maintains  cash  balances  at various  financial
              institutions.  Accounts  at each  institution  are  insured by the
              Federal  Deposit  Insurance   Corporation  up  to  $100,000.   The
              Company's accounts at these institutions may, at times, exceed the
              federally  insured  limits.  The Company has not  experienced  any
              losses in such accounts.

                  Approximately  35%,  22% and 27% for the years ended  December
              31, 1999, 1998 and 1997, respectively, of DHB's sales were made to
              the United States Government or its agencies.

                  Certain  factors  relating  to the  industries  in  which  DHB
              operates   and  the   Company's   business   should  be  carefully
              considered.  A substantial portion of the products sold by DHB are
              used in situations which could result in serious personal injuries
              or death,  whether on account of the failure of such products,  or
              otherwise. Although DHB maintains substantial amounts of insurance
              coverage to cover such  risks,  there is no  assurance  that these
              amounts  would be sufficient to cover the payment of any potential
              claims. In addition,  there is no assurance that this or any other
              insurance  coverage will remain  available or, if available,  that
              DHB would be able to obtain such  insurance at a reasonable  cost.
              The inability to obtain such insurance coverage would prohibit DHB
              from bidding for certain orders for bullet resistant products from
              certain governmental customers.

                  Substantially   all  of  the   raw   materials   used  in  the
              manufacturing  of  ballistic-resistant   garments  are  made  from
              fabrics  which are  patented by major  corporations  and which are
              purchased from three independent weaving companies.  Although,  in
              the opinion of management  of DHB, DHB enjoys a good  relationship
              with  these  vendors,  should  any of the  manufacturers  cease to
              produce  these  products for any reason,  DHB would be required to
              use other fabrics.  In such an event, an alternative  fabric would
              have to be selected and ballistic test would have to be performed.
              Until this was done,  DHB's sale of ballistic  resistant  products
              would be severely curtailed and DHB's financial condition would be
              materially adversely affected.

Note 16 FAIR VALUES OF FINANCIAL INSTRUMENTS

              The  Company's   financial   instruments  include  cash,  accounts
              receivable,  accounts  payable and  long-term  debt.  The carrying
              values  of  cash,  accounts   receivable,   accounts  payable  and
              long-term  debt  approximate  their  fair  values.  The  Company's
              long-term  debt is not  traded  and has no  quoted  market  value,
              however  management  believes any difference  between its carrying
              value and fair value  would not be  material  in  relation  to the
              consolidated financial statements.


Note 17 SEGMENT INFORMATION:

              The    Company    operates    in   three    principal    segments:
              Ballistic-resistant   equipment,    Electronics   and   Protective
              athletic/medical equipment. The Company designs, manufacturers and
              markets products in the segments as described above.

                                      F-16
<PAGE>
Note 17 SEGMENT INFORMATION - Continued

         Financial  information  on  the  Company's  business  segments  was  as
         follows:
<TABLE>
<CAPTION>

Net Sales                                         1999              1998               1997
---------                                    ------------       ------------       ------------
<S>                                          <C>                <C>                <C>
Ballistic-resistant equipment                $ 30,358,537       $ 28,695,127       $ 26,805,471
Electronic components                           8,841,393          8,398,107                 --
Protective athletic & medical equipment         6,236,438          8,388,544          7,094,808
                                             ------------       ------------       ------------
                                               45,436,368         45,481,778         33,900,279
Less inter-segment sales                       (2,781,099)        (3,647,353)          (628,672)
Less discontinued operations (3)               (7,514,541)        (8,761,007)
                                             ------------       ------------       ------------
Consolidated Net Sales                       $ 35,140,728       $ 33,073,418       $ 33,271,607
                                             ============       ============       ============

