U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    Form 10-K/A
                               Amendment No. 1 to

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2004

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

                For the transition period from_______ to________
                          Commission File No. 01-13112

                              DHB INDUSTRIES, INC.
                         (Name of issuer in its charter)

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

                400 Post Ave Suite 303, Westbury, New York 11590
                    (Address of principal executive offices)

                    Issuer's telephone number: (516) 997-1155

         Securities registered under Section 12(b) of the Exchange Act:

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

       Securities registered under Section 12(g) of the Exchange Act: None

Indicate by check mark whether the issuer (1) has 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 [ ]

Indicate by check mark if disclosure  of  delinquent  filers in response to Item
405 of Regulation S-K is not contained herein, and will not 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 ].

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Exchange Act Rule 12b-2). Yes [ X] No [ ] .

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 June 30, 2004: $586,672,648.*

 Number of shares outstanding of the issuer's common equity, as of March 1, 2005
     (Exclusive of securities convertible into common equity): 45,282,536.

DOCUMENTS INCORPORATED BY REFERENCE:  None

*  Excludes 6,634,799  shares  of Common  Stock  held by  directors,  executives
officers and stockholders  whose beneficial  ownership exceeds 10% of the shares
outstanding.  Exclusion of shares held by any person  should not be construed to
indicate that such person possesses the power, direct or indirect,  to direct or
cause the  direction of the  management or policies of the  Registrant,  or that
such person is controlled by or under common control of the Registrant.


<PAGE>

                              EXPLANATORY STATEMENT

         We are filing this  Amendment  No. 1 to our Annual  Report on Form 10-K
for the year ended  December 31, 2004 to revise  certain  financial  information
including the Note payable - bank on the  consolidated  balance  sheet,  and the
related footnote, Note 6 - Note Payable - Bank, as well as the discussion of the
Note Payable - Bank in Liquidity and Capital Resources, Note 2 Supplemental Cash
Flow  Information , Note 9 Stockholders  Equity,  and to correct the omission of
the line  titled  "Accounts  receivable"  under the  caption  "CASH  FLOWS  FROM
OPERATING  ACTIVITIES"  in  the  Consolidated  Statement  of  Cash  Flows.  This
Amendment  speaks as of the  original  filing date of our Annual  Report on Form
10-K and has not been  updated to reflect  events  occurring  subsequent  to the
original filing date.



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                                     PART I

ITEM 1.    BUSINESS

GENERAL

         We  are  a  leading   manufacturer   and   provider   of   bullet   and
projectile-resistant  garments,  and fragmentation  protective vests,  slash and
stab  protective  armor,  and  related  ballistic  accessories,  which  are used
domestically and  internationally  by military,  law  enforcement,  security and
corrections personnel, as well as governmental agencies. We also manufacture and
distribute  protective athletic apparel and equipment,  including a wide variety
of knee,  ankle,  elbow,  wrist and back supports and braces that assist serious
athletes, weekend sports enthusiasts,  and general consumers in their respective
sports and everyday  activities.  We are organized as a holding company with two
divisions:  the DHB Armor  Group (the "Armor  Group") and DHB Sports  Group (the
"Sports Group").  The Armor Group represents  approximately  98%, 97% and 96% of
our consolidated revenues during 2004, 2003, and 2002, respectively. The balance
of the  consolidated  revenues are  attributable to the Sports Group. The Sports
Group  manufactures  and sells a variety of sports  medicine health supports and
protective  products.  We sell our products directly through our corporate sales
force and a network of over 215 distributors and sales agents.


         We were incorporated as a Delaware  corporation in 1992 and changed our
name from DHB Capital  Group Inc.  to DHB  Industries,  Inc.  in July 2001.  Our
executive offices are located at 400 Post Avenue, Suite 303, Westbury,  New York
11590,   our   telephone   number   is   516-997-1155,   and  our   website   is
www.dhbindustries.com.  Information set forth on our website is not incorporated
by  reference  into  this  filing  and,  unless  otherwise  indicated,   is  not
incorporated  by reference  into any of our filings.  Our common stock trades on
the American Stock Exchange under the ticker symbol "DHB."  Throughout this Form
10-K DHB  Industries,  Inc. is  referred  to using terms such as the  "Company",
"DHB", "us," "our," "we" or similar words.

DHB ARMOR GROUP

         PRODUCTS AND MARKETS.

         We manufacture  and sell a wide variety of body armor through the Armor
Group under the brand names Point BlankTM and Protective Apparel  Corporation of
America (PACATM).  Our body armor is designed to protect individuals from bodily
injury from different  threats  including  threats from either  bullets,  knives
and/or other sharp  instruments  and explosive  shrapnel.  Our products  provide
varying  levels of protection  based on the type and  configuration  of the body
armor and its intended purpose.

         We principally manufacture and market three types of body armor:

         o  Concealable  Armor,  which is  typically  worn  beneath  the  user's
            clothing  and is  designed  to  protect  against  handgun  ballistic
            threats;

         o  Tactical Armor,  which is worn externally and is designed to protect
            against handgun and rifles  ballistic  threats and can be customized
            to meet the specific needs of the user; and


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         o  Military Armor, which is manufactured to military standards specific
            to their mission.

         Our armor  products are sold to U.S.  government  agencies and the U.S.
military  through  direct  sales and to state and local  agencies  predominantly
through a network  of  distributors.  International  sales are  handled  through
international  distributors  and agents as well as salaried sales staff.  All of
our armor  products  are  manufactured  and  tested to the  applicable  National
Institute of Justice ("NIJ") standards and/or military specifications.

         In 1998,  the U.S. Army and Marine Corps  procured the  "InterceptorTM"
Outer Tactical Vest ("OTV") system which is a soft armor vest for  fragmentation
protection  and has pouches where hard ceramic armor plates can be inserted into
the soft vest to  provide  ballistic  protection  over  vital  organs as well as
accessories  that can be added or removed to meet specific threat  requirements.
We designed the InterceptorTM as a continually  upgradeable  modular,  soft body
armor system  specifically for the U.S. military.  The system includes removable
yoke/collar, throat and groin protection that can be customized by the wearer to
the  threat.  In 2004,  DHB  developed  for the  U.S.  Marines  Corps.  an Armor
Protection  Enhancement System  ("A.P.E.S").  This modular system is designed to
enhance the current  InterceptorTM  OTV by providing  equivalent  protection  to
areas previously not covered by the InterceptorTM  which includes the under arm,
shoulder,  and upper arms.  Also during 2004, we developed a similar product for
the US Army called "Deltoid Auxiliary Protection System ("D.A.P.S."). In June of
2004, we were awarded a $239 million three-year  contract from the U.S. Army for
D.A.P.S.  The  InterceptorTM  system  was  first  extensively  used in combat in
Afghanistan during Operation Enduring Freedom, where it was credited in reducing
the number of  life-threatening  wounds.  During  Operation  Iraqi Freedom,  the
InterceptorTM   system  was  widely  deployed  among  U.S.  combat  forces.  The
InterceptorTM  is the  standard  issue soft body armor  approved for use by U.S.
Army,  Marine Corps and Air Force ground  forces.  On December 23, 2004, the U.S
Army  awarded  us  the  body  armor  contract  to  supply  the  U.S.  Army  with
InterceptorTM  OTVs.  The  contract  value is estimated  at  approximately  $189
million over three years to produce up to 360,000 InterceptorTM vests.

         Since 1998, the Company has delivered over 850,000  InterceptorTM  OTVs
to the U.S.  Army,  Marine Corps and Air Force.  We  manufacture  and supply the
InterceptorTM to the U.S. military through contracts with the U.S. Department of
Defense ("DOD") and off the General Service Administration (the "GSA") schedule.
We have developed seven  ballistic  models of the  InterceptorTM  that have been
approved by the U.S. military and are customized for use by different  branches.
Extensive  procurement  actions by DOD are  underway to equip the ground  forces
that could be deployed in combat with the InterceptorTM OTV system.

         In  addition to the  InterceptorTM,  we  manufacture  a number of other
protective  armor systems for military  use.  Fragmentation  armor,  such as the
Combat Vehicle Crewman system and the Warfighter system are designed to military
specifications and offer protection  against  fragmentation of explosive devices
such as grenades, mortars, artillery shells and ballistic projectiles. The Light
Assault Vest ("LAV"),  developed in 2003 and marketed in 2004,  serves the needs
of  the  Special   Operations   Community.   The  LAV  provides   ballistic  and
fragmentation protection, load carrying capabilities, and immediate, single pull
ejection  for  specialized  maneuvers.  During  2004,  the Armor  Group has also
developed  a  ballistic  fragmentation  blanket  program to address the need for
protection  against roadside bombs,  improvised  explosive  devices ("IEDs") and
other fragmentation threats occurring during military troop


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movements  and  ambushes.  Our  blanket  system  is  designed  to  optimize  its
survivability under high threat conditions.

         During  2004,  we  increased  sales of our body  armor to the state and
local law  enforcement  community by 19%. By working with our  customers to make
department-specific  modifications  to our standard  products,  we have achieved
additional  sales  and  developed  patent  pending  features.  See  "Patent  and
Trademarks." Through our collaborative  relationship with customers,  we seek to
increase sales by developing  customer  loyalty and providing  additional  value
beyond  our  standard  products  through  customization.  The  majority  of  our
concealable  vests  sold to state  and  local law  enforcement  officers  and to
federal  agencies  are  individually  sized  to  provide  the  optimal  fit  and
protection. Our customer relationships also help us with our product development
efforts. We developed our Basic Assault Vest ("BAT"), Light Assault Vest ("LAV")
and Warfighter  system, in part,  through our efforts to customize  products for
specific customers.

         Our corrections  body armor products are designed  primarily for use by
personnel in corrections  facilities and by other law enforcement  employees who
are primarily exposed to threats from knives and other sharp instruments.  These
vests  are  constructed  with  special,  blended  fabrics,  stainless  steel and
titanium,  and flexible woven fabrics and are available in both  concealable and
tactical  models.  The first front opening tactical vest, The Rock, was patented
in 2004 and offers  modularity,  concealability,  and the ability  for  tactical
upgrades.

         Our lines of body armor products also include  tactical police jackets,
military field jackets,  executive vests for special agents,  corrections vests,
K-9 protection, fragmentation and close-quarter-battle systems.

         RAW MATERIALS AND MANUFACTURING.

         The Armor  Group  manufactures  all of its  bullet,  fragmentation  and
projectile-resistant products. Most of the raw materials used in the manufacture
of our  ballistic-resistant  garments consist of fabrics,  which are patented by
major corporations and purchased from four independent  weaving or manufacturing
companies.   The  primary  woven  fabrics  used  in  the   manufacture   of  the
ballistic-resistant  products include Kevlar(TM),  a patented product of E.I. du
Pont de Nemours Co. Inc.,  Twaron(TM),  a patented product of Akzo-Nobel Fibers;
B.V. SpectraTM a patented product of Honeywell,  Inc. and Zylon(TM),  a patented
product of Toyobo Co., Ltd. Our primary shield products include GoldFlex(TM) and
Spectra  Flex(TM),  patented  products of Honeywell,  Inc., and  Dyneema(TM),  a
patented product of DSM Dyneema B.V.

         We have letters of  commitment  with our raw materials  suppliers  that
guarantee a steady supply of ballistic fibers. These letters are required by our
contracts  with the DOD.  We also have such  letters of  commitment  relating to
other, non-DOD contracts.  Our letters of commitment are legally enforceable and
include a commitment to supply raw materials for the duration of our  contracts.
Our DOD-related  letters of commitment provide that the supplier will provide us
with  raw  materials  at a fixed  price  for the life of the DOD  contract.  Our
letters of  commitment  that are related to non-DOD  contracts do not have fixed
pricing  terms;  rather,  we have the right to  purchase  raw  materials  at the
suppliers' published prices.


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         We believe our  relationships  with the  suppliers of our raw materials
are good. If any of the  manufacturers  of any of these fabrics cease production
for any reason, we have the capability to substitute alternative fabrics. Should
these materials become  unavailable for any reason,  we may be unable to replace
them with  materials of like weight and strength.  Thus, if our supply of any of
these  materials were reduced or cut off or if there was a price increase in the
prices  of these  materials,  our  manufacturing  operations  and our  financial
condition could be adversely  affected.  In order to provide  flexibility in the
availability  of raw materials,  we have  cross-certified  several  fabrics with
competitive  raw  materials.  Further,  in an attempt to avoid  shortages of raw
materials,  we seek to maintain an inventory of ballistic  fabrics that is based
on the  availability  of such  fabrics  rather  than  our  short-term  projected
manufacturing  requirements.  This policy increases our inventory carrying costs
but has helped avoid manufacturing disruptions.

         From 2002 through 2004, shortages of required raw materials limited our
ability to fully meet the demand for our  products.  We mitigated  the impact of
these  raw  materials   shortages  by  using  a  variety  of  ballistic   fibers
(hybridization), instead of relying on a single fiber in our products. Even when
using a variety of fibers,  however,  the impact of shortages was not completely
eliminated due to limits on the  availability  of individual  ballistic  fibers.
During the period from 2002 through  2004,  shortages of raw  materials  limited
total  production  capacity.  The  availability of raw materials placed an upper
limit on the amount of product that we could produce, and demand for our product
exceeded that amount.

         PATENTS AND TRADEMARKS.

         Intellectual property rights that apply to our various products include
patents, copyrights, trade secrets and trademarks. We maintain an active program
to protect our investment in technology by enforcing our  intellectual  property
rights.  We have filed over 19 patent  applications  in the U.S.,  these patents
have a duration  through 2024 . We currently have numerous  patents  pending for
our protective armor designs and integrated technologies.  While our patents are
an important  element of our success,  our business as a whole is not materially
dependent on any one patent. Specifically,  we have one U.S. patent covering our
modular front opening body armor commercial  product with a duration of 16 years
that is  important to our  business.  Approximately  10% of our domestic  market
revenue is  dependent on products  that  incorporate  these  patents and pending
patent applications.

         To  distinguish  our products  from those of our  competitors,  we have
obtained  certain  trademarks and trade names for our products,  and we maintain
advertising programs to promote our brands and identify our products.  In total,
we hold 22 trademarks of which 7 were issued during 2004.

         We also protect  certain  details about our products and  strategies as
trade secrets;  keeping confidential the information that we believe provides us
with a competitive advantage.  We have ongoing programs designed to maintain the
confidentiality of such information.

         CUSTOMERS.

         Our  products are sold  domestically  to the U.S.  military,  state and
local law enforcement agencies,  correctional  facilities,  federal agencies and
distributors and are sold internationally to governments and distributors. Sales
to the U.S. military,  directly or as a subcontractor accounted for 76%, 64% and
57% of our Armor Group's  revenues for the years ended  December 31, 2004,  2003
and 2002,  respectively.  InterceptorTM  OTV's sales accounted for approximately
59% of the military sales or 44% of consolidated  net sales.  Sales directly and


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indirectly to domestic state and local law  enforcement  agencies,  security and
intelligence   agencies,   distributors  and  federal  and  state   correctional
facilities,  accounted for 21%, 35% and 42% of the Armor Group's revenues in the
years ended December 31, 2004, 2003 and 2002, respectively.

         Certain of our sales to federal  agencies are made pursuant to standard
purchasing  contracts of a type issued by the GSA, that are commonly referred to
as GSA Schedules.  GSA Schedule contracts  accounted for approximately 33%, 12%,
and 16% of the Armor  Group's  revenues  for the years ended  December 31, 2004,
2003 and 2002,  respectively.  Our current GSA Schedule contract expires on July
31, 2006 but is  renewable  for terms of five years by mutual  agreement  of the
parties.

         Our  contracts  with  the U.S.  government  are all  firm  fixed  price
contracts.  Therefore,  there is no portion of our  business  that is subject to
renegotiation of profits at the election of government. However, U.S. government
contracting  regulations and mandatory  clauses in government  contracts provide
the  government  with the right  unilaterally  to terminate the contract for the
convenience of the  government.  U.S.  government  contracts that are subject to
this right of unilateral  termination or reduction in scope constituted 45%, 47%
and 48% of our corporate revenues in 2004, 2003 and 2002, respectively.

         With the exception of the U.S.  government,  no customer  accounted for
10% or more of our corporate revenues in 2004, 2003 or 2002.

         MARKETING AND DISTRIBUTION.

         Due to the  success  of the  InterceptorTM  OTV  System  with  the U.S.
military,  performance in the industry and our advertising efforts, our products
and  brands  are  widely  recognized  in  the  military,   law  enforcement  and
corrections  communities.  We seek to build a reputation as the premier provider
of technologically advanced body armor to these communities.

         We   employ  19   customer   support   representatives   and  30  sales
representatives  under the direction of 4 sales  managers.  These  personnel are
responsible  for  marketing  our  products  to  federal,  state  and  local  law
enforcement  agencies in the United States. We sell to law enforcement  agencies
primarily through  distributorships  established by our sales team.  However, in
areas in which there are no suitable distributors, we fill orders through direct
contract awards or through internal customer service representatives. Our strong
relationship with our distributors is the cornerstone of our marketing strategy.
We believe our  distributors  profit from our  reputation and the quality of our
products.  We continuously  work to strengthen our distribution  network through
advertising and additions to our product line.

         We have established a government and international  liaison office near
the Pentagon in Washington, D.C. This office makes direct sales to international
and  governmental  customers  that can visit this office to examine our products
prior to  purchase.  The  sales  representatives  in this  office  seek to build
relationships  with various  international  and government  customers as well as
potential distributors and international agents.


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         GOVERNMENT AND INDUSTRY REGULATIONS AND STANDARDS.

         The ballistic and fragmentation resistant garments and accessories that
we manufacture  and sell are not currently the subject of government  regulation
domestically.  Sales of NIJ  Level  III and  Level IV armor  require  an  export
license for shipment to our international customers. However, our contracts with
governmental entities are subject to rules, regulations and approvals applicable
to  government  contractors  and we are subject to routine  audits to assure our
compliance  with these  requirements.  Our failure to comply with these contract
terms and  contracting  rules or  regulations  could  expose  us to  substantial
penalties,  including the loss of these contracts and disqualification as a U.S.
government  contractor.  A number of our employees  involved with certain of our
government  contracts  are  required  to maintain  specified  levels of security
clearances.  Further,  law enforcement  agencies and the U.S.  military  specify
certain  standards of  performance,  such as NIJ standards for  bullet-resistant
vests in several  categories,  and the NIJ has established a voluntary  standard
for testing  stab-resistant armor, which is often a requirement for the sales of
correctional  armor. We regularly  submit our vests to independent  laboratories
for testing under these standards.

         COMPETITION.

         The  ballistic-resistant  garment  business is highly  competitive  and
fragmented. We estimate the number of competitive United States manufacturers at
approximately  20. We compete by combining  high quality  products  with on time
delivery and personalized  customer service.  Our principal  competitors include
Armor  Holdings,  Inc.  and Second  Chance Body Armor,  Inc.  Since there are no
published reports  concerning the market, and many companies are privately held,
we are unable to estimate the size of the market.