Income from Operations
Ballistic-resistant equipment                 $(9,629,504)      $  2,485,395       $  2,017,281
Electronic components                          (1,835,137)          (782,908)                --
Protective athletic & medical equipment        (2,390,834)         1,207,743            498,062
Corporate and Other (1)                        (2,824,826)        (1,508,027)        (1,039,316)
                                             ------------       ------------       ------------
     Sub-total                                (16,680,301)         1,402,203          1,476,027
Less discontinued operations (3)                6,809,082          1,451,216                 --
                                             ------------       ------------       ------------
Consolidated Operating Income                $(9,871,219)      $  2,853,419       $  1,476,027
                                             ============       ============       ============

Identifiable Assets (2)
Ballistic-resistant equipment                $ 14,283,739       $ 23,743,604       $ 17,572,698
Electronic components                           6,177,019          5,749,438                 --
Protective athletic & medical equipment         3,335,253          8,844,627          6,322,150
                                             ------------       ------------       ------------
                                               23,796,011         38,337,669         23,894,848
Corporate and Other                               400,038          4,641,566          3,779,781
                                             ------------       ------------       ------------
Consolidated Net Assets                        24,196,049         42,979,235         27,674,629
Discontinued operations (3)                    (4,825,532)        (5,568,122)                --
Assets held for sale                            3,928,980          3,952,697
                                             ------------       ------------       ------------
Adjusted Net Assets                          $ 23,299,247       $ 41,363,810       $ 27,674,629
                                             ============       ============       ============
</TABLE>

           Foreign  sales  accounted for 17%, 12% and 10%,  respectively  of the
         total  revenues for the years ended  December 31, 1999,  1998 and 1997.
         Foreign  identifiable  assets accounted for 13%, 5% and 2% of the total
         assets at December 31, 1999, 1998 and 1997.

(1) Corporate and Other includes corporate general and  administrative  expenses
(2) Corporate assets are principally cash, marketable  securities,  and deferred
charges (3) Discontinued  operations included the Companies sold, LEC and DHB KK
as well as the loss from the shutdown of the LAP plant.

                                      F-17
<PAGE>
Note 18       COMMITMENTS AND CONTINGENCIES

              Leases

                      DHB leases a warehouse and  manufacturing  facility from a
               partnership  indirectly owned by the majority  stockholder of DHB
               on a  month-to-month  basis with annual  rentals of $480,000.  In
               addition,  DHB must pay real estate  taxes and certain  operating
               expenses of this property.

                      DHB leases a warehouse and manufacturing facility from the
               president of one of its  subsidiaries on a  month-by-month  basis
               with annual rentals of $43,200, plus real estate taxes.

                      The Company has a four-year lease for a 60,000 square foot
               warehouse  adjacent  to the  existing  Florida  facility  with an
               annual rental of approximately $210,000.

                      In  association  with the  acquisition  of PB  Int'l,  the
               Company  assumed a lease for their  warehouse and store in Liege,
               Belgium.  This space is occupied  pursuant  to a nine-year  lease
               with annual rentals of approximately, $42,000.

                      In association  with the  acquisitions of LAP and LEC, the
               Company  assumed a lease for  82,000  square  feet of office  and
               warehouse  facility in Delaware,  as well as, a 3,500 square foot
               ballistic  testing  range.  The lease  expires  in March 2001 and
               provides for annual base rentals of $420,000.  This  location was
               relinquished when the Company sold LEC in March 2000.

                      The  Company  entered  into a  three-year  lease for their
               corporate  headquarters  January 1, 2000.  The premises are for a
               3,750 square foot office space with annual rental of $44,250 with
               annual increases of 5%.

                      Rent and real estate tax expense charged to operations for
               the years  ended  December  31,  1999,  1998 and 1997  aggregated
               approximately $1,684,000, $1,917,000 and $962,000, respectively.

               Employment agreements

                      The Company is  committed  under an  employment  agreement
               with its majority  stockholder,  which  expires in April 2001 and
               provides for an annual salary of $325,000 and annual increases of
               $25,000  thereafter.  In addition,  the contract provides for the
               annual grant of 750,000  warrants to the  principal  stockholder,
               which are  exercisable  at $2.33 per share and expire  five years
               from date of grant.

                                      F-18
<PAGE>
Note 18       COMMITMENTS AND CONTINGENCIES - Continued

              Litigation

                      In October  1999,  certain  agencies of the United  States
              government  began a  preliminary  investigation  of the  Company's
              employment  practices,   amongst  other  things.   Management  has
              indicated  that  the  counsel  for  the  Company  feels  that  the
              Government  does not intend to pursue  any  criminal  actions  and
              management  believes  the  exposure  to civil  penalties  is not a
              material amount.

                      The  Company  is subject to other  legal  proceedings  and
              claims,  which have risen in the  ordinary  course of its business
              and  have  not  been  finally  adjudicated.   These  actions  when
              ultimately  concluded and  determined  will not, in the opinion of
              management,  have a  material  adverse  effect on the  results  of
              operations or the financial condition of the Company.

Note 19   INCOME TAXES

              Components of income taxes are as follows:
<TABLE>
<CAPTION>

                                                        1999                1998                 1997
                                                        ----                ----                 ----
<S>                                                  <C>                  <C>                 <C>
                    Federal
                       Current                           $ 0                  $ 0                 $ 0
                       Deferred                            0                    0             374,000
                                                           -                    -             -------
                             Total federal                 0                    0             374,000

                    State
                       Current                        67,385               21,650              22,509
                       Deferred                            0                    0                   0
                                                           -                    -                   -
                             Total state             $67,385             $ 21,650            $ 22,509
                                                     =======             ========            ========
</TABLE>

The tax effects of significant  items  comprising the Company's net deferred tax
balances are as follows:
<PAGE>
<TABLE>
<CAPTION>
                                                                                         1999                 1998
                                                                                     -----------           ----------
<S>                                                                                  <C>                   <C>
Deferred tax asset                                                                   $10,920,000           $1,000,000
   Net operating loss carryforwards                                                       85,000              172,000
   Accounts receivable reserve not deducted for tax purposes                             212,000                    0
   Write down of marketable securities not deducted for tax purposes                     234,000              213,000
   Write down of investment in subsidiaries not deducted for
       tax purposes                                                                      340,000                    0
                                                                                     -----------                    -
                                                                                      11,791,000            1,385,000
Less valuation allowance                                                              11,347,000            1,051,000
                                                                                     -----------            ---------
Net deferred tax asset                                                               $   444,000            $ 334,000
                                                                                     ===========            =========

</TABLE>

                                      F-19

<PAGE>
                     DHB CAPITAL GROUP INC. AND SUBSIDIARIES
                     SCHEDULE II TO THE FINANCIAL STATEMENTS
                        VALUATION AND QUALIFYING ACCOUNTS
                        DECEMBER 31, 1999, 1998 AND 1997

Allowances deducted from related balance sheet accounts:

<TABLE>
<CAPTION>
                                                                  Investment      Net Write
                                                                   in Non-        Down of
                                    Accounts                      marketable   investment in
                                   Receivable      Inventory      securities    subsidiaries
                                   ----------      ---------      ----------    ------------
<S>                                <C>            <C>             <C>             <C>
Balance at December 31, 1997      $  303,230      $  700,000      $1,000,000      $  529,579

Additions charged to
     costs and  expenses             154,509

Subtractions charged to
      costs and expenses                  --              --              --              --
                                  ----------      ----------      ----------      ----------

Balance at December 31, 1998      $  507,739      $        0      $  628,000      $  529,579
                                  ==========      ==========      ==========      ==========

Additions charged to
     costs and  expenses             250,002         624,898         688,750       1,000,000

Subtractions charged to
     costs and expenses                   --              --              --              --
                                  ----------      ----------      ----------      ----------

Balance at December 31, 1999      $  757,741      $  624,898      $1,316,750      $1,529,579
                                  ==========      ==========      ==========      ==========