         We believe that the following are competitive strengths that provide us
an advantage in our target markets:

         o  Execution   and  Customer   Service  --  We  believe  that  the  key
            competitive  factor in  marketing  and selling our products is order
            execution  and  on-time  delivery  of  products.  Our  products  are
            critically  important to the safety of military and law  enforcement
            personnel and reliable  on-time  delivery is  essential.  We believe
            that our ability to execute  orders and deliver our products on time
            backed by knowledgeable  and professional  customer service is a key
            competitive advantage.

         o  Government  Relationships-- A majority of our revenues are dependent
            upon  U.S.   government   contracts.   We  believe  that  the  close
            relationships our management and sales teams have developed with the
            military,  federal,  state and local  agencies that use our products
            gives us and our products the credibility to effectively compete for
            contracts.

         o  Product  and  Brand  Recognition--  We  have  sought  to  develop  a
            favorable  reputation  through over 30 years of  supplying  the U.S.
            military, federal, state and municipal governments and agencies. Due
            to the success of our products,  especially the  InterceptorTM  OTV,
            and our efforts to promote our brands,  we believe our  products and
            trademarks  are widely  recognized  and favorably  viewed within our
            target  markets.  Because our products are used in  life-threatening
            situations,  we  believe  that  trust in the  manufacturer  is a key
            element in the purchasing decision for our products. We believe that


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            familiarity with our name and products gives us an advantage in this
            regard.

         o  Broad  Product  Lines--We  have  full  product  lines of  protective
            apparel and  accessories  for use by military,  law  enforcement and
            corrections  personnel to provide a wide range of protection against
            various  threat  levels.  Our full product  lines and their  modular
            design and easy customization  encourage customer loyalty due to the
            modularity and compatibility of our various products.

         o  Network of  Distributors--We  have spent many years  developing  and
            training  a  network  of   distributors   throughout  the  U.S.  The
            effectiveness of our state and local government marketing efforts is
            substantially  dependent upon the  professionalism and motivation of
            our distribution  network. We are fully committed to the distributor
            network and provide  support through  education and training,  sales
            and marketing  assistance,  and accessibility,  which results in our
            strong distributor network.

         o  Market  Position in Body  Armor-- In December  2004,  the U.S.  Army
            awarded us with the  exclusive  contract  to  provide  them with our
            InterceptorTM  OTV . We believe that the favorable  reception by the
            U.S. Army of the InterceptorTM  provides us an advantage as the U.S.
            Army has  sought  to equip  more and more  servicemen  and women and
            consequently  more of such  servicemen  and  women  depend  upon our
            products for their personal safety.

         BACKLOG.

         The Armor  Group had a backlog of orders  that we  believe  are firm of
approximately  $415  million  and $132  million  as of March 1,  2005 and  2004,
respectively.  Backlog  at any one date is not a  reliable  indicator  of future
sales.  In  addition  to our  backlog,  we often  receive  contract  awards  for
municipal  orders that may be extended over a period of time.  The actual dollar
amount of products  to be  delivered  pursuant  to these and  similar  contracts
cannot  be  accurately  predicted  and we  generally  exclude  it from  reported
backlog.

         POTENTIAL PRODUCT LIABILITY.

         Our products are used as protective  devices in  situations  that could
result in serious injuries or death, including injuries that may result from the
failure of our products.  We maintain product liability  insurance for the Armor
Group in the  amount of  $21,000,000  per  occurrence,  and  $22,000,000  in the
aggregate,   less  a  deductible  of  $100,000  for  each  of  our  Armor  Group
subsidiaries.  We have 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 we will be able to obtain such insurance at a reasonable  cost.
Any  substantial  uninsured  loss  would have to be paid out of our  assets,  as
applicable,  and may have a material  adverse effect on our financial  condition
and results of operations on a  consolidated  basis.  If we are unable to obtain
product  liability  coverage we may be  prohibited  from bidding for orders from
certain government customers.  Many governmental agencies currently require such
insurance coverage, and any


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inability to bid for government contracts as a result of insufficient  insurance
coverage  would have a material  adverse  effect on our financial  condition and
results of operations.

DHB SPORTS GROUP

         PRODUCTS AND MARKETS.

         We manufacture and sell a variety of sports  medicine,  health supports
and protective  products.  Our products  include a wide variety of knee,  ankle,
elbow, wrist and back supports and braces that assist serious athletes,  weekend
sports enthusiasts and general consumers in their respective sports and everyday
activities.  Currently,  we manufacture and market  athletic  products under the
brands NDLTM, GRIDTM, MagneSystemsTM,  FLEX-AIDTM, and Doctor Bone Savers TM. We
market our  products  to a variety of  distribution  points  with an emphasis on
major  retailers.  Our various  brands and private label programs are offered to
the  consumers  through  mass  merchandisers,  chain drug  stores,  food chains,
independent  sporting  goods  retailers,   independent   pharmacies,   catalogs,
wholesalers,  and e-commerce.  Our customer list includes retail  establishments
such as Wal-Mart,  Walgreen's,  Longs Drug Stores,  Target,  and Meijer. We also
have  established  private label  programs with large  wholesalers to the retail
trade such as  AmerisourceBergen,  Cardinal  Health,  Chain Drug  Consortium and
Chain  Drug  Marketing   Association.   Two  customers,   Wal-Mart  and  Target,
collectively accounted for 66%, 68% and 61% of our Sports Group revenues for the
years ended December 31, 2004, 2003 and 2002, respectively.

         RAW MATERIALS AND MANUFACTURING.

         Approximately  75% of the health  supports we manufacture are made from
neoprene  fabric as  compared  to the brown  elastic  fabric.  During  2004,  we
outsourced  the  production  of our  braces to a  subcontractor  in  Taiwan  for
approximately 47% of the Sports Group's annual purchases.  Neoprene is a readily
available  fabric  and to date we have  not  experienced  any  shortage  of this
fabric.

         POTENTIAL PRODUCT LIABILITY.

         Our products are used as protective  devices in  situations  that could
result in serious injuries or death, including injuries that may result from the
failure of such products. We maintain product liability insurance for the Sports
Group in the  amount of  $21,000,000  per  occurrence,  and  $22,000,000  in the
aggregate,  less a  deductible  of  $100,000.  We have 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 we would be able to obtain such
insurance at a reasonable cost. Any substantial  uninsured loss would have to be
paid out of our assets and may have a material  adverse  effect on our financial
condition and results of operations.

RESEARCH AND DEVELOPMENT

         Our research and development program is a key element in our efforts to
maintain and improve our position in the market for protective  body armor.  Our
research  and  development  team has an aggregate of over 100 years of ballistic
research and development experience,  including more than 40 years of experience
with  NIJ  certification  requirements.  Many of our  research  and  development
personnel  previously  held  positions of  responsibility  with other  companies
within the industry.  Our research and development consists of our own sponsored
efforts  and   government-funded   efforts  under  our  fixed-price   government


                                       9
<PAGE>

contracts.  Our  collaborative  efforts to  customize  our products for specific
customers are an important  part of our research and  development  process,  and
have resulted in several new products such as D.A.P.S. and ballistic blankets.

         Our  research  and  development  expenses  (materials,   salaries,  and
ballistic testing) are included in selling,  general and administrative expenses
as incurred and for the years ended  December 31, 2004,  2003 and 2002 were $9.7
million, $10.8 million and $4.2 million, respectively.

ENVIRONMENTAL REGULATION

         We are subject to various federal, state and local laws and regulations
governing the use, discharge and disposal of hazardous material. Compliance with
current laws and  regulations has not had and is not expected to have a material
adverse  effect  on our  financial  condition.  It is  possible,  however,  that
environmental  issues may arise in the future that the Company cannot  currently
predict and which may have a material  adverse effect on the Company's  business
or financial condition.

EMPLOYEES

         As of March 1, 2005, we employed  approximately 875 full-time employees
in the Armor Group. There was one operating officer, 32 employees in supervisory
capacities,  680  employees  in  manufacturing,  shipping  and  warehousing,  67
employees in quality  control,  46 employees  in customer  service and sales,  5
employees  in  technical/research  development,  and 44  employees in office and
administration.  We believe that we have a  satisfactory  relationship  with our
Armor Group employees.

         As of March 1, 2005, we employed  approximately 75 full-time  employees
in our  Sports  Group.  There  was  one  officer,  3  employees  in  supervisory
capacities, 66 employees in manufacturing,  shipping and warehousing, 1 employee
in sales and customer service,  and 4 employees in office support.  All of these
employees  are employed  full-time.  We believe that our  relationship  with our
Sports Group  employees is  satisfactory.  We also have more than 40 independent
sales  representatives who, together with the sales executives,  are responsible
for sales  throughout the Untied States,  Western Europe,  Asia, the Middle East
and Latin America.

SEGMENT INFORMATION

         As described in detail  above,  we operate in two  principal  segments:
ballistic-resistant  protective  equipment  and  protective  athletic and sports
products.  Financial  information on our business  segments (in thousands) is as
follows:

<TABLE>
<CAPTION>

Net Sales                                                             2004               2003               2002
---------                                                         --------           --------           --------
<S>                                                               <C>                <C>                <C>

Ballistic-resistant equipment                                     $333,029           $224,152           $124,860
Protective athletic & sports products                                7,051              5,859              5,492
                                                                  --------           --------           --------
                                                                   340,080            230,011            130,352
Less inter-segment sales                                               (5)                 --                (5)
                                                                  --------           --------           --------
Consolidated net sales                                            $340,075           $230,011           $130,347
                                                                  ========           ========           ========


                                       10
<PAGE>


                                                                      2004               2003               2002
                                                                  --------           --------           --------
Income before other income (expense)
Ballistic-resistant equipment                                     $ 61,290           $ 33,618           $ 17,534
Protective athletic & sports products                                1,017                426                563
Corporate and other (1)                                            (12,736)            (8,028)            (4,274)
                                                                  --------           --------           --------
Consolidated income before other income (expense)
                                                                  $ 49,571           $ 26,016           $ 13,823
                                                                  ========           ========           ========

Depreciation and Amortization Expense
Ballistic-resistant equipment                                     $    662           $    350           $    289
Protective athletic & sports products                                  119                 64                 86
                                                                  --------           --------           --------
                                                                       781                414                375
Corporate and other                                                    197                150                 88
                                                                  --------           --------           --------
Consolidated depreciation and amortization expense
                                                                  $    978           $    564           $    463
                                                                  ========           ========           ========

Interest Expense
Ballistic-resistant equipment                                     $  1,367           $  1,238           $    935
Protective athletic & sports products                                   --                 --                 --
                                                                  --------           --------           --------
                                                                     1,367              1,238                935
Corporate and other (2)                                                  7                106                710
                                                                  --------           --------           --------
Consolidated interest expense                                     $  1,374           $  1,344           $  1,645
                                                                  ========           ========           ========

Expenditures for additions to long lived assets
Additions to property and equipment
Ballistic-resistant equipment                                     $  1,147           $    592           $    250
Protective athletic & sports products                                   --                 57                 35
Corporate and other                                                    644                 92                 82
                                                                  --------           --------           --------
                                                                  $  1,791           $    741           $    367
                                                                  ========           ========           ========

Income Taxes (Benefit)
Ballistic-resistant equipment                                     $ 15,227           $ 14,341           $     22
Protective athletic & sports products                                   --                182                  2
                                                                  --------           --------           --------
                                                                    15,227             14,523                 24
Corporate and other (2)                                              2,346             (3,425)            (3,696)
                                                                  --------           --------           --------
Consolidated tax (benefit) expense                                $ 17,573           $ 11,098           $(3,672)
                                                                  ========           ========           ========

Identifiable Assets
Ballistic-resistant equipment                                     $138,370           $ 88,503           $ 56,471
Protective athletic & sports products                                5,018              3,186              2,907
                                                                  --------           --------           --------
                                                                   143,388             91,689             59,378
Corporate and other (2)                                              2,469              1,739              5,993
                                                                  --------           --------           --------
Consolidated assets                                               $145,857           $ 93,428           $ 65,371
                                                                  ========           ========           ========

</TABLE>


Foreign sales  accounted  for 3%, 1% and 2% of the total  revenues for the years
ended December 31, 2004, 2003 and 2002,  respectively.  The Company did not have
any  foreign  identifiable  assets  in 2004  and  2003.  There  were no  foreign
identifiable assets during 2004 and 2003. Foreign  identifiable assets accounted
for 1% of the total assets as of December 31, 2002.


                                       11
<PAGE>


         (1)  Corporate and other  includes  corporate  general,  administrative
              expenses.

         (2) Corporate  assets are  principally  deferred  income tax
             assets and property and equipment.

AVAILABLE INFORMATION.

         Our internet address is  www.dhbindustries.com.  As of the date of this
Annual Report on Form 10-K/A, we make  available  free of charge on our  website
materials that we file or furnish under the  Securities  Exchange Act of 1934 as
soon as reasonably  practicable after such materials are filed with or furnished
to the Securities and Exchange Commission.  Information set forth on our website
is not  incorporated  by  reference  into  this  filing  and,  unless  otherwise
indicated,  is not  incorporated  by reference into any of our filings.  We will
voluntarily  provide  electronic copies (or a reasonable number of paper copies)
of our filings free of charge upon request.


 ITEM 2.  PROPERTIES

         CORPORATE  HEADQUARTERS.  In February  2004, we relocated our corporate
headquarters  to a 3,952 square foot leased  office  located at 400 Post Avenue,
Suite 303, Westbury, New York. The lease expires on February 28, 2010.

          POINT BLANK  FACILITY.  In December 2003, the Company leased a 104,000
square foot manufacturing facility with administrative offices in Pompano Beach,
Florida,  to expand the  production  of the Point Blank  subsidiary of our Armor
Group. The lease expires on April 30, 2014.

         POINT  BLANK-MILITARY  FACILITY.  In January  2003,  we leased a 51,246
square foot  manufacturing  facility  with  administrative  offices in Deerfield
Beach,  Florida, to expand Point Blank's military production.  The lease expires
on April 30, 2008.

         PACA.  We  lease a  60,060  square  foot  manufacturing  facility  with
administrative  offices at 179 Mine Lane,  Jacksboro,  Tennessee  37757, for our
subsidiary,  Protective  Apparel  Corporation  of  America  ("PACA").  The lease
expires on April 15, 2006.

         NDL/POINT  BLANK  FACILITY.  We lease a 67,000  square  foot office and
manufacturing facility located at 4031 N.E. 12th Terrace,  Oakland Park, Florida
for Point Blank and our Sports  Group.  Until July 2004, we leased this facility
from V.A.E.  Enterprises LLC ("V.A.E."),  a limited liability company controlled
by Mrs. Terry Brooks, wife of Mr. David H. Brooks, and beneficially owned by Mr.
and Mrs.  Brooks'  minor  children.  In July 2004,  the  building was sold to an
unrelated third party,  Cabot  Industries Value Fund LP, from which we now lease
the facility from under the same terms. The lease expires on December 31, 2010.

         WASHINGTON  DC  OFFICE.  In May  2002,  we opened a 2,192  square  foot
government  and  international  liaison  sales  office at 1215  Jefferson  Davis
Highway, Arlington, Virginia. The lease expires on April 30, 2006.

ITEM 3.  LEGAL PROCEEDINGS

         On January 3, 2005, a class action  lawsuit was filed against us in the
Circuit Court of the Seventeenth Judicial Circuit in Broward County,  Florida by
a police  organization  and  individual  police  officers,  because of  concerns


                                       12
<PAGE>

regarding   the   effectiveness   and   durability   of  body  armor  with  high
concentrations  of Zylon  in the  Company's  bullet-resistant  soft  body  armor
(vests).  In February 2005, we reached a preliminary  settlement with respect to
the class action lawsuit  filed,  subject to final court  approval.  The Company
does not  expect  this  settlement  to have a  material  adverse  effect  on its
financial position.

         We are currently the subject of an  investigation by the Securities and
Exchange   Commission  (the  "SEC"),  with  respect  to  certain  related  party
transactions and executive  compensation matters regarding DHB and affiliates of
Mr. David H. Brooks (the Company's Chief Executive Officer).  DHB and Mr. Brooks
are  cooperating  with the SEC in this  investigation.  In  addition,  the Audit
Committee  expects to  periodically  monitor the status and performance of these
related party  transactions  to assess the relative  benefits to the Company and
the related party's compliance with its contractual obligations.

         We are  involved in other  litigation,  none of which we consider to be
material to our  business or believe  would,  if  adversely  determined,  have a
material adverse effect on our financial condition or operations.

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

                  At the DHB Industries,  Inc. Annual  Stockholders'  Meeting on
December  30, 2004,  our  stockholders  elected  each of the director  nominees,
ratified the selection of our independent auditors,  and because there was not a
quorum for the proposal, did not approve our 2004 Omnibus Equity Incentive plan.

<TABLE>
<CAPTION>


           1. To elect six directors to hold office during
              the year following the Annual Meeting and
              until their successors are elected and qualified                           Number of Shares
                                                                                         ----------------
                                                                            Voted For       Voted Against   Withheld
                                                                            ----------      -------------   --------
<S>                                                                         <C>               <C>              <C>

           David Brooks                                                     38,907,659        2,054,089       -0-
           Gary Nadelman                                                    40,383,648          578,100       -0-
           Jerome Krantz                                                    40,427,542          534,206       -0-
           Cary Chasin                                                      40,392,607          569,141       -0-
           Dawn Schlegel                                                    39,012,272        1,949,476       -0-
           Barry Berkman                                                    40,564,943          396,805       -0-


                                                                                     Number of Shares
                                                                                  Voted                      Broker
                                                                   Voted For     Against        Abstain     Non-Votes
                                                                   ---------     ---------      -------     ---------
           2. To ratify the appointment of Weiser
              LLP as independent auditors for the
              Company for 2004.                                   40,758,676       153,398       49,673        95,751

           3. To consider and vote upon the
              Company's proposed 2004 Omnibus
              Equity Incentive Plan.                               15,924,956    3,060,114      269,281    21,803,147

</TABLE>


                                       13
<PAGE>


                                     PART II


ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Our common stock is listed on the  American  Stock  Exchange  under the
symbol DHB. The  following  table shows the high and low prices of the Company's
common stock for each quarter in the two-year period ended December 31, 2004:


                                        Low             High
                                       ------          ------

              2004     4th Quarter     $13.47          $20.56
                       3rd Quarter      11.23           17.05
                       2nd Quarter       7.65           16.05
                       1st Quarter       5.29            7.41
              2003     4th Quarter       3.87            8.25
                       3rd Quarter       3.80            4.95
                       2nd Quarter       2.18            4.60
                       1st Quarter       1.35            2.70

         Since we issued  our  Series A, 12%  convertible  preferred  stock (the
"Preferred  Stock") on January  12,  2002,  we have paid cash  dividends  on the
Preferred Stock each quarter at a rate of $0.18 per share per quarter ($0.72 per
share per annum),  an amount equal to the interest  that would have been payable
on the  shareholder  indebtedness  from which the Preferred  Stock was converted
(See "Certain Transactions" below). We have not paid any dividends on our common
stock in the last three fiscal years.

         We currently  retain our income from earnings and  anticipate  that our
future  earnings will be retained to finance the expansion of our business.  Any
determination  to pay cash dividends on the Company's common stock in the future
will be at the  discretion  of the Board of Directors  after taking into account
various factors, including financial condition,  results of operations,  current
and  anticipated  cash  needs,  and  restrictions,  if  any,  under  our  credit
agreements.  Our current credit  facility  prohibits the payment of dividends on
our common stock without the lender's prior written consent.

         On March 1, 2005,  there were 1,750  holders of record of our Company's
common  stock.  However,  the number of holders of record  includes  brokers and
other depositories for the accounts of others. We estimate that as of that date,
there were approximately 22,000 beneficial owners of our common stock.

         In 2004,  the  Company  issued  to each of the then six  board  members
50,000  unregistered  five year common stock  warrants  exercisable at $5.88 per
share.  These  warrants  may either be exercised at the option of the holder for


                                       14
<PAGE>

cash or pursuant to a cashless exercise based upon the five prior business days'
stock price.  On November 29,  2004,  the members of the Board of Directors  and
Sandra L. Hatfield,  the Company's Chief Operating Officer,  exercised 4,555,000
common stock warrants pursuant to a cashless exercise yielding  4,261,799 shares
of common  stock.  Included in the above  mentioned  warrants is the exercise by
David H. Brooks,  the Company's  Chief Executive  Officer of 3,875,000  warrants
yielding  3,669,757 shares of common stock,  Dawn Schlegel,  the Company's Chief
Financial  Officer of 205,000 warrants  yielding 177,006 shares of common stock,
and  Sandra L.  Hatfield,  the  Company's  Chief  Operating  Officer  of 200,000
warrants  yielding 180,119 shares of common stock. In addition,  on December 28,
2004, Sandra L. Hatfield,  the Company's Chief Operating  Officer,  exercised an
additional  warrant of 100,000 shares pursuant to a cashless  exercise  yielding
89,426 shares of common stock.  Employees  exercised  warrants for 63,895 shares
with aggregate  proceeds of $110,000.  A former member of the Board of Directors
exercised a warrant for 25,000 shares of common stock with aggregate proceeds of
$50,000.  An  outside  consultant  exercised  a warrant  pursuant  to a cashless
provision yielding 100,280 shares of common stock.

         All of the  aforementioned  issuances of  unregistered  securities were
made  by the  Company  pursuant  to and in  reliance  upon  Section  4(2) of the
Securities  Act of  1933,  relating  to  transactions  not  involving  a  public
offering.

         As of December 31, 2004, the Company had outstanding  options/warrants,
and shares  available  for future  grants of  options/warrants  under its equity
plan, as follows:

<TABLE>
<CAPTION>

                                           Equity Compensation Plan Information

                                                                                         Number of securities remaining
                                 Number of securities to be       Weighted-average       available for future issuance
                                   issued upon exercise of       exercise price of         under equity compensation
                                    outstanding options,        outstanding options,      plans (excluding securities
Plan category                        warrants and rights        warrants and rights         reflected in column (a))
                                 --------------------------     --------------------     ------------------------------
                                            (a)                         (b)                           (c)
<S>                                       <C>                          <C>                              <C>

Equity compensation plans
    approved by security
    holders....                           507,000                      $5.00                            0
Equity compensation plans not
    approved by security
    holders....                                 0                         --                           -0-
              Total ............          507,000                      $5.00                            0

</TABLE>


ITEM 6.  SELECTED FINANCIAL DATA

         The selected consolidated  financial data set forth below for the years
ended  December  31,  2004,  2003,  2002,  2001 and 2000,  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 Form 10-K/A.


                                       15
<PAGE>

<TABLE>
<CAPTION>


Income Statement Data (in thousands, except for per share data)
                                                                     2004          2003          2002           2001          2000
                                                                 --------      --------      --------        -------       -------
<S>                                                              <C>           <C>           <C>             <C>           <C>

Net sales                                                        $340,075      $230,011      $130,347        $98,015       $70,018
Cost of goods sold                                                245,940       166,670        92,621         71,639        49,359
                                                                 --------      --------      --------        -------       -------
Gross profit                                                       94,135        63,341        37,726         26,376        20,659
Selling, general and administrative expenses                       44,564        37,325        23,903         13,597        12,460
                                                                 --------      --------      --------        -------       -------
Income (loss) before other income (expense)                        49,571        26,016        13,823         12,779         8,199
Interest expense                                                   (1,374)       (1,344)       (1,645)        (2,513)       (2,743)
Other income (expense)                                                 35         1,605           130             42           341
                                                                       --         -----           ---             --           ---
Income (loss) before discontinued operations                       48,232        26,277        12,308         10,308         5,797
Discontinued operations                                                --            --            --             --           340
                                                                 --------      --------      --------        -------       -------
Income (loss) before income taxes                                  48,232        26,277        12,308         10,308         6,137
Income tax (benefit) expense                                       17,573        11,098       (3,672)            175           130
                                                                 --------      --------      --------        -------       -------
Income (loss) before minority interest                             30,659        15,179        15,980         10,133         6,007
Minority interest                                                    (224)           (7)            --             --            --
                                                                 --------      --------      --------        -------       -------
Net income (loss)                                                  30,435        15,172         15,980         10,133         6,007
                                                                 --------      --------      --------        -------       -------
Dividend - preferred stock                                           (360)         (360)         (345)             --            --
                                                                 --------      --------      --------        -------       -------
Income available to common stockholders                          $ 30,075      $ 14,812      $ 15,635        $10,133       $ 6,007
                                                                 ========      ========      ========        =======       =======

Earnings per share
Basic                                                            $   0.73      $   0.36      $   0.42        $  0.32       $  0.19
Diluted                                                          $   0.67      $   0.34      $   0.37        $  0.28       $  0.18

Balance Sheet Data (in thousands)                                    2004           2003          2002          2001           2000
---------------------------------                                --------      --------      --------        -------       -------

Working capital                                                  $107,086      $ 66,822      $ 53,125        $20,472       $ 7,497
Total assets                                                      145,857        93,428        65,371         40,896        28,056
Total current liabilities                                          35,180        23,969         7,822         16,585        16,949
Long-term liabilities                                              33,220        22,514        26,204         19,305        16,062
Stockholders' equity (deficit)                                     77,026        46,738        31,345          5,006        (4,955)

</TABLE>


         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 Form 10-K/A.

GENERAL

                  We  are  a   manufacturer   and   provider   of   bullet   and
projectile-resistant  garments, and fragmentation  protective vests, and related
ballistic  accessories,  which  are used  domestically  and  internationally  by
military,  law  enforcement,  security  and  corrections  personnel,  as well as
governmental  agencies.  We also manufacture and distribute  protective athletic
apparel and equipment, including a wide variety of knee, ankle, elbow, wrist and
back  supports  and  braces  that  assist  serious   athletes,   weekend  sports
enthusiasts  and  general  consumers  in their  respective  sports and  everyday
activities.


                                       16
<PAGE>


         We are organized as a holding company that currently  conducts business
through its subsidiaries through two divisions,  the DHB Armor Group and the DHB
Sports  Group.  The Armor Group  represented  approximately  98%, 97% and 96% of
consolidated  revenues of the Company during 2004, 2003 and 2002,  respectively.
The Company's  products are sold both nationally and  internationally.  Sales to
the U.S.  military  comprise the largest portion of the Armor Group's  business,
followed  by sales  to  federal,  state  and  local  law  enforcement  agencies,
including  correctional  facilities.  Accordingly,  any substantial  increase or
reduction  in  government  spending  or change in  emphasis  in defense  and law
enforcement programs could have a material effect on the Armor Group's business.
The  Sports  Group  manufactures  and  markets  a variety  of  sports  medicine,
protective  gear, and health  supports  products  under its own labels,  private
labels and house brands for major retailers.

         We derive substantially all of our revenues from sales of our products.
As indicated in the financial  information  included in this report, the Company
has experienced substantial increases in its revenues in the past several years,
which has been  attributable  primarily to product demand from the U.S. military
and federal, state and local law enforcement.  The Company's ability to maintain
these revenue levels will be highly dependent on continued demand for body armor
and projectile-resistant  clothing; and although the Company does not foresee an
immediate  material  reduction  in  such  demand,  there  is no  assurance  that
governmental  agencies  will not  refocus  their  expenditures  based on changed
circumstances or otherwise.

         Due to its growth,  the Company has outgrown its small business  status
under  government  procurement  regulations.  Although  the  loss  of our  small
business  status makes us ineligible  for certain  set-asides  under  government
contracting  regulations,  we believe that our current size suggests our ability
to manage  larger  orders and  allows us to  credibly  bid on major  procurement
contracts under which small businesses would be our subcontractors.

         The Company's  market share is highly dependent upon the quality of its
products,  and its  ability  to  deliver  its  products  in a prompt  and timely
fashion.  To meet  projected  demand,  and to  maintain  its  ability to deliver
quality  products in a timely  manner,  the Company in April 2004,  moved into a
new, expanded production facility in Pompano Beach, Florida.  However,  there is
no assurance  that,  in the long term,  demand for the  Company's  products will
remain at recent  levels,  or that the Company  will be able to  diversify  into
alternate markets or alternate products, or to increase its market share through
acquisitions of other  businesses.  Management's  current  strategic focus is on
quality  and  delivery,  which  management  believes  are  the key  elements  in
obtaining  additional and repeat orders under the Company's existing procurement
contracts with the U.S. military and other governmental agencies.

         RESULTS OF OPERATIONS

         YEAR ENDED DECEMBER 31, 2004 COMPARED TO YEAR ENDED DECEMBER 31, 2003.

         Consolidated  net sales for the year ended  December 31, 2004 increased
47.9% to  approximately  $340.1  million as  compared  to  approximately  $230.0
million  for the year  ended  December  31,  2003.  The Armor  Group's  revenues
increased  48.6% to $333.0  million  for the year ended  December  31, 2004 from
approximately $224.2 million for the year ended December 31, 2003. This increase
was  attributed  to a 76.7%  increase  in sales  to the US  military  and  19.4%
increase in sales to state and local law enforcement  agencies.  Sales to the US
military were approximately  $254.7 million for the year ended December 31, 2004
compared to $144.1 million for the year ended December 31, 2003.  Sales to state


                                       17
<PAGE>

and local law  enforcement  agencies  either  directly  or through  distributors
increased  to $59.2  million for the year ended  December  31, 2004 versus $49.6
million for the year ended  December 31, 2003. In  recognition  of the increased
focus  on  homeland  security  and  the  war on  terrorism,  the  number  of law
enforcement  officers  and agents has  increased  over the past three  years and
there has been increased funding to help equip these officers and agents,  which
has led to increased demand for our products.  International  sales increased to
$9.8 million during the year ended December 31, 2004 as compared to $900,000 for
the year ended December 31, 2003. The Sports Group's sales increased 20% to $7.0
million for the year ended  December  31, 2004  compared to $5.9 million for the
year ended  December  31,  2003.  This  increase is  attributable  to  increased
revenues  from Target and the addition of Longs and Walgreen  drug stores to its
customer base during 2004.

         Gross profit  increased to $94.1  million for 2004 as compared to $63.3
million in 2003.  However as a percentage  of net sales,  gross profit  remained
nearly  constant with the gross profit  percentage of 27.7% in 2004 and 27.5% in
2003.

         Selling,  general and administrative expenses decreased as a percentage
of net sales to 13.1% or  approximately  $44.6  million  for 2004 as compared to
16.2% or  approximately  $37.3 million for 2003. The main cause of this decrease
as a percentage  of net sales is the  reduction of $1.97 million in research and
development expenditures during 2004. Research and development material expenses
were 2.5% of sales or approximately $8.5 million during 2004 as compared to 4.5%
or approximately  $10.4 million for 2003. The Company  anticipates that research
and  development  costs will remain at 2 to 3% of revenue in 2005.  During 2004,
the Company paid a total of $4.8  million in bonuses  (1.4% of net sales) to its
executives  and  supervisors  as compared to $2.7 million (1.2% of net sales) in
2003.

         Interest  expense  for  2004  was  approximately  $1.4  million  versus
approximately  $1.3  million for 2003 as a result of the Company  utilizing  the
Libor option on more of its  outstanding  debt,  and  therefore  decreasing  its
average  interest  percentage  it was  paying,  even though its  borrowings  had
increased.  Total other income (expense) decreased $1.6 million during 2004 to a
total other expense of $1.3 million  compared to other income of $261,000 during
2003.  During  2003,  the Company  received  income from the  settlement  of its
lawsuit with its insurance  company and insurance  agent of  approximately  $1.0
million. Also included in other income during 2003 was the $1.45 million gain on
the sale of a .0065%  interest of its  subsidiary  to an  unrelated  third party
during December 2003. In addition, during 2003, the Company wrote down the value
of its investment in non-marketable securities for a loss of $904,000.

         Income tax expense in 2004 increased to approximately  $17.6 million as
compared to  approximately  $11.1 million for 2003.  Current taxes  increased to
$17.3  million  or  35.9%  of  income  before  taxes  as  compared  to  27.3% or
approximately $7.2 million for 2003. This increase is attributable to higher tax
brackets as the Company  continues to grow and the  utilization of net operating
loss  carryovers  during 2003.  The full  utilization  of the net operating loss
carryovers during 2003 caused the deferred tax expense to go down to $268,000 in
2004 versus $3.9 million for 2003.  The  Company's  effective tax rate was 38.5%
during 2004 as compared to 42.2% during 2003. This decrease in the effective tax
rate is attributable among other items to an over accrual of taxes in 2003 as it
relates to the Hightower  transaction with the sale of the minority  interest of
Point Blank.

         Income available to common stockholders was approximately $30.1 million
for  the  year  ended  December  31,  2004,  a  103%  increase  as  compared  to
approximately  $14.8  million  for the year ended  December  31,  2003.  Diluted
earnings  per share  increased  97% to $0.67 for 2004 as  compared  to $0.34 for


                                       18
<PAGE>

2003. The weighted  average  shares  outstanding on a diluted basis for the year
ended  December 31, 2004 were  45,735,023 as compared to 44,196,802 for the year
ended December 31, 2003.

         YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002.

         Consolidated  net sales for the year ended  December 31, 2003 increased
76.5% to $230.0 million as compared to $130.3  million for the prior  comparable
periods.  The Armor Group's  revenues  increased 79.5% to $224.2 million for the
year ended  December 31, 2003,  from  approximately  $124.8 million for the year
ended December 31, 2002. This increase was  attributable to a 103.3% increase to
$144.1 million in sales (including  approximately $152 million for InterceptorTM
OTVs or 59% of the military sales) from the military as well as a 61.2% increase
to $49.6  million  in sales to state  and  local law  enforcement  agencies.  In
recognition  of  the  increased  focus  on  homeland  security  and  the  war on
terrorism,  the number of officers  and agents has  increased  over the past two
years and there has been  increased  funding to help equip  these  officers  and
agents,  which has led to increased demand for our products.  The Sports Group's
revenues for the year ended December 31, 2003  increased  7.2% to  approximately
$5.9  million as  compared  to  approximately  $5.5  million  for the year ended
December 31, 2002. The increase in the Sports Group's  revenues was attributable
to the addition of Wal-Mart  stores in Canada to its customer base, the addition
of a new chain of drug  stores,  Long Drugs  stores,  and an expanded  number of
products in Target stores during 2003. The consolidated  gross profit percentage
for the year ended December 31, 2003 was 27.5% as compared to 28.9% for the year
ended December 31, 2002. This decrease in the gross profit percentage reflects a
change  in the  product  mix as well as the  additional  costs  associated  with
increasing  and expediting  the Company's  sales orders to meet the  accelerated
demand of our  customers,  including  overtime  costs and freight  and  delivery
charges.

         The  Company's  selling,  general  and  administrative  expenses  as  a
percentage  of sales  improved to 16.2% of revenues for the year ended  December
31, 2003 as compared to 18.3% for the year ended  December 31, 2002. The Company
incurred higher than normal selling,  general and administrative expenses during
the year ended  December 31, 2003 over the prior  comparable  period due to $2.7
million in bonuses paid to key employees and  executives to compensate  them for
their   contribution  to  the  success  of  the  Company.   These  bonuses  were
approximately  1% of revenues for the year ended  December 31, 2003.  During the
fourth  quarter  of 2003,  the  Company  also  retained  an agent to expand  its
overseas  opportunities,  and paid a consulting  fee of  $634,000.  Research and
development  expenditures  increased 157% to approximately $10.8 million for the
year  ended  December  31,  2003,  as  compared  to $4.2  million  for the prior
comparable  year.  The primary  reason for this increase is associated  with the
testing costs for the military,  which  increased  with the  significant  volume
increase  from the  military,  and the  addition of two new programs for testing
verification   of  incoming  raw  materials  and  the  development  of  new  law
enforcement  techniques  for a more in depth analysis of  performance.  Selling,
general and  administrative  expenses  during the year ended  December  31, 2002
included certain non-recurring expenses,  including sharply increased legal fees
pertaining to the Company's  successful  defense of a patent  infringement suit,
legal  and  professional  fees  associated  with the union  organizing  campaign
relating to the  Company's  Point Blank Body Armor  subsidiary,  and $646,000 in
non- cash compensation  charges for the issuance of stock warrants to an outside
consultant.  Operating  income  increased 88.4% to  approximately  $26.0 million
during the year ended  December  31,  2003 as compared  to  approximately  $13.8
million in the prior  comparable  period,  driven  primarily by increased  sales
volume  along with the  decrease  in the  percentage  of  selling,  general  and
administrative  expenses.  Operating margins increased to 11.4% in 2003 from 11%
in 2002.


                                       19
<PAGE>


         Interest expense for the year ended December 31, 2003 was approximately
$1.3 million,  an 18.8% decrease from  approximately  $1.6 million for the prior
comparable period. This decrease was due primarily to lower interest rates under
the Company's  revolving  credit  facility and the repayment of the  shareholder
loan.  Included  in other  expenses  is a  $904,000  non-cash  write-off  of the
Company's long-term investment in non-marketable securities of a private company
to its net realizable  value.  Also included in other income was the gain on the
sale of approximately a 1% interest in the Company's Point Blank subsidiary.  In
December 2003, as part of this  transaction,  the Company received  inventory as
consideration  for the sale of Point Blank stock, with an approximate fair value
of $1.65 million.  The shares of Point Blank stock had a book value of $200,000,
realizing a gain of $1.45 million in December 2003. In 2003, the Company settled
its lawsuit with its insurance agent and insurance carrier,  for losses incurred
from Hurricane Irene in 1999, for which the Company  received net of legal fees,
approximately  $1,009,000  during the year ended  December  31,  2003,  which is
included in Other Income.

         Income before taxes increased by 113.8% to approximately  $26.3 million
for the year ended December 31, 2003, as compared to approximately $12.3 million
for the prior  comparable  period.  Income taxes for the year ended December 31,
2003 were approximately  $11.1 million as compared to approximately $3.7 million
income tax benefit for the year ended December 31, 2002. The Company's effective
tax rate was 42.2% for 2003, as compared to (29.8%) for 2002;  the effective tax
rate  was  nominal  in  2002  due  to the  utilization  of  net  operating  loss
carryforwards.

         Income available to common stockholders was approximately $14.8 million
or $0.34 per diluted share for the year ended  December 31, 2003, as compared to
approximately  $15.6  million  or $0.37 per  diluted  share  for the year  ended
December 31, 2002. The weighted  average  shares  outstanding on a diluted basis
for the year ended  December 31, 2003 were  44,196,802 as compared to 42,304,254
for the year ended December 31, 2002.

LIQUIDITY AND CAPITAL RESOURCES

         The Company expects that its primary capital requirements over the next
twelve  months will be to assist its  subsidiaries  in financing  their  working
capital requirements.  The Company's operating subsidiaries sell the majority of
their products on 30 to 90-day terms.  Working  capital is needed to finance the
receivables,  manufacturing  process and inventory.  Working capital at December
31, 2004 was  approximately  $107.1  million as  compared to working  capital of
approximately  $66.8 million at December 31, 2003. The accounts  receivable days
outstanding  increased to 58 days at December 31, 2004 as compared to 54 days at
December  31,  2003 as a result of higher  receivables  from state and local law
enforcement which typically pay a little slower. Although the working capital of
the Company  increased  during 2004, the cash used from operations  increased to
approximately   $10  million  compared  to  cash  provided  from  operations  of
approximately $2.6 million during 2003. The main cause of the negative operating
cash flow is the  substantial  growth the  Company  has been  experiencing.  The
underlying  drivers of  operating  cash flows are the  inflows  and  outflows of
funds.

         Inflows are principally cash collections from customers. As a result of
the  Company's  continued and rapid  growth,  the Company has been  experiencing
increases in its accounts receivable,  thus causing cash inflows from operations
to lag behind net sales.  Cash  collections  from  customers  approximated  $325
million  and $207  million  for the  years  ended  December  31,  2004 and 2003,
respectively,  compared  to net sales of  approximately  $340  million  and $230
million  respectively,  for the comparable  years.  The outflows are principally


                                       20
<PAGE>

manufacturing  costs plus the buildup of the  inventory  to  accommodate  future
growth.  Therefore,  the Company's cash outflows related to  manufacturing  cost
plus increasing  inventory values outpaced the cost of goods sold. Cash outflows
for  manufacturing  costs plus inventory  buildup  approximated $305 million and
$165  million for the years  ended  December  31,  2004 and 2003,  respectively,
compared to cost of goods sold of  approximately  $245 million and $167 million,
respectively, for comparable years.

         On March 15, 2005, the Company  amended its bank credit  agreement (the
"Credit Agreement"), which increased the total borrowing limits from $45 million
to $55 million at that time.  Pursuant to the Credit Agreement,  the Company may
borrow,  on a revolving  basis,  up to $37  million on 85% of eligible  accounts
receivable (the "Credit Facility"),  and the Company borrowed a term loan in the
principal  amount of $18 million  (repaying the $12.5 million dollar term loan),
amortizing  at the rate of $2 million per  quarter  commencing  July 2005.  This
amended Credit  Agreement will expire on October 1, 2007. On March 15, 2004, the
Company again  amended the Credit  Agreement,  to increase the revolving  credit
borrowing  limit to $45.5  million and the  Company  borrowed a term loan in the
principal  amount  of 12.5  million  amortizing  at the rate of $1  million  per
quarter  commencing  July 1, 2004.  Borrowings  under the Credit  Agreement bear
interest,  at the Company's  option, at the bank's prime rate (5.25% at December
31,  2004) or LIBOR  (2.3% at  December  31,  2004)  plus 1.75% per annum on the
Credit  Facility and at the bank's prime rate or LIBOR (2.50130% at December 31,
2004) plus 2.25% on the term loan. For 2003, the borrowings bore interest at the
bank's  prime rate or LIBOR  plus  1.75%  (3.145% at  December  31,  2003).  The
borrowings  under the Credit  Agreement are  collateralized  by a first security
interest in substantially all of the assets of the Company.