</TABLE>

                                      F-20
<PAGE>
<TABLE>
<CAPTION>
                                         DHB CAPITAL GROUP INC. AND SUBSIDIARIES
                                         PROF FORMA CONSOLIDATED BALANCE SHEETS
                                                    DECMEBER 31, 1999

                       ASSETS                                                  Less
                       ------                                                  ----
                                                                            Companies                        Pro Forma
                                                          Consolidated         sold           Adjustments   Consolidated
                                                          ------------         ----           -----------   ------------
<S>                                                        <C>              <C>                <C>            <C>
CURRENT ASSETS
Cash and cash equivalents                                  $   473,441      $  188,871         1,850,000      $2,1345401
Accounts Receivable                                          5,780,292         571,927                         5,208,365
Inventories                                                 10,267,876       1,222,023                         9,045,853
Prepaid expenses and other current assets                      667,945          71,504                --         596,441
                                                           -----------      ----------         ---------      ----------

Total Current Assets                                        17,189,554       2,054,325         1,850,000      16,985,229
                                                           -----------      ----------         ---------      ----------

PROPERTY AND EQUIPMENT                                       5,119,164       2,866,471                         2,252,693
                                                             ---------       ---------                         ---------

OTHER ASSETS
Intangible assets, net                                          32,051          17,698                            14,353
Investments in non-marketable securities                     1,000,050                                         1,000,050
Deferred tax assets                                            444,000                                           444,000
Deposits and other assets                                      411,280          71,504            40,000         335,371
                                                           -----------      ----------         ---------      ----------

Total Other Assets                                           1,887,331       5,054,403            40,000       1,793,724
                                                           -----------      ----------         ---------      ----------

TOTAL ASSETS                                               $24,196,049                        $1,890,000     $21,031,646
                                                           ===========                        ==========     ===========

         LIABILITIES AND STOCKHOLDERS' EQUITY
         ------------------------------------

CURRENT LIABILITIES
Note payable                                                $5,000,000      $2,575,000      $(2,425,000)     $       --
Current maturities of long term debt                           152,815          52,509                          100,306
Accounts payable                                            10,188,364         692,701                        9,495,663
Accrued expenses and other current liabilities               2,761,141       2,888,633         2,684,782      2,557,290
                                                           -----------      ----------         ---------      ----------

Total Current Liabilities                                   18,102,320       6,208,843           259,782     12,153,259
                                                            ----------       ---------           -------     ----------

LONG TERM LIABILITIES
Long term debt, net of current maturities                      233,582         107,400                          126,182
Note Payable - stockholder                                  16,046,469               -                       16,046,469
                                                            ----------       ---------                       ----------

Total Long Term Debt                                        16,280,051         107,400                       16,172,651
                                                            ----------         -------                       ----------

Total Liabilities                                           34,382,371       6,316,243           259,782     28,325,910

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY                                      (10,186,322)     (1,261,840)         1,630,218    (7,294,264)
                                                          ------------     -----------         ---------    -----------

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY                   $24,196,049      $5,054,403        $1,890,000    $21,031,646
                                                           ===========      ==========        ==========    ===========
</TABLE>

                                      F-21
<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 report to be signed on its
behalf by the  undersigned,  thereunto  duly  authorized  on this the 24d day of
March, 2000.


                                                    DHB Capital Group Inc.


                                                    /S/ David Brooks
                                                    ----------------
                                                        David H. Brooks
                                                        Co-Chairman of the Board


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities indicated on March 24, 2000.


Signature                           Capacity                      Date

/S/ David H. Brooks                 Co-Chairman of the Board,     March 24, 2000
-------------------                 and Director
    David H. Brooks


/S/ Dawn Schlegel                   Treasurer                     March 24, 2000
-----------------
    Dawn Schlegel                   Principal Financial Officer
                                    Principal Accounting Officer


/S/  Gary Nadelman                  Co-Chairman and Director      March 24, 2000
 -----------------
     Gary Nadelman