         The Credit Facility  includes both  affirmative and negative  covenants
customary  for a  financing  of this  nature.  The Credit  Facility  among other
things,  requires the Company to maintain a minimum (1)  tangible net worth,  as
defined,  (2) fixed charge  coverage ratio,  and (3) earnings  before  interest,
taxes,   depreciation  and   amortization.   The  Credit  Facility  has  certain
restrictive  covenants that limit the Company's  ability to pay dividends to its
common stockholders,  repurchase treasury shares, and limits the total amount of
capital  expenditures  to $2 million during any given year. The Company does not
anticipate  capital  expenditures  to reach the $2  million  limit as  described
below. These restrictive  covenants require the Company to obtain prior approval
with the bank before  paying  common stock  dividends or  repurchasing  treasury
shares.  Currently  the Credit  Facility  has a 1%  prepayment  penalty  through
October 1, 2005. The Company  believes that these  restrictive  covenants do not
have a material impact on the Company's liquidity and capital resources.

         The Company's  capital  expenditures  in 2004  increased  approximately
$1.06  million to  approximately  $1.8  million  as  compared  to  approximately
$741,000 during 2003. This increase is attributable to the additional machinery,
equipment,  furniture  and  fixtures  and  leasehold  improvements  with the new
warehouse and  administrative  facility in Florida for the Company's Point Blank
subsidiary and a new location for the Company's corporate  headquarters.  During
2005,  the Company  currently  anticipates  spending  approximately  $300,000 in
capital expenditures to construct a new state of the art ballistic testing range
in its Point Blank's  Pompano Beach  facility in addition to our normal  capital
expenditures   of   approximately   $800,000  for  total   anticipated   capital
expenditures of approximately $1.1 million.

         The Company believes that its existing credit line, together with funds
generated from operations, will be adequate to sustain its operations (including
projected capital expenditures) through 2005. Historically, the Company has been


                                       21
<PAGE>

successful in obtaining increases in its revolving credit facility,  as required
in order to finance the increased  working capital needs brought on by the rapid
and substantial  expansion of the Company's business.  However,  there can be no
assurance  that the Company  will be able to obtain  further  such  increases if
needed,  and the Company may be required to explore other  potential  sources of
financing  (including  the  issuance of equity  securities  and,  subject to the
consent of the Company's lender,  other debt financing) if the Company continues
to experience escalating demand for its products.


OFF-BALANCE SHEET ARRANGEMENTS

         As  of   December   31,   2004,   we  did  not  have  any   significant
off-balance-sheet   arrangements,  as  defined  in  Item  303(a)(4)(ii)  of  SEC
Regulation S-K.


CASH CONTRACTUAL OBLIGATIONS


The following  table  presents the Company's  estimated  cash  requirements  for
contractual obligations outstanding as of December 31, 2004:

<TABLE>
<CAPTION>


                                                                  Payments Due by Period
                                                                     ($ In thousands)
                                           Less
                                           than             1-3             4-5           After
 Contractual Obligations                  1 year           years           years         5 years          Total
<S>                                       <C>             <C>               <C>            <C>           <C>

 Long-Term Debt                          $ 4,000          $32,134           $--            $ --          $36,134

 Employment Contracts                        363                             --              --              363

 Operating Leases                          1,983            5,840          6,058             --           13,881
                                         -------          -------         ------           ----          -------

 Total Contractual Cash
      Obligations                        $ 6,346          $37,974         $6,058           $ --          $50,378
                                         =======          =======         ======           ====          =======
</TABLE>


         CRITICAL ACCOUNTING POLICIES

         The Company's management believes that its critical accounting policies
include:

         REVENUE  RECOGNITION  - DHB  recognizes  revenue when it is realized or
realizable and has been earned.  Product  revenue is recognized  when persuasive
evidence of an  arrangement  exists,  the product has been  delivered  and legal
title and all risks of ownership  have been  transferred,  written  contract and
sales  terms are  complete,  customer  acceptance  has  occurred  and payment is
reasonably  assured.  Returns  are  minimal  and do not  materially  affect  the
consolidated financial statements.

         ESTIMATES - The preparation of financial  statements in conformity with
accounting  principles  generally  accepted  in the  United  States  of  America
requires  management to make estimates and assumptions  that affect the reported
amounts of assets,  liabilities  and  contingent  assets and  liabilities in the
financial statements and accompanying notes.  Significant  estimates inherent in
the preparation of the accompanying  consolidated  financial  statements include
the carrying  value of long-lived  assets and  allowances  for  receivables  and
inventories. Actual results could differ from these estimates.

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


                                       22
<PAGE>


         INCOME TAXES - DHB uses the asset and liability approach to account for
income  taxes.  Under this  method,  deferred  tax assets  and  liabilities  are
recognized for the expected future tax  consequences of differences  between the
carrying  amounts of assets and liabilities and their respective tax basis using
enacted tax rates in effect for the year in which the  differences  are expected
to reverse. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period when the change is enacted. Deferred
tax  assets  are  reduced  by a  valuation  allowance  when,  in the  opinion of
management,  it is more likely than not that some portion or all of the deferred
tax assets will not be realized.

         OTHER  INVESTMENT - DHB had a cost-based  investment in a  non-publicly
traded  company.  During  2003,  a  decline  in the  value  of  this  cost-based
investment  below  cost that was  deemed  other than  temporary  was  charged to
earnings, resulting in a loss on investment of $904,000.

         Judgments and estimates  underlying the Company's  accounting  policies
vary  based on the  nature  of the  judgment  and  estimate.  The  company  uses
judgments  and  estimates  in order to  determine  its  allowance  for  doubtful
accounts, which relates to the Company's revenue critical accounting policy. The
allowance for doubtful  accounts is determined  through analysis of the aging of
the accounts receivable at the date of the financial statements,  assessments of
collectibles  based on an evaluation  of historic and  anticipated  trends,  the
financial  condition of customers  and an  evaluation  of the impact of economic
conditions.  The Company also uses  judgments  and  estimates  to determine  the
valuation allowances on its deferred tax assets to establish reserves for income
taxes,  each of which relate to the Company's  income taxes critical  accounting
policy.  The Company bases these  estimates on projections  of future  earnings,
effective tax rates and the impact of economic  conditions.  These judgments and
estimates  are  based  upon  empirical  data as  applied  to  present  facts and
circumstances.  Judgments and estimates are  susceptible  to change  because the
projections  that they are based  upon do not  always  turn out to be correct or
unanticipated issues arise that are not considered in the Company's assumptions.


         NEW ACCOUNTING STANDARDS

         In December 2003, the Financial  Accounting Standards Board issued FASB
Interpretation  Number 46-R  "Consolidation of Variable Interest  Entities." FIN
46-R,  which modifies  certain  provisions  and effective  dates of FIN 46, sets
forth  criteria to be used in  determining  whether an  investment is a variable
interest  entity  should  be  consolidated.  These  provisions  are based on the
general  premise that if a company  controls  another entity  through  interests
other than voting  interests,  that company  should  consolidate  the controlled
entity.  The Company  believes  that  currently,  it does not have any  material
arrangements that meet the definition of a variable interest entity, which would
require consolidation.

         In November 2004, the FASB issued SFAS No. 151,  "Inventory  Costs - An
Amendment of ARB NO. 43,  Chapter 4" (SFAS No.  151).  SFAS No. 151 requires all
companies to recognize a  current-period  for abnormal  amount of idle  facility
expense,  freight,  handling  costs and wasted  materials.  This  statement also
requires  that the  allocation  of fixed  production  overhead  to the  costs of
conversion be based on the normal  capacity of the production  facilities.  SFAS
No. 151 will be effective  for fiscal year  beginning  after June 15, 2005.  The
Company does not expect the adoption of this statement to have a material effect
on its consolidated financial statements.


                                       23
<PAGE>


         In December 2004, the FASB issued SFAS No.123(R), "Share-Based Payment"
(SFAS No. 123(R)).  This statement  replaces SFAS No. 123 and supersedes APB 25.
SFAS 123\(R)  requires  all  stock-based  compensation  to be  recognized  as an
expense in the financial  statements and that such cost be measured according to
the fair value of stock  options.  SFAS 123 (R) will be effective  for quarterly
periods beginning after June 15, 2005. While the Company currently  provides the
pro forma disclosures  required by SFAS No. 148 on a quarterly basis (see Note 1
(k) - Stock Based  Compensation"),  it is currently  evaluating  the impact this
statement will have on its consolidated financial statements.

         In  December  2004,  the  FASB  issued  SFAS  No.  153,  "Exchanges  on
Nonmonetary  Assets  - An  Amendment  of  APB  Option  No.  29,  Accounting  for
Nonmonetary  Transactions"  (SFAS 153) SFAS  eliminates  the exception from fair
value  measurement for  nonmonetary  exchanges of similar  productive  assets in
paragraph 21(b) of APB Option No. 29, "Accounting for Nonmentary  Transactions,"
and  replaces it with an exception  for  exchanges  that do not have  commercial
substance.  SFAS  153  specifies  that a  nonmonetary  exchange  has  commercial
substance  if the  future  cash  flows of the  entity  are  expected  to  change
significantly as a result of exchange.  SFAS 153 is effective for fiscal periods
beginning  after June 15, 2005. The Company does not expect the adoption of this
statement to have a material effect on its consolidated financial statements.


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

         This Annual Report on Form 10-K/A contains  forward-looking  statements
regarding  future  events and our future  results  that are based on our current
expectations, estimates, forecasts and projections about the industries in which
we operate and the  beliefs and  assumptions  of our  management.  Words such as
"expects,"  "anticipates,"  "targets," "goals," "projects,"  "intends," "plans,"
"believes,"  "seeks,"  "estimates,"   variations  of  such  words,  and  similar
expressions  are intended to identify  such  forward-looking  statements.  These
forward-looking statements are only predictions that speak as of the date hereof
and are subject to risks,  uncertainties  and assumptions  that are difficult to
predict.  Therefore,  actual  results may differ  materially  and adversely from
those expressed in any forward-looking  statements.  Factors that might cause or
contribute to such differences  include, but are not limited to, those discussed
below,  elsewhere in this Form 10-K and in other reports that we have filed with
the  Securities  and Exchange  Commission.  You are cautioned not to place undue
reliance  on these  forward-looking  statements  that  speak only as of the date
hereof.   We  undertake  no  obligation   to  revise  or  update   publicly  any
forward-looking  statements  to reflect  any change in the  expectations  of our
management  with  regard  thereto  or  any  change  in  events,  conditions,  or
circumstances on which any such statements are based.

RISK FACTORS

          Our  business,  operations  and  financial  condition  are  subject to
various risks.  Several  material risks are described below, and you should take
these risks and others set forth in this Annual Report on Form 10-K and in other
reports and materials that we file with the  Securities and Exchange  Commission
into account in  evaluating  us or any  investment  decision  involving us. This
section  does not  describe  all risks  applicable  to us, our  industry  or our
business, and it is intended only as a summary of certain material risk factors.


                                       24
<PAGE>


         OUR BUSINESS IS MATERIALLY  DEPENDENT UPON RAW MATERIALS THAT HAVE BEEN
SUBJECT TO SHORTAGES OVER THE PAST TWO YEARS.

         A substantial majority of our revenues and net income is dependent upon
the  sale  of the  ballistic-resistant  products  of our  Armor  Group.  The raw
materials   used   by   our   Armor   Group   in   the   manufacturing   of  our
ballistic-resistant  products  include  Kevlar(TM),  Twaron(TM)  Spectra(TM) and
Zylon(TM) and our primary shield products include GoldFlex(TM),  Dyneema(TM) and
Spectra   Flex(TM).   Substantially  all  of  the  raw  materials  used  in  the
manufacturing of our  ballistic-resistant  products consist of fabrics which are
patented by major corporations which are purchased from four independent weaving
or  manufacturing  companies.  Accordingly,  we  have  limited  sources  of such
required raw materials  for our  ballistic-resistant  products.  During 2002 and
2003,  shortages of such required raw materials limited the quantity of products
of our Armor Group that we could produce,  and demand for such products exceeded
that amount. Although we were able to partially mitigate the impact of these raw
materials shortages by using a variety of ballistic fibers,  instead of one type
of fiber,  the impact of the shortages  was not  completely  eliminated  because
there are also limits on the availability of ballistic fiber blends. In response
to these shortages,  we have adopted a policy of purchasing such materials based
on their  availability  rather than our immediate need for such materials.  This
policy is designed to mitigate the effects of any future shortages;  however, it
will also increase our inventory carrying costs.  Further,  notwithstanding  our
efforts to increase our  inventory of required  raw  materials,  if any of these
manufacturers cease to produce these products or shortages persist or worsen, we
may be required to use other  fabrics in our  ballistic-resistant  products.  In
such event,  we have no  assurance  that we would be able to identify  alternate
fabrics with comparable performance.  We expect any material future shortages of
required  raw  materials  to have a  material  adverse  effect on our  business,
financial condition and results of operations.

         THE  PRODUCTS  WE SELL ARE  INHERENTLY  RISKY  AND  COULD  GIVE RISE TO
PRODUCT  LIABILITY  AND  OTHER  CLAIMS  FOR  WHICH WE MAY NOT BE ABLE TO  OBTAIN
ADEQUATE INSURANCE.

         The products that we manufacture are typically used in applications and
situations that involve high levels of risk of personal  injury.  Failure to use
our products for their intended  purposes,  failure to use them properly,  their
malfunction,  or,  in  some  limited  circumstances,  even  correct  use  of our
products,  could result in serious bodily injury or death.  We cannot assure you
that our  insurance  coverage  would be  sufficient  to cover the payment of any
potential claim. In addition, we cannot assure you that our current insurance or
any other  insurance  coverage  will  continue to be available or, if available,
that we will be able to obtain it at a  reasonable  cost.  Our cost of obtaining
insurance  coverage  has risen  substantially  since the  terrorist  attacks  of
September 11, 2001. Any material  uninsured  loss could have a material  adverse
effect on our business, financial condition and results of operations.

         A  SUBSTANTIAL  PORTION OF OUR REVENUE IS DEPENDENT ON OUR U.S MILITARY
BUSINESS AND A LOSS OR DECREASE IN SUCH BUSINESS  WOULD HAVE A MATERIAL  ADVERSE
EFFECT ON US.

         Our U.S. military  contracts  account for a significant  portion of our
revenue.  The U.S.  military funds these contracts in annual  increments.  These
contracts require subsequent  authorization and appropriation that may not occur
or that may be  greater  than or less  than the total  amount  of the  contract.


                                       25
<PAGE>

Changes in the U.S. military budget, spending allocations and the timing of such
spending could adversely affect our ability to receive future contracts. None of
our contracts with the U.S. military has a minimum purchase commitment,  and the
U.S.  military  generally  has the right to cancel  its  contracts  unilaterally
without prior notice. The loss of, or a significant  reduction in, U.S. military
business for  ballistic-resistant  products could have a material adverse effect
on our business, financial condition, results of operations and liquidity.


         MANY  OF OUR  CUSTOMERS  HAVE  FLUCTUATING  BUDGETS,  WHICH  MAY  CAUSE
SUBSTANTIAL FLUCTUATIONS IN OUR RESULTS OF OPERATIONS.

         Customers  for our products  include  federal,  state,  municipalities,
foreign,  military, law enforcement and other governmental agencies.  Government
tax revenues and budgetary  constraints,  which fluctuate from time to time, can
affect  budgetary  allocations  for these  customers.  Many domestic and foreign
government  agencies have in the past experienced  budget deficits that have led
to  decreased  spending in  defense,  law  enforcement  and other  military  and
security  areas.  Our  results  of  operations  may be  subject  to  substantial
period-to-period  fluctuations  because  of these  and other  factors  affecting
military,  law  enforcement  and other  governmental  spending.  A reduction  of
funding for federal, state,  municipal,  foreign and other governmental agencies
could have a material  adverse effect on sales of our products and our business,
financial  condition  and results of  operations.  For  example,  our sales have
increased due to the U.S.  military  operations in Iraq and Afghanistan.  We can
provide  no  assurance  that  these  increases  will  be  maintained  after  the
completion of those operations.

         OUR  BUSINESS IS SUBJECT TO VARIOUS LAWS AND  REGULATIONS  FAVORING THE
U.S. GOVERNMENT'S CONTRACTUAL POSITION, AND OUR FAILURE TO COMPLY WITH SUCH LAWS
AND REGULATIONS COULD HARM OUR OPERATING RESULTS AND PROSPECTS.

         As a contractor  to the U.S.  government,  we must comply with laws and
regulations  relating to the formation,  administration  and  performance of the
federal government contracts that affect how we do business with our clients and
may impose added costs on our  business.  These rules  generally  favor the U.S.
government's  contractual  position.  For example,  these  regulations  and laws
include  provisions  that  subject  contracts we have been awarded to protest or
challenge  by  unsuccessful  bidders and  unilateral  termination,  reduction or
modification by the U.S. government. The accuracy and appropriateness of certain
costs and expenses used to  substantiate  our direct and indirect  costs for the
U.S.  government  under our  contracts are subject to extensive  regulation  and
audit by the Defense  Contract  Audit Agency,  an arm of the U.S.  Department of
Defense.  Responding to governmental  audits,  inquiries or  investigations  may
involve significant expense and divert  management's  attention.  Our failure to
comply  with  these or other  laws and  regulations  could  result  in  contract
termination,   suspension  or  debarment  from   contracting  with  the  federal
government,  civil fines and damages and criminal prosecution and penalties, any
of which  could  have a  material  adverse  effect  on our  business,  financial
condition and results of operations.

         OUR STOCK PRICE IS VOLATILE.

         The  market  price  and  trading  volume of our  common  stock has been
subject to  significant  volatility  and this trend may  continue.  The  general
economic,  political  and stock  market  conditions  that may  affect the market
prices of our  common  stock are  beyond our  control.  The market  price of our


                                       26
<PAGE>

common  stock at any  particular  time may not remain  the  market  price in the
future.  The value of our common stock may decline  regardless  of our operating
performance  or prospects.  Factors  affecting our market price include (but are
not  limited  to)  variations  in our  operating  results,  and  whether we have
achieved our key business  targets,  the limited  number of shares of our common
stock available for purchase or sale in the public  markets,  sales or purchases
of large blocks of our stock,  changes in, or our failure to meet,  our earnings
estimates, changes in securities analysts' buy/sell recommendations, differences
between our  reported  results and those  expected by investors  and  securities
analysts and  announcements  of new contracts by us or our  competitors.  In the
past,  securities class action litigation has been instituted  against companies
following  periods of  volatility in the market price of their  securities.  Any
such litigation, if instituted against us, could result in substantial costs and
a diversion of management's attention and resources.

         GROWTH IN OUR OPERATIONS  MAY STRAIN OUR  RESOURCES,  AND IF WE FAIL TO
SUCCESSFULLY MANAGE OUR GROWTH, OUR BUSINESS COULD BE HARMED.

         The increase in orders for body armor for military personnel as well as
  the  introduction of new products,  is placing,  and will continue to place, a
  significant strain on our operational,  financial and managerial resources and
  personnel.  Any  failure to  effectively  manage  growth  could have  material
  adverse effects on our business, operating results and financial condition.

         INCREASES IN THE PRICES PAID FOR RAW MATERIALS MAY ADVERSELY EFFECT OUR
PROFIT MARGINS.

         In the event we experience significant increases in the prices paid for
  our raw  materials,  we may be unable to completely  pass  through,  either in
  whole  or in  part,  such  increases  in  the  cost  of raw  materials  to our
  customers.  In the event we are so unable to pass  through all or a portion of
  such price increases to our customers,  our profit margin on such products may
  be reduced.

ITEM 7A.  QUANTITATIVE AND QUALTITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company does not issue or invest in financial  instruments or their
derivatives for trading or speculative  purposes.  The Company's  market risk is
limited to fluctuations in interest rates as it pertains to its borrowings under
its $45 million credit facility. The Company can borrow at either the prime rate
of interest or LIBOR plus 1.75%.  Any  increase in these  reference  rates could
adversely affect the Company's interest expense. The change in the interest rate
for 2004 was  immaterial.  The  extent  of  market  rate  risk  associated  with
fluctuations in interest rates is not quantifiable or predictable because of the
volatility  of  future  interest  rates  and  business  financing  requirements.
However,  given the small  percentage  change in the past,  the Company does not
expect  any  changes  in the  interest  rate to have a  material  effect  on its
operating results.  International  transactions are predominately denominated in
U.S.  dollars,  mitigating  any market  risk  resulting  from  foreign  currency
exchange fluctuations.  The Company does not have any material sales, purchases,
assets or liabilities  denominated in currencies other than the U.S. Dollar, and
as such, is not subject to material foreign currency exchange rate risk.



                                       27
<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



SUPPLEMENTAL  QUARTERLY  FINANCIAL DATA (UNAUDITED,  IN THOUSANDS EXCEPT FOR PER
SHARE DATA)

<TABLE>
<CAPTION>

                                                            FIRST            SECOND           THIRD            FOURTH
                                                          QUARTER           QUARTER         QUARTER           QUARTER
                                                      -----------       -----------     -----------       -----------
<S>                                                   <C>               <C>             <C>               <C>

FISCAL 2004
Net sales                                             $    74,403       $    86,066     $    89,410       $    90,196
Cost of goods sold                                         53,638            62,186          64,537            65,579
                                                      -----------       -----------     -----------       -----------
Gross profit                                               20,765            23,880          24,873            24,617
Selling, general and admin expense                          9,872            10,890          11,591            12,211
                                                      -----------       -----------     -----------       -----------
Operating income                                           10,893            12,990          13,282            12,406
Other income (expense), net                                  (289)             (355)           (348)             (347)
                                                      -----------       -----------     -----------       -----------
Income before income taxes                                 10,604            12,635          12,934            12,059
Income taxes                                                4,186             4,936           4,728             3,723
                                                      -----------       -----------     -----------       -----------
Income before minority interest                             6,418             7,699           8,206             8,336
Minority interest                                             (59)              (39)            (58)              (68)
                                                      -----------       -----------     -----------       -----------
Net income                                                  6,359             7,660           8,148             8,268
Dividend - preferred stock                                    (90)              (90)            (90)              (90)
                                                      -----------       -----------     -----------       -----------
Income available to common stockholders               $     6,269       $     7,570     $     8,058       $     8,178
                                                      ===========       ===========     ===========       ===========
Earnings per share
Basic shares                                          $      0.15       $      0.19     $      0.20       $      0.19
                                                      ===========       ===========     ===========       ===========
Diluted shares                                        $      0.14       $      0.17     $      0.18       $      0.18
                                                      ===========       ===========     ===========       ===========

Weighted average shares outstanding
Basic shares                                           40,743,784        40,808,345      40,891,896        42,410,791
                                                      ===========       ===========     ===========       ===========

Diluted shares                                         45,142,033        45,739,277      45,962,109        46,082,240
                                                      ===========       ===========     ===========       ===========

                                                            FIRST            SECOND           THIRD            FOURTH
FISCAL 2003                                               QUARTER           QUARTER         QUARTER           QUARTER
                                                      -----------       -----------     -----------       -----------

Net sales                                             $    46,153       $    56,525     $    54,417       $    72,916
Cost of goods sold                                         33,185            41,001          39,599            52,885
                                                      -----------       -----------     -----------       -----------
Gross profit                                               12,968            15,524          14,818            20,031
Selling, general and admin expense                          5,793             7,773           9,055            14,704
                                                      -----------       -----------     -----------       -----------
Operating income                                            7,175             7,751           5,763             5,327
Other income (expense), net                                   423              (331)           (282)              451
                                                      -----------       -----------     -----------       -----------
Income before income taxes                                  7,598             7,420           5,481             5,778
Income taxes                                                2,579             3,369           2,231             2,919
                                                      -----------       -----------     -----------       -----------
Income before minority interest                             5,019             4,051           3,250             2,859
Minority interest                                              --                --              --                (7)
                                                      -----------       -----------     -----------       -----------
Net income                                                  5,019             4,051           3,250             2,852
Dividend - preferred stock                                    (90)              (90)            (90)              (90)
                                                      -----------       -----------     -----------       -----------
Income available to common stockholders               $     4,929       $     3,961     $     3,160       $     2,762
                                                      ===========       ===========     ===========       ===========
Earnings per share
Basic                                                 $      0.12       $      0.10     $      0.08       $      0.07
                                                      ===========       ===========     ===========       ===========
Diluted                                               $      0.12       $      0.09     $      0.07       $      0.06
                                                      ===========       ===========     ===========       ===========

Weighted average shares outstanding
Basic shares                                           40,413,746        40,458,867      40,594,746        40,687,774
                                                      ===========       ===========     ===========       ===========

Diluted shares                                         42,785,488        44,235,879      44,510,790        45,049,051
                                                      ===========       ===========     ===========       ===========


                                       28
<PAGE>


FISCAL 2002*(RESTATED)                                  Restated*         Restated*       Restated*         Restated*
                                                      -----------       -----------     -----------       -----------
                                                            First            Second           Third            Fourth
                                                          Quarter           Quarter         Quarter           Quarter

Net sales                                             $    33,639       $    34,014     $    30,146       $    32,548
Cost of goods sold                                         24,184            23,977          21,005            23,455
                                                      -----------       -----------     -----------       -----------

Gross profit                                                9,454            10,037           9,141             9,093
Selling, general and admin expense                          4,268             5,283           7,605             6,747
                                                      -----------       -----------     -----------       -----------

Operating income                                            5,187             4,754           1,536             2,346
Other income (expense), net                                  (441)             (452)           (503)             (119)
                                                      -----------       -----------     -----------       -----------

Income before income taxes                                  4,746             4,302           1,033             2,227
Income taxes                                                   27                61              81            (3,841)
                                                      -----------       -----------     -----------       -----------

Net income                                                  4,719             4,241             952             6,068
                                                      ===========       ===========     ===========       ===========

Dividend - preferred stock                                     --                --              --              (345)
                                                      -----------       -----------     -----------       -----------

Income available to common stockholders               $     4,719       $     4,241     $       952       $     5,723
                                                      ===========       ===========     ===========       ===========

Earnings per share
Basic                                                 $      0.14       $      0.11     $      0.03       $      0.14
                                                      ===========       ===========     ===========       ===========
Diluted                                               $      0.11       $      0.10     $      0.03       $      0.13
                                                      ===========       ===========     ===========       ===========

Weighted average shares outstanding
Basic shares                                           31,486,391        36,789,796      40,413,746        40,413,746
                                                      ===========       ===========     ===========       ===========
Diluted shares                                         41,722,903        41,024,916      43,827,580        42,641,615
                                                      ===========       ===========     ===========       ===========


                                       29
<PAGE>

<FN>

* - During the fourth quarter of 2002, the Company recorded certain  adjustments
as  described  in Note 15 to the  Company's  consolidated  financial  statements
contained in Form 10-K filed with the SEC on July 24, 2003.  The effect of these
adjustments on the condensed consolidated statements of operations for the first
quarter of 2002 was a decrease  in net income and no change in basic and diluted
earnings per share.  For the second and third  quarters of 2002 there would have
been a decrease in net income,  basic earnings per share,  and diluted  earnings
per share for each  quarter.  The Company has restated the three and nine months
ended September 30, 2002, to show the effect of the adjustments on the condensed
consolidated  statements of operations.  The first  adjustment was an additional
accrual to straight-line rent expense in accordance with SFAS No. 13 "Accounting
for Leases," which increases the selling, general and administrative expenses by
$39 for each of the  first  three  quarters  of 2002 for a total of $117 for the
nine months  ended  September  30,  2002.  In addition to  straight-lining  rent
expense,  the Company  recorded in the fourth quarter of 2002 a $646 expense for
the issuance of stock warrants to an unaffiliated  outside consultant,  of which
$146  and  $284  was  applicable  to the  second  and  third  quarters  of 2002,
respectively.  These adjustments  increased selling,  general and administrative
expenses for the first  quarter,  second  quarter and third  quarter of 2002 and
decreased  the  selling,  general  and  administrative  expenses  for the fourth
quarter of 2002.

</FN>
</TABLE>



ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         In August 2003, Grant Thornton resigned as our independent accountants.
Grant  Thornton  audited  our  financial  statements  for the fiscal  year ended
December  31, 2002,  which were  included in our Form 10-K/A for the fiscal year
ended  December 31, 2002 and our Form 10-K/A for the fiscal year ended  December
31, 2003. Grant Thornton has not withdrawn its opinion, however, in consultation
with Grant  Thornton,  we have decided to have our financial  statements for the
fiscal year ended  December 31, 2002 that are included in this Form 10-K audited
by Rachlin, Cohen & Holtz LLP.

ITEM 9A. CONTROLS AND PROCEDURES

         Attached as exhibits to this Form 10-K are  certifications of our Chief
Executive Officer (CEO) and Chief Financial Officer (CFO), which are required in
accordance  with Rule 13a-14 of the Securities  Exchange Act of 1934, as amended
(the Exchange Act). This "Controls and Procedures" section includes  information
concerning   the   controls  and   controls   evaluation   referred  to  in  the
certifications.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

         We  conducted  an  evaluation  of the  effectiveness  of the design and
operation of our disclosure  controls and procedures as of the end of the period
covered by this Form 10-K. The disclosure controls and procedures evaluation was
conducted  under  the  supervision  and with the  participation  of  management,
including our CEO and CFO.  Disclosure  controls and procedures are controls and
procedures that are designed to ensure that information required to be disclosed
in our reports filed under the Exchange Act is recorded,  processed,  summarized
and  reported  within the time  periods  specified in the SEC's rules and forms.
Disclosure  controls  and  procedures  are also  designed  to  ensure  that such
information required to be disclosed in our reports filed under the Exchange Act
is accumulated and communicated to our management, including the CEO and CFO, as
appropriate  to  allow  timely  decisions  regarding  required  disclosure.  Our
quarterly   evaluation  of  disclosure   controls  and  procedures  includes  an
evaluation of some components of our internal control over financial  reporting,
and internal control over financial reporting is also separately evaluated on an
annual basis for purposes of providing the management  report which is set forth
below.

         The  evaluation of our disclosure  controls and  procedures  included a
review  of the  controls'  objectives  and  design,  our  implementation  of the
controls and the effect of the controls on the information  generated for use in
this Form 10-K.  This type of  evaluation  is performed on a quarterly  basis so
that the  conclusions of management,  including the CEO and CFO,  concerning the
effectiveness  of the disclosure  controls and procedures can be reported in our
periodic reports on Form 10-Q and Form 10-K. The overall goals of our evaluation
activities are to monitor our disclosure controls and procedures,  and to modify
them as  necessary.  Our  intent is to  maintain  our  disclosure  controls  and
procedures as dynamic systems that change as conditions warrant.

         Based  upon the  controls  evaluation,  our CEO and CFO have  concluded
that,  as of the end of the period  covered by this Form  10-K,  our  disclosure
controls and procedures were effective to ensure that information required to be
disclosed in our reports  filed under the  Exchange Act is recorded,  processed,
summarized and reported within the time periods specified in the SEC's rules and
forms and that  information  required to be disclosed in our reports filed under
the Exchange Act is accumulated and  communicated  to our management,  including
the CEO and CFO, as appropriate  to allow timely  decisions  regarding  required
disclosure.


                                       30

<PAGE>

MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

         In accordance with SEC Release No. 34-50754, "Order Under Section 36 of
the  Securities  Exchange  Act of 1934  Granting  an  Exemption  from  Specified
Provisions of Exchange Act Rules 13a-1 and 15d-1"  (November  30, 2004),  we are
claiming the exemption from the requirement to include in this annual report the
management's  report on internal  control over financial  reporting  required by
Item  308(a)  of  Regulation  S-K  and the  related  attestation  report  of our
independent  registered  public  accounting  firm  required  by Item  308(b)  of
Regulation S-K. Accordingly, these items are omitted from this annual report.

         Pursuant to the terms of the Order, we intend to file our  management's
report on internal control over financial  reporting and the related attestation
report of our independent  registered  public accounting firm in an amendment to
this annual  report not later than 45 days after the  deadline for the filing of
this annual report.

INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS

         Our  management,  including  our CEO and CFO,  does not expect that our
disclosure  controls  and  procedures  or our internal  control  over  financial
reporting will prevent or detect all error and all fraud. A control  system,  no
matter  how well  designed  and  operated,  can  provide  only  reasonable,  not
absolute, assurance that the control system's objectives will be met. The design
of a control  system must reflect the fact that there are resource  constraints,
and the  benefits  of  controls  must be  considered  relative  to their  costs.
Further,  because  of the  inherent  limitations  in  all  control  systems,  no
evaluation of controls can provide absolute  assurance that misstatements due to
error or fraud will not occur or that all control issues and instances of fraud,
if any,  within the  company  have been  detected.  These  inherent  limitations
include the realities that judgments in  decision-making  can be faulty and that
breakdowns  can occur  because of simple error or mistake.  Controls can also be
circumvented by the individual acts of some persons, by collusion of two or more
people, or by management  override of the controls.  The design of any system of
controls is based in part on certain  assumptions about the likelihood of future
events,  and there can be no assurance that any design will succeed in achieving
its stated  goals under all  potential  future  conditions.  Projections  of any
evaluation  of controls  effectiveness  to future  periods are subject to risks.
Over time,  controls may become  inadequate  because of changes in conditions or
deterioration in the degree of compliance with policies or procedures.

IMPROVEMENTS IN INTERNAL CONTROLS

         Under the  supervision and with the  participation  of our CEO and CFO,
our  management  has evaluated  changes in our internal  controls over financial
reporting  that  occurred  during  our  last  fiscal  quarter.   Based  on  that
evaluation, our CEO and CFO did not identify any change in our internal controls
over financial reporting that has materially  affected,  or is reasonably likely
to materially affect, our internal controls over financial reporting.

         On a  cumulative  basis  from 1997  through  2003,  unreimbursed  costs
relating  to the  Florida  residence,  the New York home  office and the private
airplane,   and  unpaid   salary  under  his   employment   contracts,   totaled
approximately  $2,769,000 (consisting of approximately  $1,228,000 in respect of
the Florida residence,  $90,000 in respect of the New York home office, $953,000
in respect of the private  airplane,  and $498,000 in respect of unpaid salary).
In this same period utilizing the same calculation  methodology described above,
a total of approximately  $2,000,000 was charged by Mr. Brooks to Company credit
cards  for  personal  expenses  and other  expenses  that  could not be  clearly
characterized  as  business  expenses.  The  Company  also paid by check or cash
relatively small amounts for other  non-business  expenses of Mr. Brooks and his
affiliates.  In each of such  years and for the 1997 to 2003  period as a whole,
netting these totals  against one another yields a net balance due to Mr. Brooks
and his  affiliate.  Mr.  Brooks  and his  affiliate  have  waived all rights to
reimbursement in respect of all unreimbursed  amounts.  In addition,  Mr. Brooks
has waived any claim for  accrued or unpaid  amounts  that could still be due to
him under the 1997 Resolution.

         As disclosed in our Form 8-K filed on August 27, 2003,  Grant Thornton,
our former independent accountants, informed us that they considered there to be
certain  deficiencies in our internal control procedures that would be deemed to
be a material weakness under standards  established by the American Institute of
Certified  Public  Accountants.   Grant  Thornton  made  this  determination  in
connection with the preparation of our consolidated  financial  statements as of
and for the fiscal  year  ended  December  31,  2002 for  inclusion  in our Form
10-K/A,  which was filed on July 24,  2003 to amend our Form 10-K for the fiscal
year ended  December  31,  2002 filed on March 31,  2003.  The  opinion of Grant
Thornton in the Form 10-K/A did not contain an adverse  opinion or disclaimer of
opinion and was not  qualified  or modified  as to  uncertainty,  audit scope or
accounting principles.

         Grant   Thornton   informed  us  and  our  Audit   Committee  of  these
deficiencies  in a letter  delivered  on August  20,  2003.  These  deficiencies
included the failure to disclose certain related party  transactions in our Form
10-K for the fiscal year ended  December 31, 2002,  our reliance on  substantial
outside  assistance  from  outside  professionals  in  preparing  our  financial
statements, and understaffing in our accounting and finance department. Our Form
10-K/A filed on July 24, 2003 fully disclosed the related party transactions.

         Following  receipt  of  the  letter  from  Grant  Thornton,  the  Audit
Committee directed management to dedicate resources and take additional steps to
strengthen  its control  processes and  procedures to ensure that these internal
control  deficiencies  would  not  result  in a  material  misstatement  in  our
financial  statements.  As of the end of  March  2004,  we had  implemented  the
following additional procedures:

         o    During 2003, our Chief  Financial  Officer  explained in detail to
              our Chairman and Chief  Executive  Officer the  requirements  with
              respect to disclosure of related party transactions.

         o    Our Chief Financial Officer distributed a questionnaire to each of
              our officers and directors  specific to related party transactions
              and our Chief  Financial  Officer has pursued and will continue to
              pursue  rigorous   follow-up  with  our  directors  and  executive
              officers regarding their responses to annual  questionnaires  used
              in preparing our Form 10-K and proxy materials.

         o    Our Chief  Financial  Officer has developed a financial  statement
              disclosure  checklist  to be  completed  by  the  Chief  Financial
              Officer each time we prepare financial statements.

         o    We  have  begun  the  preparation  of  our  quarterly  and  annual
              financial  statements  sooner after the end of each fiscal quarter
              and  fiscal  year.  We have  undertaken  an  additional  layer  of
              internal  review  prior  to  delivering   drafts  to  our  outside
              professionals.

         o    Our  Chairman  and Chief  Executive  Officer  and Chief  Financial
              Officer  continue to reinforce  with our auditors their ability to
              communicate with and obtain information from lower level personnel
              in our  accounting  and finance  department  by  fostering  direct
              contact with the accounting and financial personnel.

         o    We  have  evaluated  [and  implemented]   further  delegation  and
              allocation of  responsibilities  within our accounting and finance
              department  to  facilitate   prompt   availability   of  financial
              information.

         o    We continue to review,  confirm  and  clarify  with our  personnel
              their  specific  functions  and  responsibilities  to promote  the
              orderly flow and availability of financial data and information.

         We will  continue to: (a) evaluate  the  effectiveness  of its internal
controls and  procedures on an ongoing basis,  (b) implement  actions to enhance
our  resources and training in the area of financial  reporting  and  disclosure
responsibilities,  and (c) review  such  actions  with the Audit  Committee  and
Weiser LLP,  our  independent  accountants.  We have  discussed  our  corrective
actions with the Audit Committee and Weiser LLP.

         The Company monitors its disclosure  controls and internal controls and
makes  modifications  as necessary;  the Company's intent in this regard is that
the disclosure  controls and the internal controls will be maintained as dynamic
systems that change  (including with improvements and corrections) as conditions
warrant.

ITEM 9B.  OTHER INFORMATION.

         Not applicable.


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS

         Our Directors  serve for a term of one year following their election at
the Annual Meeting of Stockholders, and until their successors have been elected
and  qualified.  Our officers serve at the discretion of the Board of Directors.
Set forth below is certain information regarding the Company's current Directors
and executive officers:

         DAVID H. BROOKS,  age 50, has served as the Chairman or  Co-Chairman of
the Company  since its  inception  in 1992.  Mr.  Brooks has served as the Chief
Executive  Officer of the Company since July 2000,  having  previously served in
that capacity prior to September 1998. Mr. Brooks also serves as Chairman of the
Board,  President and a Director of Brooks Industries of L.I., Inc., a privately
held venture capital firm.


                                       31
<PAGE>


         DAWN M. SCHLEGEL,  CPA, age 35, has been the Chief Financial Officer of
the Company since September 1999. Mrs. Schlegel has also served as Treasurer and
Secretary of the Company since  September 1999, and was elected a Director as of
July 2000. Prior thereto,  Mrs.  Schlegel was our Accounting  Manager.  Prior to
joining DHB, Mrs.  Schlegel was a Senior  Accountant with Israeloff,  Trattner &
Co. CPAs,  P.C., a certified  public  accounting  firm, for more than five years
where she managed  audits of middle  market  companies  and her duties  included
auditing,  compilation and review of financial  statements,  taxes,  and general
accounting. Mrs. Schlegel is a licensed Certified Public Accountant in the State
of New York.

         JEROME KRANTZ,  age 49, has been a Director since July 2000. Mr. Krantz
has been the owner of and  employed  with Krantz  Financial  Group for over five
years,  and has over 25 years  of  experience  in the  insurance  and  financial
industry.  Mr. Krantz is a chartered  life  underwriter,  a chartered  financial
consultant,  and a registered investment advisor. Mr. Krantz currently serves as
Chairman of the Audit and Compensation Committees of the Board of Directors.

         GARY NADELMAN, age 52, has been a Director since July 2001. Since 2003,
Mr. Nadelman has been President of Ninety Holding,  a subsidiary of Central Park
West, a privately held clothing  manufacturer.  From 2002 to 2003, Mr.  Nadelman
was  a  partner  in a  privately  held  clothing  manufacturer,  Garrick  Sales.
Immediately prior thereto, he was the President of Synari,  Inc., a manufacturer
of women's sportswear and other apparel,  for more than five years. Mr. Nadelman
has over twenty years of experience in the apparel industry. Mr. Nadelman serves
on the Audit and Compensation Committees of the Board of Directors.

         CARY CHASIN, age 57, has been a Director since October 2002. Mr. Chasin
has been an advertising  executive at Star Community  Publishing Group (formerly
known as DSA Community  Publishing) for three years.  Immediately prior thereto,
he owned and operated an apparel retail store,  Pants Palace. He was an employee
of the  Company  from  November  1999  through  April  2000,  working on special
projects including the closing of the hard armor division. He has over 30 years'
experience in owning and operating  apparel retail,  manufacturing and importing
businesses.  Mr. Chasin serves on the Audit and  Compensation  Committees of the
Board of Directors.

         BARRY  BERKMAN,  age 64, has been a Director  since  February 2003. Mr.
Berkman has been a partner  with  Berkman  Bottger & Rodd,  a New York law firm,
since 1994, and he is a member of the American Bar Association

         GENERAL  LARRY ELLIS,  USA RETIRED,  age 58, has been a Director  since
December  2004.  Retired  General Larry Ellis  completed his military  career as
Commanding General, United Sates Army Forces command from November 2001 until he
retired on July 1, 2004.  For more than  thirty-five  years,  General  Ellis has
served in a succession of command and staff positions  worldwide within the U.S.
Military.

         SANDRA L.  HATFIELD,  age 51, has been Chief  Operating  Officer  since
December 2000. From October 1996 until December 2000, she served as President of
Point Blank. For more than five years before that, she was the Vice President of
Production at PACA.

         The Board of Directors has determined  that all members of the Board of
Directors  (other than Mr.  Brooks and Mrs.  Schlegel) are  "independent"  under
Section 121 (A) of the listing Standards of the American Stock Exchange.


                                       32
<PAGE>


                             AUDIT COMMITTEE REPORT

         We have a separately-designated standing audit committee established in
accordance  with section 3  (a)(58)(A)  of the Exchange Act that is comprised of
three directors,  Jerome Krantz, Gary Nadelman, and Cary Chasin, who are not DHB
officers or employees. The Board of Directors has determined that each member of
the Audit  Committee  qualifies for service on the Audit Committee under Section
121(B)(2) of the listing standards of the American Stock Exchange.  The Board of
Directors has determined  that we have at least one "audit  committee  financial
expert"  within the meaning of Item  401(h)(2) of SEC  Regulation S-K serving on
our Audit Committee and that Mr. Krantz is an audit committee financial expert.

         At the time of his appointment to the Audit  Committee,  Mr. Chasin was
not considered to be "independent" because he had been employed by us within the
preceding  three  years;  however,  due to Mr.  Chasin's  familiarity  with many
then-current matters of our business,  the Board of Directors determined that it
was in our best  interests and the best interests of our  stockholders  that Mr.
Chasin  serve  on  the  Audit  Committee,  and  we  obtained  a  waiver  of  the
independence  requirement  with respect to Mr.  Chasin from the  American  Stock
Exchange, conditional upon the preceding disclosure.

         SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.  Section 16(a)
of the  Securities  Exchange Act of 1934  requires the  Company's  directors and
executive  officers,  and persons who own more than 10% 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 year  ended  December  31,  2004,  all  Section  16(a)  filing  requirements
applicable to the Company's officers,  directors and greater-than-10% beneficial
owners were complied with

         CODE OF ETHICS. Our Board of Directors has adopted a code of ethics for
our chief  executive  officer,  chief financial  officer,  controllers and other
financial  officers.  Our Code of Ethics is filed as an exhibit to this  report.
Our Code of Ethics is intended to be a codification  of the business and ethical
principles which guide us and constitutes, written standards that are reasonably
designed  to  deter  wrongdoing  and to  promote:  honest and  ethical  conduct,
including  the  ethical  handling of actual or  apparent  conflicts  of interest
between personal and professional  relationships;  full, fair, accurate, timely,
and  understandable  disclosure in reports and  documents  that we file with, or
submit to, the SEC and in other public  communications that we make;  compliance
with  applicable  governmental  laws,  rules and  regulations;  prompt  internal
reporting  of  violations  of the Code of  Ethics  to an  appropriate  person or
persons  identified in the Code of Ethics;  and  accountability for adherence to
the Code of Ethics.

                                       33

<PAGE>


ITEM 11.  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 any of the years ended  December  31,  2004,  2003 or
2002 exceeded $100,000:

<TABLE>
<CAPTION>


                                                                                    LONG TERM COMPENSATION
                                            ANNUAL COMPENSATION            AWARDS                      PAYOUTS
   Name and Principal       Year        Salary($)         Other          Restricted     Securities      LTIP          All Other
        Position                                         Annual             Stock       Underlying     Payouts      Compensation
                                                     Compensation(1)    Award(s) ($)     Options/        ($)             ($)
                                                                                         SARs(#)
<S>                         <C>          <C>           <C>                   <C>          <C>             <C>        <C>

David H. Brooks,            2004         $675,000      $87,500(1)            0            50,000          0          $2,000,000
Chairman and Chief          2003          625,000      156,250               0            50,000          0           1,000,000
Executive Officer           2002          575,000       68,750               0            25,000          0                   0

Sandra L. Hatfield,         2004         $225,385            0(2)            0                 0          0          $  750,000
Chief Operating Officer     2003          163,068            0               0                 0          0             695,000
                            2002          163,068            0               0            25,000          0                   0

Dawn M. Schlegel, Chief     2004         $200,000            0(2)            0            50,000          0          $  500,000
Financial Officer           2003         $140,625            0               0            50,000          0             100,000
                            2002          140,625            0               0            25,000          0                   0

<FN>

1.            While Mr.  Brooks'  employment  agreement  provides  for an annual
              salary of $500,000  through  July 2001,  with annual  increases of
              $50,000,  Mr. Brooks received  additional salary to compensate him
              for foregone vacation time provided for in such agreement.


                                       34
<PAGE>


2.            Although certain officers receive certain  benefits,  such as auto
              allowances and expense  allowances,  the value of such perquisites
              did not in any year  exceed  the  lesser of  $50,000 or 10% of the
              respective officer's salary and bonus.

</FN>
</TABLE>


         EMPLOYMENT AGREEMENTS.  In July 2000, Mr. Brooks and DHB entered into a
five-year employment agreement.  Pursuant to the agreement,  Mr. Brooks received
an annual salary of $500,000 through July 2001, with annual increases of $50,000
thereafter.  The agreement  also awards Mr. Brooks 750,000 common stock warrants
each year that are exercisable at $1.00 per share and which expire July 1, 2010.
Because DHB owns companies in New York,  Florida,  Belgium and Tennessee and Mr.
Brooks is expected to spend  considerable  time in all locations,  the agreement
requires DHB to pay the expenses  associated with Mr. Brooks' Florida  residence
and a car and driver in all locations. Because Mr. Brooks is expected to utilize
his  residences  to conduct  business  for DHB,  DHB is  required to pay certain
expenses of Mr.  Brooks'  residences  including  without  limitation  telephone,
information services,  delivery services and certain entertainment  expenses. In
2004,  the  Compensation  Committee  formalized  the provisions of the agreement
pertaining  to Mr.  Brooks'  Florida  residence,  by  providing  for the monthly
payment to an affiliated company of Mr. Brooks, which owns the residence,  of an
amount  equivalent to the market rental rate for comparable  properties less any
direct  expenses  of such  residence  paid by DHB.  This  contract is subject to
renewal by Mr. Brooks for an additional term of five years on the same terms and
conditions.

                                       35

<PAGE>


         DIRECTOR COMPENSATION.  In March 2004, the six members of the Company's
Board of Directors were each awarded 50,000 common stock warrants exercisable at
$5.88 per share for five  years.  These  warrants  give the holder the option to
exercise  the  warrants  for either a cash  payment  or  provide  for a cashless
exercise  based upon the prior  five day market  price.  During  2004,  David H.
Brooks,  Sandra L. Hatfield,  and Dawn M. Schlegel exercised 3,669,757,  269,545
and 177,006 warrants,  respectively  pursuant to cashless  exercises.  The other
members of the Board of Directors  exercised a total of 234,917  warrants during
2004.

         In  January  2003,  the then five  members  of the  Company's  Board of
Directors were each awarded 50,000  warrants  exercisable at $1.41 per share for
five years. In July 2003, the additional Board member was issued 50,000 warrants
exercisable  at $4.33 per share for five years.  In addition,  in February 2003,
the  Board  of  Directors  awarded  key  employees  a total of  35,000  warrants
exercisable at $2.01 per share, which expire in February 2008. In July 2003, the
Board of Directors  awarded a key employee 33,000 warrants  exercisable at $3.85
per share,  which expire in July 2008.  Also in 2003,  the Company issued 15,000
unregistered  shares of  common  stock to an  employee.  During  the year  ended
December 31, 2003,  employees  and  consultants  exercised  warrants for 165,000
shares of the Company's common stock, with aggregate  proceeds to the Company of
approximately $261,000.

         The  following  table  summarizes   option/warrant   grants  (excluding
director grants) and the named officers' stock option activity during 2004.


                                       36
<PAGE>

<TABLE>
<CAPTION>



                             Number of
                             Securities        % of Total                                       Potential Gain at assumed
                             underlying       Options/SARs                                        Annual Rates of Stock
                             options /         granted to        Exercise or                     Price Appreciation for
                               SARs2          employees in        Base Price      Expiration         Option Term 1:
          Name                Granted          Fiscal Year        ($/Share)          Date              5%               10%
          ----               ----------       ------------       -----------      ----------        --------        ----------
<S>                            <C>                 <C>              <C>            <C>              <C>             <C>

David H. Brooks                50,000              4%               $5.88          01/15/08         $863,162        $1,099,823

Sandra L. Hatfield                 --             --                   --              --                 --               --

Dawn M. Schlegel               50,000              4%               $5.88          01/15/08         $ 69,319           $78,101

<FN>

1.       These amounts assume hypothetical appreciation rates of 5% and 10% over
         the term of the option, as required by the SEC, and are not intended to
         forecast  the  appreciation  of the stock  price.  No gain to the named
         officers will occur unless the price of DHB's common shares exceeds the
         options' exercise price.

2.       The Company has no SARs.

</FN>
</TABLE>


                        AGGREGATED WARRANT/OPTION VALUES

         The  following  table sets forth  information  regarding the number and
value of unexercised warrants/options held at December 31, 2004 by the executive
officers  listed in the Summary  Compensation  Table above.  This table does not
include  warrants  provided to Mr. Brooks in capacities other than as a director
or officer of the Company.

<TABLE>
<CAPTION>

                                                     Number of Securities
                                                     Underlying Unexercised       Value of Unexercised In-the Money
                     Shares         Value            Options/SAR at FY-End             Options / SAR at FY-End
                     Acuired        Realized      -----------------------------     -----------------------------
       Name          On Exercise    ($)           Exercisable     Unexercisable     Exercisable     Unexercisable
       ----          -----------    --------      -----------     -------------     -----------     -------------
<S>                  <C>                          <C>              <C>               <C>            <C>


David H. Brooks      3,669,757      $69,930,000   50,000               -0-         $658,000               -0-
Sandra L. Hatfield     269,545      $ 3,532,000   25,000           100,000           59,650         1,704,000
Dawn M. Schlegel       177,006      $ 2,932,000   50,000               -0-          658,000               -0-

</TABLE>


         During 2004, David H. Brooks exercised  3,669,757  warrants,  Sandra L.
Hatfield  exercised  269,545  warrants,  and Dawn M. Schlegel  exercised 177,006
warrants.  In 2003,  none of such  executive  officers  exercised any options or
warrants to purchase stock of the Company.

                                       37

<PAGE>


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

         The  following  table  sets  forth  the  beneficial  ownership  of  the
Company's  common  stock as of March 1, 2005,  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.

<TABLE>
<CAPTION>

                                            Number of Shares           Percent Owned(1)
                        Name                Beneficially Owned(2)      * - Less than one (1%)
                        ----                ------------------         ----------------------

<S>                                             <C>                             <C>
David H. Brooks(3)                              6,963,171(3)                    15%
Jerome Krantz                                      64,300(4)                     *
Sandra L. Hatfield                                125,000(5)                     *
Dawn M. Schlegel                                   78,003(6)                     *
Gary Nadelman                                     122,125(7)                     *
Cary Chasin                                        50,000(8)                     *
Barry Berkman                                     182,200(9)                     *
All officers and Directors as a group
(7 people)                                     7,584,799(10)                    17%(9)


                                       38
<PAGE>


<FN>

1.   Based  upon  45,282,536  shares   outstanding  as  of  March  1,  2005.  In
     calculating the percentage owned by any individual officer or director, the
     number  of  currently   exercisable  warrants  and  options  held  by  such
     individual have been included in the calculation of the percentage owned.
2.   Includes  currently  exercisable  options  or  warrants,  which  are  those
     exercisable within 60 days after the date of this Form 10-K.
3.   Consists of 2,587,133  common shares owned by a  corporation,  of which Mr.
     Brooks is President,  768,746 common shares owned by a trust, of which, Mr.
     Brooks is the trustee, 500,000 shares issuable upon conversion of Series A,
     12% Convertible Preferred Stock owned by Mr. Brooks, 3,057,292 shares owned
     by a  corporation,  of  which  his wife is  President,  and  50,000  shares
     acquirable  under  currently  exercisable  warrants  at a price of 5.88 per
     share;  issued in 2004.  As the only person with more than 5%  ownership of
     the Company,  Mr. Brooks'  address is 400 Post Avenue,  Westbury,  New York
     11590.
4.   Includes 50,000 shares,  which may be acquired under currently  exercisable
     warrants issued in 2004 at a price of $5.88 per share.
5.   Includes 125,000 shares, which may be acquired under currently  exercisable
     warrants at prices between $2.00 and $7.11 per share.
6.   Includes 50,000 shares,  which may be acquired under currently  exercisable
     warrants issued in 2004 at a price of $5.88 per share.
7.   Includes 50,000 shares,  which may be acquired under currently  exercisable
     warrants issued in 2004 at a price of $5.88 per share.
8.   Includes 50,000 shares,  which may be acquired under currently  exercisable
     warrants issued in 2004 at a price of $5.88 per share.
9.   Includes 75,000 shares,  which may be acquired under currently  exercisable
     warrants  at a prices  between  $4.33 and $5.88  per  share,  50,000 of the
     warrants were issued in 2004.
10.  Includes  450,000  shares  purchasable  pursuant to  currently  exercisable
     warrants held by directors and officers.

</FN>
</TABLE>

         Equity  compensation plan information is set forth in this report under
the Caption "Item 5. Market for Common Equity and Related Stockholders Matters -
Equity Compensation Plan Information."

ITEM 13.  CERTAIN  RELATIONSHIPS AND RELATED TRANSACTIONS

         We have funded certain of our acquisitions  and operations  through the
use of term loans from Mr. David H. Brooks,  Chairman of the Board and principal
stockholder.  On  January  14,  2002,  Mr.  Brooks  exchanged  $3 million of the
approximately  $10  million of  indebtedness  due him at the time,  for  500,000
shares  our newly  authorized  Series A, 12%  Convertible  Preferred  Stock (the
"Preferred  Stock").  The Preferred Stock has a dividend rate of $0.72 per share
per annum, or $360,000 in total, an amount equal to the interest that would have
been payable on the exchanged  indebtedness.  Shares of the Preferred  Stock are
currently convertible,  on a one-to-one basis, at the option of Mr. Brooks, into
shares of Common Stock.  The shares of Preferred Stock are not redeemable at the
option of Mr Brooks  under any  circumstances.  The shares of  Preferred  Stock,
however,  are  redeemable at our option on December 15 of each year at an amount
in cash  equal to $6.00 per  share.  During  2002,  we repaid  $5.5  million  of
principal  indebtedness owed to Mr. Brooks,  bringing our total  indebtedness to
Mr.  Brooks as of December 31, 2002 to $1.5  million.  On May 9, 2003, we repaid
the balance of $1.5 million to Mr. Brooks, eliminating the shareholder loan from
our balance sheet.  These shareholder loans had borne interest at 12% per annum.
Interest  expense  included  in our  financial  statements  for the years  ended
December 31, 2003 and 2002 was approximately $94,000 and $540,000, respectively.


                                       39
<PAGE>


         We leased a 67,000 square foot office and  manufacturing  facility (the
"Oakland  Park  Facility")  located at 4031 N.E.  12th  Terrace,  Oakland  Park,
Florida 33334, for our Point Blank  subsidiary and our Sports Group.  Until July
2004, we leased this facility from V.A.E.  Enterprises LLC ("V.A.E."), a limited
liability company  controlled by Terry Brooks,  the wife of Mr. David H. Brooks,
and beneficially  owned by Mr. and Mrs.  Brooks' minor children.  Our management
performed a comparison of market rental rates for  comparable  properties at the
time we entered into this lease and determined  that the terms of the lease were
at the then current  market  rental rate that could then have been obtained from
an unrelated  third party.  In July 2004, the building was sold to an unrelated
third party, Cabot Industries Value Fund LP. from whom we now lease the facility
under the same terms as the previous lease.  Total rent expense under this lease
payable to the related  party was $369,000  $693,000 and $711,000 in 2004,  2003
and 2002, respectively, and the lease expires on December 31, 2010.

         Mrs.  Terry  Brooks,  the wife of Mr. David H.  Brooks,  owns a company
called Tactical Armor Products,  Inc. or TAP. We purchase certain  components of
the  ballistic-resistant  apparel  that we  manufacture  and sell from TAP.  The
majority  of our  purchases  from  TAP are  hard  armor  overweight  Small  Arms
Protective  Inserts,  or SAPIs,  which can be inserted into our  Interceptor and
other Outer Tactical Vests. TAP is also an approved  subcontractor on certain of
our  government  contracts  to perform  sewing,  but the cost of sewing is not a
material  portion of our purchases  from TAP during any year. Our purchases from
TAP  during  the  years  ended  December  31,  2004,   2003,  and  2002  totaled
approximately $ 17.6 million, $29.2 million, and $8.0 million,  respectively. To
facilitate  the delivery and  integration  of the products that we purchase from
TAP, beginning in May 2001, we permitted TAP to manufacture  certain products in
a portion of our manufacturing facility in Jacksboro,  Tennessee,  for which TAP
paid us occupancy charges of approximately $39,600 each year for the years ended
December 31, 2004, 2003 and 2002. The rent paid by TAP is an estimated allocable
portion of our total rent for the facility).

         Until  July 23,  2003,  Mrs.  Terry  Brooks,  the wife of Mr.  David H.
Brooks,  owned  a  company  called  U.S.  Manufacturing  Corporation.   We  paid
approximately  $560,000  and  $43,355  to U.S.  Manufacturing  in 2003 and 2002,
respectively,  for certain  stitching  work.  This company has since been merged
into TAP.

         During  2004,  we sold  certain raw  materials  (ceramic  cores for the
overweight  SAPIs)  to TAP at cost.  Our  sales  to TAP  during  the year  ended
December  31,  2004  totaled  approximately  $6.6  million,  $15,109 and $5,242,
repectively.

         Pursuant to his 1996  employment  agreement with the Company (which was
superseded in 2000 by another employment agreement),  Mr. Brooks was entitled to
receive  annual bonuses equal to 10% of the Company's net income in each year of
the  agreement.  In 1997,  Mr. Brooks  permanently  waived the right to all such
bonuses,  and the  Compensation  Committee of the  Company's  Board of Directors
adopted a resolution (the "1997 Resolution") granting to Mr. Brooks the right to
reimbursement  for business and personal  expenses in an aggregate annual amount
not to exceed  10% of the  Company's  annual  net  income.  Under  both his 1996
employment  agreement  and his  2000  employment  agreement  (which  remains  in
effect),  the Company agreed to reimburse Mr. Brooks for all expenses associated
with a Florida  residence  and office owned by an affiliate of Mr.  Brooks,  and
expenses  incurred in conducting  business from his New York  residence;  and by
resolution  dated April 22, 2002, the Board of Directors  authorized the Company
to pay for all business  trips related to the business use of an airplane  owned
by an  affiliate  of Mr.  Brooks,  at a total  cost  not to  exceed  the cost of
comparable  charter  services.  On August 12, 2004, the  Compensation  Committee
formally repealed the 1997 Resolution,  and the Audit Committee of the Company's
Board  of  Directors  adopted  a  resolution  (the  "2004   Resolution")   which
specifically  approved payment or reimbursement for the fair rental value of the
Florida residence and office,  the corporate use of the New York residence (in a
net amount  equal to the fair rental value of the  allocable  portion of the New


                                       40
<PAGE>

York residence  used to conduct  Company  business),  and the Company use of the
plane  belonging to Mr.  Brooks'  affiliate at rates  equivalent  to  comparable
charter flights.

         In 2003, we did not reimburse Mr. Brooks for certain expenses  relating
to the Florida residence and office, the New York home office and the use of Mr.
Brooks' affiliate's airplane.  The unreimbursed expenses relating to the Florida
residence and office were estimated (utilizing applicable depreciation schedules
contained  in the U.S.  Master  Tax  Guide) to be  approximately  $251,000,  the
allocable cost of the use of the New York home office was estimated (again using
applicable  depreciation  schedules  from  the  U.S.  Master  Tax  Guide)  to be
approximately  $12,800, and the Company's use of the private airplane was valued
at approximately $457,000 (based on comparable charter rates). In the year 2003,
a total of  approximately  $322,000 of  personal  expenses  were  charged by Mr.
Brooks to Company credit cards, which was more than offset by Mr. Brooks and his
affiliate  not  receiving   reimbursement   from  the  Company  of  a  total  of
approximately  $721,000. Mr. Brooks and his affiliates have waived all rights to
reimbursement in respect of such amounts.

         On a  cumulative  basis  from 1997  through  2003,  unreimbursed  costs
relating  to the  Florida  residence,  the New York home  office and the private
airplane,   and  unpaid   salary  under  his   employment   contracts,   totaled
approximately  $2,769,000 (consisting of approximately  $1,228,000 in respect of
the Florida residence,  $90,000 in respect of the New York home office, $953,000
in respect of the private  airplane,  and $498,000 in respect of unpaid salary).
In this same period utilizing the same calculation  methodology described above,
a total of approximately  $2,000,000 was charged by Mr. Brooks to Company credit
cards  for  personal  expenses  and other  expenses  that  could not be  clearly
characterized  as  business  expenses.  The  Company  also paid by check or cash
relatively small amounts for other  non-business  expenses of Mr. Brooks and his
affiliates.  In each of such  years and for the 1997 to 2003  period as a whole,
netting these totals  against one another yields a net balance due to Mr. Brooks
and his  affiliate.  Mr.  Brooks  and his  affiliate  have  waived all rights to
reimbursement in respect of all unreimbursed  amounts.  In addition,  Mr. Brooks
has waived any claim for  accrued or unpaid  amounts  that could still be due to
him under the 1997 Resolution.

         Pursuant to the 2004 Resolution, we paid an affiliated company owned by
Mr.  Brooks'  children  charter  fees for the use of a  personal  jet to fly our
executive  officers and Board of Directors  on business  trips during 2004.  The
Company paid direct expenses  associated with the 2004 airplane use for business
trips to third party vendors not related to the Brooks  family of  approximately
$696,000 for pilot pay,  fuel and  maintenance  and  reimbursed  the  affiliated
company approximately  $161,000 to bring the total cost of the airplane trips to
the comparable  charter rate as determined by the compensation  committee.  Also
during 2004, the compensation  committee  approved the fair rental value payment
of $25,000 per month for the cost of renting Mr. Brooks  Florida  residence,  to
formalize  the  provision  in  his  employment  contract  which  calls  for  the
reimbursement  of  his  Florida  living  expenses,  since  the  majority  of our
operations  are in Florida and require Mr. Brooks to spend  substantial  time in
Florida at those operations.  We paid direct expenses to unrelated third parties
of  approximately  $171,000  during 2004 and reimbursed the affiliated  company,
which owns the Florida residence, approximately $129,000 for 2004.

         During 2003, the son of the Company's  chief  operating  officer,  Mrs.
Hatfield, provided legal services to the Company for $95,000.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES


         AUDIT  FEES.  The  aggregate  fees  billed  for  professional  services
rendered  by Weiser  LLP  ("Weiser")  for the audit of the  Company's  financial
statements  ("Audit  Services")  during the year ended  December  31,  2003 were
$275,000.  The  aggregate  fees  billed by Weiser for  services  rendered to the
Company,  other than the services  described  above under "Audit Fees",  for the
fiscal year ended December 31, 2003 were approximately $163,700. These fees were
principally for review of the Company's  Quarterly  Reports on Form 10-Q.  There
were no audit or non-audit  services  rendered by Weiser to the Company prior to
September  2, 2003.  Weiser had billed the Company a total of $275,000 for audit
services (in respect of the 2003 fiscal year) through April 9, 2004.

         AUDIT-RELATED FEES. The Company paid to Weiser $25,000 in fees relating
to the review of quarterly  reports in 2003,  and  reimbursed  Weiser $7,820 for
travel  expenses  in  conjunction  with the audit of the 2003  annual  financial
statements.


                                       41
<PAGE>


         TAX FEES.  Weiser has provided the Company with  professional  services
for tax  compliance,  tax  advice  and tax  planning,  and  billed  the  Company
aggregate fees of approximately  $54,900 for such professional  services through
September 30, 2004.

         ALL OTHER FEES.  There were no other fees billed by Weiser for services
rendered to the Company, other than the services described above, for the fiscal
year ended December 31, 2003. There were no audit or non-audit services rendered
by Weiser to the Company  prior to September  2, 2003.  Except for audit and tax
fees described  above, and $1,020 in fees for responding to SEC inquiry letters,
Weiser  has not  billed  the  Company or  provided  any  services  other than in
connection with the audit of the Company's financial statements and tax planning
during the year ended December 31, 2003.



                                    PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

         (a) The following  documents are filed as a part of this report on Form
10-K:

         1. Financial Statements

         See the  Index to  Financial  Statements  on page F-1 for a list of the
financial statements filed with this report.

         2. Financial Statement Schedules

         None.

         3. List of Exhibits

         See the  Exhibit  Index  for a list  of the  exhibits  incorporated  by
reference into or filed with this report.

         (b) Exhibits required by Item 601 of Regulation S-K.

         See the  Exhibit  Index  for a list  of the  exhibits  incorporated  by
reference into or filed with this report.

         (c) Financial Statement Schedules

         None.



                                       42
<PAGE>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS








                                    CONTENTS

                                                                           Page

Report of Independent Registered Public Accounting Firm:
   Weiser LLP                                                               F-2

Report of Independent Registered Public Accounting Firm:
   Rachlin, Cohen & Holtz LLP                                               F-3

Consolidated Balance Sheets                                                 F-4

Consolidated Statements of Operations                                       F-5

Consolidated Statement of Stockholders' Equity (Deficit)
   and Comprehensive Income                                                 F-6

Consolidated Statements of Cash Flows                                       F-7

Notes to the Consolidated Financial Statements                       F-8- F- 27

Schedule II - Valuation and Qualifying Accounts                            F-28


                                      F-1


<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors and
Stockholders of DHB Industries, Inc.

We have audited the accompanying  consolidated balance sheets of DHB Industries,
Inc. and Subsidiaries  (the "Company") as of December 31, 2004 and 2003, and the
related  consolidated  statements of operations,  stockholders' equity (deficit)
and  comprehensive  income,  and cash  flows for the  years  then  ended.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
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
Industries,  Inc. and  Subsidiaries  as of December  31, 2004 and 2003,  and the
consolidated results of their operations and their cash flows for the years then
ended, in conformity with U.S. generally accepted accounting principles.

We have also  audited the  financial  statement  Schedule II for the years ended
December 31, 2004 and 2003. In our opinion,  this schedule  presents fairly,  in
all material respects, the information required to be set forth therein.

/s/ WEISER LLP


March 6 , 2005 (except for Note 6, as to which the date is March 15, 2005)


New York, New York


                                      F-2


<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors and
Stockholders of DHB Industries, Inc.



We  have  audited  the  accompanying   consolidated  statements  of  operations,
stockholders'  equity (deficit) and comprehensive  income, and cash flows of DHB
Industries,  Inc. and  Subsidiaries  (the "Company") for the year ended December
31, 2002.  These 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 audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
consolidated  financial  statement  presentation.  We  believe  that  our  audit
provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the consolidated  results of operations and
consolidated  cash flows of DHB Industries,  Inc. and  Subsidiaries for the year
ended December 31, 2002, in conformity with U.S. generally  accepted  accounting
principles.

/s/ RACHLIN COHEN & Holtz LLP


March 8, 2005


Fort Lauderdale, Florida


                                      F-3


<PAGE>

<TABLE>
<CAPTION>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                 (In thousands, except share and per share data)

                                                                            DECEMBER 31,
ASSETS                                                                     2004           2003
------                                                                 --------        -------
<S>                                                                    <C>             <C>

Current assets:
Cash and cash equivalents                                              $    447        $   441
Accounts receivable, less allowance for doubtful
  accounts of $702 and $852, respectively                                47,560         33,707
Accounts receivable - related party                                       6,583              -
Inventories                                                              85,973         54,753
Deferred income tax assets                                                  483            372
Prepaid expenses and other current assets                                 1,220          1,518
                                                                       --------        -------
Total current assets                                                    142,266         90,791
                                                                       --------        -------

Property and equipment, net                                               2,632          1,819
                                                                       --------        -------

Other assets
Deferred income tax assets                                                  593            437
Deposits and other assets                                                   366            381
                                                                       --------        -------
Total other assets                                                          959            818
                                                                       --------        -------
Total assets                                                           $145,857        $93,428
                                                                       ========        =======

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable                                                       $  8,014        $ 9,465
Accrued expenses and other current liabilities                            8,350          5,635
Note payable - bank                                                       4,000          2,000
Income taxes payable                                                     14,816          6,869
                                                                       --------        -------
Total current liabilities                                                35,180         23,969
                                                                       --------        -------

LONG TERM LIABILITIES
Notes payable-bank                                                       25,634         22,012
Term loan payable                                                         6,500             --
Other liabilities                                                         1,086            502
                                                                       --------        -------
Total liabilities                                                        68,400         46,483
                                                                       --------        -------

Minority interest in consolidated subsidiary                                431            207

COMMITMENTS AND CONTINGENCIES

Stockholders' equity
Convertible  preferred  stock  $0.001 par value,  5,000,000  shares
authorized, 500,000 shares of Series A, 12% convertible
preferred stock issued and outstanding; liquidation preference $3,000         1              1
Common stock, $0.001 par value, 100,000,000 shares
authorized, 45,282,536 and 40,742,136 shares issued and
outstanding, respectively                                                    45             41
Additional paid in capital                                               35,540         35,384
Accumulated other comprehensive loss                                         --            (53)
Retained earnings                                                        41,440         11,365
                                                                       --------        -------
Total stockholders' equity                                               77,026         46,738
                                                                       --------        -------
Total liabilities and stockholders' equity                             $145,857        $93,428
                                                                       ========        =======

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

</TABLE>



                                      F-4


<PAGE>

<TABLE>
<CAPTION>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                        FOR THE YEARS ENDED DECEMBER 31,
                 (In thousands, except share and per share data)

                                                                                    2004               2003               2002
                                                                                  --------           --------           --------
<S>                                                                               <C>                <C>                <C>

Net sales (including related party sales of $6,559, $15,109 and
         $5,242, respectively)                                                    $340,075           $230,011           $130,347

Cost of goods sold (including related party purchases of $17,627,
         $29,243,and $8,387, respectively)                                         245,940            166,670             92,621
                                                                                  --------           --------           --------

Gross profit                                                                        94,135             63,341             37,726

Selling, general and administrative expenses                                        44,564             37,325             23,903
                                                                                  --------           --------           --------

Income before other income (expense)                                                49,571             26,016             13,823
                                                                                  --------           --------           --------

Other income (expense)
Interest expense                                                                    (1,374)            (1,344)            (1,645)
Write down of other investment                                                          --              (904)                 --
Gain on sale of subsidiary stock                                                        --              1,450
Other income (including  insurance settlement of $1,009 in 2003)                        35              1,059                130
                                                                                  --------           --------           --------
Total other income (expense)                                                        (1,339)               261             (1,515)
                                                                                  --------           --------           --------

Income before income tax (benefit) expense                                          48,232             26,277             12,308

Income taxes (benefit) expense
Current taxes                                                                       17,840              7,186                 77
Deferred tax expense (benefit)                                                        (267)             3,912             (3,749)
                                                                                  --------           --------           --------
Total income tax (benefit) expense                                                  17,573             11,098             (3,672)
                                                                                  --------           --------           --------

Income before minority interest of subsidiary                                       30,659             15,179             15,980

Less minority interest of subsidiary                                                  (224)                (7)                --
                                                                                  --------           --------           --------

Net income                                                                          30,435             15,172             15,980

Dividend - preferred stock (related party)                                            (360)              (360)              (345)
                                                                                  --------           --------           --------

Income available to common stockholders                                           $ 30,075           $ 14,812           $ 15,635
                                                                                  ========           ========           ========

Basic earnings per common share                                                   $   0.73           $   0.36           $   0.42
                                                                                  ========           ========           ========

Diluted earnings per common share                                                 $   0.67           $   0.34           $   0.37
                                                                                  ========           ========           ========

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

</TABLE>


                                      F-5


<PAGE>

<TABLE>
<CAPTION>



                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE INCOME
              FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                 (In thousands, except share and per share data)

                                                                                               Accumulated       Retained
                                        Series A                                Additional           Other       Earnings
                                       Preferred     Par                  Par      Paid-in   Comprehensive   (Accumulated
                                          Shares   Value       Common   Value      Capital            Loss       Deficit)      Total
                                       ---------   -----   ----------   -----   ----------   -------------   ------------    -------
<S>                                     <C>       <C>     <C>          <C>       <C>               <C>         <C>         <C>

Balance December 31, 2001                     --      --   31,481,914   $  31     $24,109           $ (52)      $(19,082)   $ 5,006

Net income                                                                                                        15,980     15,980
Effect of foreign currency translation                                                                 11                        11
                                                                                                                            -------
Total comprehensive income                                                                                                   15,991
Issuance of Series A Preferred Stock     500,000   $   1                            2,999                                     3,000
Preferred stock dividends paid                                                                                      (345)      (345)
Issuance of stock warrants to outSide
consultant                                                                            646                                       646
Exercise of stock warrants (net of
   taxes)                                      -       -    8,931,832       9       7,038               -              -      7,047
                                         -------   -----   ----------   -----     -------           -----       --------    -------
Balance December 31, 2002                500,000   $   1   40,413,746   $  40     $34,792           $ (41)      $ (3,447)   $31,345

Net income                                                                                                        15,172     15,172
Effect of foreign currency translation                                                                (12)                      (12)
                                                                                                                            -------
Total comprehensive income                                                                                                   15,160
Preferred stock dividends paid                                                                                      (360)      (360)
Stock issued for services                                      80,000                 165                                       165
Exercise of stock warrants                     -       -      248,390       1         427               -              -        428
                                               -       -   ----------   -----     -------           -----       --------    -------
Balance December 31, 2003                500,000   $   1   40,742,136   $  41     $35,384           $ (53)      $ 11,365    $46,738
                                         =======   =====   ==========   =====     =======           =====       ========    =======

Net income                                                                                                        30,435     30,435
Effect of foreign currency translation                                                                 53                        53
                                                                                                                                 --
Total comprehensive income                                                                                                   30,488
Preferred stock dividends paid                                                                                      (360)      (360)
Exercise of stock warrants                     -       -    4,540,400       4         156               -              -        160
                                               -       -   ----------   -----     -------           -----       --------    -------
Balance December 31, 2004                500,000   $   1   45,282,536   $  45     $35,540           $ ---       $ 41,440    $77,026
                                         =======   =====   ==========   =====     =======           =====       ========    =======

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

</TABLE>



                                      F-6

<PAGE>

<TABLE>
<CAPTION>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                        FOR THE YEARS ENDED DECEMBER 31,
                 (In thousands, except share and per share data)

CASH FLOWS FROM OPERATING ACTIVITIES                                     2004            2003              2002
                                                                   ----------      ----------         ---------
<S>                                                                <C>             <C>                <C>

Net Income                                                         $   30,435      $   15,172         $  15,980
Adjustments to reconcile net income to net cash provided by
  (used in) operating activities:
Depreciation and amortization                                             978             564               463
Amortization of deferred financing costs                                  119             130               125
Provision for doubtful accounts                                             5              99               379
Write-off of other investment                                             ---             942                --
Change in minority interest due to sale of subsidiary stock               ---             200                --
Minority interest in consolidated subsidiary                              224               7                --
Stock issued for services                                                 ---             165                --
Issuance of stock warrants to outside consultant                           --              --               646
Deferred income tax expense (benefit)                                    (267)          3,912            (4,462)
Changes in operating assets and liabilities
Accounts receivable                                                   (13,858)        (10,902)           (12,030)
Accounts receivable-related party                                      (6,583)             --                --
Inventories                                                           (31,220)        (21,393)           (8,778)
Prepaid expenses and other current assets                                 298            (547)              106
Deposits and other assets                                                 (21)            (53)               67
Accounts payable                                                       (1,451)          4,097            (7,930)
Income taxes payable                                                    7,947           6,869                --
Accrued expenses and other current liabilities                          2,715           3,181               (61)
Other liabilities                                                         584             152               350
                                                                   ----------      ----------         ---------
Net cash provided by (used in) operating activities                   (10,095)          2,595           (15,145)
                                                                   ----------      ----------         ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment                               --              --               302
Purchases of property and equipment                                    (1,791)           (741)             (367)
                                                                   ----------      ----------         ---------
Net cash used in investing activities                                  (1,791)           (741)              (65)
                                                                   ----------      ----------         ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid on preferred stock  (related party)                       (360)           (360)             (345)
Proceeds of notes payable - bank                                      253,768         154,889            92,378
Payments of notes payable - bank                                     (252,146)       (155,231)          (76,466)
Payments of note payable- stockholder                                      --          (1,500)           (5,500)
Proceeds from the issuance of long term debt                           12,500              --                --
Issuance costs of term  loan payable                                      (83)             --               (32)
Principal payments on term  loan payable                               (2,000)            (20)             (863)
Proceeds from the issuance of common stock                                 --              --             6,275
Net proceeds from exercise of stock warrants                              160             428                --
                                                                   ----------      ----------         ---------

Net cash provided by (used in) financing activities                    11,839          (1,794)           15,447
                                                                   ----------      ----------         ---------

Effect of foreign currency translation                                     53             (12)               11
                                                                   ----------      ----------         ---------

Net increasein cash and cash equivalents                                    6              48               248

Cash and cash equivalents at beginning of year                            441             393               145
                                                                   ----------      ----------         ---------

Cash and cash equivalents at end of year                           $      447      $      441         $     393
                                                                   ==========      ==========         =========

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

</TABLE>


                                      F-7


<PAGE>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (In thousands, except share and per share data)

Note 1       BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Principles of consolidation

                  The consolidated  financial statements include the accounts of
         DHB Industries, Inc. and its subsidiaries ("DHB" or the "Company"), all
         of  which  are  wholly  owned  (except  for  a  0.0065  interest  in  a
         subsidiary,  Point Blank Body Armor Inc.,  ("Point Blank") issued to an
         unaffiliated  third  party  during  December  2003).  DHB has two major
         divisions,  DHB Armor  Group and DHB  Sports  Group.  All  intercompany
         balances and transactions have been eliminated in consolidation.

         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 for United States
         armed  forces,  federal  agencies  and state and local law  enforcement
         communities. DHB Sports Group produces and markets a comprehensive line
         of  athletic  supports  and  braces,  which  are  merchandised  through
         national superstore chains. DHB maintains  manufacturing  facilities in
         Pompano  Beach,   FL,  Deerfield  Beach,  FL,  Oakland  Park,  FL,  and
         Jacksboro, TN.


         Use of estimates in the preparation of financial statements

                  The  preparation  of financial  statements in conformity  with
         accounting  principles  generally  accepted  in the  United  States  of
         America,  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

                  DHB  recognizes  revenue when it is realized or realizable and
         has been earned. Product revenue is recognized when persuasive evidence
         of an  arrangement  exists,  the product has been  delivered  and legal
         title  and all  risks  of  ownership  have  been  transferred,  written
         contract and sales terms are complete, customer acceptance has occurred
         and  payment is  reasonably  assured.  Returns  are  minimal and do not
         materially affect the consolidated financial statements.

         Accounts Receivable

                  Accounts  receivable consist of trade receivables  recorded at
         original invoice amount,  less an estimated allowance for uncollectible
         accounts.  Trade  credit is generally  extended on a short-term  basis;
         thus trade receivables do not bear interest,  although a finance charge
         may be applied to receivables that are past due. Trade  receivables are
         periodically  evaluated for collectibility based on past credit history
         with customers and their current  financial  condition.  Changes in the
         estimated  collectibility  of trade  receivables  are  recorded  in the
         results of operations  for the period in which the estimate is revised.
         Trade receivables that are deemed  uncollectible are offset against the
         allowance for  uncollectible  accounts.  The Company generally does not
         require collateral for trade receivables.


                                      F-8


<PAGE>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (In thousands, except share and per share data)

Note 1   BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         Continued


         Inventories

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

         Property and equipment

                  Property and equipment  are recorded at cost less  accumulated
         depreciation.  Major  additions,   improvements,  and  renewals,  which
         substantially  increase  the useful lives of assets,  are  capitalized.
         Maintenance,  repairs,  and minor  renewals  are  expensed as incurred.
         Depreciation is calculated  primarily on the  straight-line  basis over
         the estimated lives of the assets. Leasehold improvements are amortized
         over the  shorter  of the  estimated  life or the  term of the  related
         lease.

         Cash and cash equivalents

                  All  short-term,   highly  liquid  investments  with  original
         maturities of ninety days or less are considered cash equivalents.

         Other investment

                  DHB  had a  cost-based  investment  in a  non-publicly  traded
         company.  At December 31, 2002,  the  investment was included in "Other
         investment"  in the  balance  sheet  and was  carried  at  cost,  which
         aggregated  $942.  In  December  2003,  a decline  in the value of this
         cost-based  investment  below cost was deemed other than  temporary and
         resulted in the investment being written off at December 31, 2003.

         Fair values of financial instruments

                  The  Company's  financial  instruments  include  cash and cash
         equivalents,  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  value  of  the
         Company's  long-term  debt was  estimated  based on the  current  rates
         offered  to the  Company  for debt  with the same  remaining  terms and
         maturities.

         Income taxes

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

                  DHB uses the asset  and  liability  approach  to  account  for
         income taxes.  Under this method,  deferred tax assets and  liabilities
         are recognized for the expected future tax  consequences of differences
         between  the  carrying  amounts  of assets  and  liabilities  and their
         respective  tax basis using enacted tax rates in effect for the year in
         which the differences  are expected to reverse.  The effect on deferred
         tax assets and  liabilities  of a change in tax rates is  recognized in
         income in the period  when the change is enacted.  Deferred  tax assets
         are  reduced  by  a  valuation   allowance  when,  in  the  opinion  of
         management,  it is more likely than not that some portion or all of the
         deferred tax assets will not be realized.


                                      F-9


<PAGE>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (In thousands, except share and per share data)

Note 1   BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         Continued


         Research and development expenses

                  Research  and  development  expenses  are included in selling,
         general and administrative expenses as incurred and for the years ended
         December  31, 2004,  2003 and 2002  were $9,740,  $10,815  and  $4,221,
         respectively.

         Advertising expenses

                  The cost of advertising  is expensed as incurred.  The Company
         incurred  approximately  $1,239,  $1,143, and $950 of advertising costs
         during the years ended December 31, 2004, 2003 and 2002, respectively.

         Earnings per share

                  Basic  earnings  per share is computed by dividing net income,
         as adjusted for preferred dividends,  by the weighted average number of
         common shares  outstanding.  Diluted  earnings per share is computed by
         dividing net income by the  weighted  average  number of common  shares
         outstanding  compounding the effects of all potentially dilutive common
         stock  equivalents,  principally  warrants,  using the  treasury  stock
         method except in cases where the effect would be anti-dilutive.

         Comprehensive income and foreign currency translation

                  Comprehensive   income   consists  of  net  income  and  other
         comprehensive  income.  Other  comprehensive  income  includes  foreign
         currency translation  adjustments,  which is a component of accumulated
         other comprehensive loss in stockholders' equity.

         Stock-based compensation

                  The Company  accounts for stock-based  compensation  using the
         intrinsic value method in accordance with Accounting  Principles  Board
         Opinion No. 25,  "Accounting for Stock Issued to Employees" and related
         Interpretations   ("APB  No.  25")  and  has  adopted  the   disclosure
         provisions of Statement of Financial  Accounting Standards ("SFAS") No.
         148,   "Accounting  for  Stock-Based   Compensation  -  Transition  and
         Disclosure,  an amendment of SFAS  Statement No. 123" ("SFAS No. 148").
         Under APB No. 25, when the  exercise  price of the  Company's  employee
         stock warrants  equals the market price of the underlying  stock on the
         date of grant, no compensation expense is recognized.

                  The per share  weighted  average fair value of stock  warrants
         granted during the years ended December 31, 2004 and 2003 was $5.88 and
         $2.08, respectively. The fair value of these warrants was determined at
         the date of grant using the  Black-Scholes  warrant  pricing model with
         the following assumptions:


                                      F-10


<PAGE>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (In thousands, except share and per share data)

Note 1   BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         Continued


         Stock-based compensation-continued

<TABLE>
<CAPTION>


                                                                     Grants Issued During
                                                                     --------------------
                                                               2004           2003          2002
                                                               ----           ----          ----
<S>                                                           <C>             <C>           <C>

             Risk-free interest rate                          2.77%           2.86%         4.67%
             Expected volatility of common stock             99.99%          98.44%        94.54%
             Dividend yield                                   0.00%           0.00%         0.00%
             Expected term                                  4.36 years       5 years       5 years

</TABLE>


                  The following  table  illustrates the effect on net income and
         earnings per share had the Company  applied the fair value  recognition
         provisions of SFAS No. 123, "Accounting for Stock-Based  Compensation,"
         to stock-based employee compensation.

<TABLE>
<CAPTION>


                                                                                     Year Ended December 31,
                                                                                 -------------------------------
                                                                                    2004        2003        2002
                                                                                 -------     -------     -------
<S>                                                                              <C>         <C>         <C>

              Net income                                                         $30,435     $15,172     $15,980

              Less dividend - preferred stock (related party)                       (360)       (360)       (345)
                                                                                 -------     -------     -------

              Income available to common stockholders, as reported               $30,075     $14,812     $15,635

              Deduct: total stock-based employee compensation
              expense determined under fair value based method for all
              awards, net of related tax effect                                   (1,637)     (1,027)     (1,829)
                                                                                 -------     -------     -------

              Pro forma                                                          $28,438     $13,785     $13,806
                                                                                 =======     =======     =======
              Basic earnings per common share
              As reported                                                        $  0.73     $  0.36     $  0.42

              Pro forma                                                          $  0.69     $  0.34     $  0.37

              Diluted earnings per common share
              As reported                                                        $  0.67     $  0.34     $  0.37

              Pro forma                                                          $  0.63     $  0.32     $  0.33

</TABLE>


                  Pro forma  compensation  expense may not be  indicative of pro
        forma expense in future years. For purposes of estimating the fair value
        of  each  warrant  on the  date  of  grant,  the  Company  utilized  the
        Black-Scholes option-pricing model.


                                      F-11


<PAGE>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (In thousands, except share and per share data)

Note 1   BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         Continued

         Impairment of long-lived assets

                  DHB reviews the  recoverability  of its long-lived assets when
         events  or  changes  in  circumstances  occur  that  indicate  that the
         carrying value of the asset or asset group may not be recoverable.  The
         assessment of possible  impairment is based on DHB's ability to recover
         the  carrying  value  of the  asset or asset  group  from the  expected
         pre-tax cash flows  (undiscounted  and without interest charges) of the
         related  operations.  If these  cash  flows are less than the  carrying
         value  of  such  asset,  an  impairment  loss  is  recognized  for  the
         difference  between  estimated  fair  value  and  carrying  value.  The
         measurement of impairment  requires  management to estimate future cash
         flows and the fair value of long-lived assets.

         New Accounting Standards

                   In December 2003, the Financial  Accounting  Standards  Board
         issued  FASB  Interpretation  Number  46-R  "Consolidation  of Variable
         Interest  Entities." "FIN 46-R, which modifies  certain  provisions and
         effective  dates  of FIN  46,  sets  forth  criteria  to  be  used   in
         determining  whether an investment is a variable interest entity should
         be consolidated. These provisions are based on the general premise that
         if a company  controls  another  entity  through  interests  other than
         voting  interests,  that  company  should  consolidate  the  controlled
         entity.  The  Company  believes  that  currently,  it does not have any
         material  arrangements  that meet the definition of a variable interest
         entity, which would require consolidation.

                  In November  2004,  the FASB  issued SFAS No. 151,  "Inventory
         Costs - An Amendment of ARB NO. 43, Chapter 4" (SFAS No. 151). SFAS No.
         151 requires all companies to recognize a  current-period  for abnormal
         amount of idle facility  expense,  freight,  handling  costs and wasted
         materials.  This  statement  also requires that the allocation of fixed
         production  overhead to the costs of  conversion be based on the normal
         capacity of the production  facilities.  SFAS No. 151 will be effective
         for fiscal year  beginning  after June 15,  2005.  The Company does not
         expect the adoption of this statement to have a material  effect on its
         consolidated financial statements.

                  In December 2004, the FASB issued SFAS No.123(R), "Share-Based
         Payment" (SFAS No.  123(R)).  This statement  replaces SFAS No. 123 and
         supersedes APB 25. SFAS 123\(R)  requires all stock-based  compensation
         to be  recognized as an expense in the  financial  statements  and that
         such cost be  measured  according  to the fair value of stock  options.
         SFAS 123 (R) will be effective for quarterly  periods  beginning  after
         June 15,  2005.  While the  Company  currently  provides  the pro forma
         disclosures  required by SFAS No. 148 on a quarterly  basis (see Note 1
         (k) - Stock Based Compensation"), it is currently evaluating the impact
         this statement will have on its consolidated financial statements.


                                      F-12


<PAGE>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (In thousands, except share and per share data)

Note 1   BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         Continued


         New Accounting Standards-Continued

                  In December 2004, the FASB issued SFAS No. 153,  "Exchanges on
         Nonmonetary Assets - An Amendment of APB Opinion No. 29, Accounting for
         Nonmonetary Transactions" (SFAS 153) SFAS eliminates the exception from
         fair value measurement for nonmonetary  exchanges of similar productive
         assets  in  paragraph  21(b) of APB  Opinion  No.  29,  "Accounting for
         Nonmonetary  Transactions," and  replaces  it  with  an  exception  for
         exchanges  that do not have  commercial  substance.  SFAS 153 specifies
         that a nonmonetary exchange has commercial substance if the future cash
         flows of the entity are expected to change significantly as a result of
         exchange. SFAS 153 is effective for fiscal periods beginning after June
         15, 2005. The Company does not expect the adoption of this statement to
         have a material effect on its consolidated financial statements.

Note 2    SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>


                                                                      Year Ended December 31,

          Cash paid for:                                            2004         2003         2002
                                                                 -------       ------       ------
<S>                                                              <C>           <C>          <C>

          Interest                                               $ 1,357       $1,329       $1,618

          Taxes                                                    9,893          295           73


       Non-cash financing and investing activities:                 2004         2003         2002
                                                                 -------       ------       ------
       Revolving credit loan refinanced to long-term debt         12,500           --           --
       Property and equipment acquired under capital lease
                                                                      --           20           --
       Cashless exercise of  warrants (See Note 5).                    0           --           --

</TABLE>


                  For the year ended December 31, 2003, the Company exchanged an
         approximately  .0065  interest in Point  Blank for $1,650 of  inventory
         pursuant  to  a  transaction,   which  qualifies  for   non-recognition
         treatment pursuant to Section 351 of the Internal Revenue Code ("IRC").
         (See Notes 8 and 14). On January 14, 2002, the Company reduced its note
         payable-stockholder  by $3,000 through the issuance of preferred stock.
         (See Note 5).

Note 3   INVENTORIES

                  The components of inventories as of December 31, 2004 and 2003
are as follows:

                                                     2004             2003
                                                  -------          -------

                 Raw materials and supplies       $31,695          $21,750
                 Work in process                   18,815           15,430
                 Finished goods                    35,463           17,573
                                                  -------          -------
                                                  $85,973          $54,753
                                                  =======          =======


                                      F-13


<PAGE>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (In thousands, except share and per share data)


Note 4    PROPERTY AND EQUIPMENT

                  Property and  equipment,  at cost, as of December 31, 2004 and
         2003 are summarized as follows:

<TABLE>
<CAPTION>


                                                                           Estimated
                                                       2004       2003     useful life
                                                       ----       ----     -----------
<S>                                                  <C>        <C>         <C>

              Machinery and equipment                $2,990     $2,215      5-10 years
              Furniture, fixtures and computer        1,816      1,147       3-7 years
              equipment
              Transportation equipment                  453        453       3-5 years
              Leasehold improvements                  1,308        970      3-10 years or
                                                                            term of lease
                                                     ------     ------

                                                      6,567      4,785
              Less accumulated depreciation and
              amortization                           (3,935)    (2,966)
                                                     ------     ------
                                                     $2,632     $1,819
                                                     ======     ======

</TABLE>


                  Depreciation  and  amortization  expense  for the years  ended
         December 31, 2004, 2003 and 2002 was approximately $978, $564 and $463,
         respectively.

Note 5   NOTE PAYABLE - STOCKHOLDER

                  This note was payable to the principal  stockholder of DHB and
         bore  interest at 12% per annum.  The  balance at December  31, 2002 of
         $1,500  was  repaid on May 9,  2003.  Interest  paid on the note to the
         principal shareholder was $93,524 for the year ended December 31, 2003.
         On  January  14,  2002,  the  note  holder  exchanged  $3,000  of  this
         indebtedness  due him for 500,000 shares of the Company's Series A, 12%
         Convertible Preferred Stock.

Note 6    NOTE PAYABLE - BANK
                                                      December 31,
                                                  2004            2003
                                               -------         -------
          Credit agreement - current           $ 4,000         $ 2,000
          Credit agreement - non-current        32,134          22,012
                                               -------         -------
                                               $36,134         $24,012
                                               =======         =======

                  On March  15,  2005,  the  Company  amended  its  bank  credit
         agreement  (the "Credit  Agreement")  to increase its borrowing  limits
         from $45,000 to $55,000.  Pursuant to the Credit Agreement, the Company
         may  borrow,  on a  revolving  basis,  up to $37,000 on 85% of eligible
         accounts receivable (the "Credit Facility"), and the Company obtained a
         secured  term  loan  of  $18,000  (repaying  the  $12,500  term  loan),
         amortizing at the rate of $1,000 per quarter commencing July 2004 until
         July 1, 2005 at which time the  amortization  shall  increase to $2,000
         per quarter.  This agreement will expire on October 1, 2007. Borrowings
         under the Credit Agreement bear interest,  at the Company's  option, at
         the bank's  prime rate or LIBOR (2.3% at December  31, 2004) plus 1.75%
         per annum on the revolving Credit Facility and at the bank's prime rate
         or LIBOR  (2.50130%  at December 31, 2004) plus 2.25% on the term loan,
         as LIBOR is set  from  time to time.  For  2003,  the  borrowings  bore
         interest  at the  bank's  prime  rate or LIBOR  plus  1.75%  (3.145% at
         December 31,  2003).  The  borrowings  under the Credit  Agreement  are
         collateralized by a first security interest in


                                      F-14


<PAGE>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (In thousands, except share and per share data)


Note 6    NOTE PAYABLE - BANK-continued

         substantially  all of the assets of the Company.  At December 31, 2003,
         the  Company  has  reflected  these  transactions  in  accordance  with
         Statement of Financial  Accounting  Standards No. 6, "Classification of
         Short-Term  Obligations  Expected to be refinanced."  Accordingly,  the
         March 15, 2004 refinancing was retroactively  reflected on the December
         31, 2003 financial statements.


         Aggregate maturities of long-term debt are as follows:

                              For the years ending December 31,
                                   2005                                 4,000
                                   2006                                 4,000
                                   2007                                28,134
                                                                      -------

                                                                      $36,134
                                                                      =======

                  In addition,  the Credit  Agreement  includes both affirmative
         and negative  covenants  customary for a financing of this nature.  The
         Credit Agreement,  among other things, requires the Company to maintain
         a minimum  (i)  tangible  net worth,  as  defined,  (ii)  fixed  charge
         coverage ratio, and (iii) earnings before interest, taxes, depreciation
         and  amortization.  The Credit  Agreement  further limits the amount of
         capital  expenditures that the Company may incur in any fiscal year and
         the payment of dividends.

                  Deferred  financing costs associated with the Credit Agreement
         were capitalized and are being amortized over the term of the September
         2001  financing  as extended  by  subsequent  amendments.  Amortization
         expense was $119,  $130,  and $125 during the years ended  December 31,
         2004, 2003 and 2002, respectively.


Note 7   ACCRUED EXPENSES AND OTHER CURRENT LIBILITIES


         Accrued expenses and other current liabilities consist of the following
         as of December 31,

                                                            2004           2003
                                                         -------        -------

         Accrued Commissions                             $   927        $   815
         Accrued Wages                                     3,716          1,502
         Accrued Inventory - inventory in transit            -0-          1,017
         Accrued Legal and professional fees               1,006            796
         Accrued other expenses ($290 to a related
            party-2004)                                    2,563          1,138
         Customer deposits                                   138            367
                                                         -------        -------

         Total accrued expenses and other current
            liabilities                                  $ 8,350        $ 5,635
                                                         =======        =======


                                      F-15


<PAGE>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (In thousands, except share and per share data)


Note 8   MINORITY INTEREST


                  The Company's  minority  interest on the consolidated  balance
         sheet  includes the 10.76  minority  shares  related to its Point Blank
         subsidiary  at December 31, 2004 and 2003.  The Company sold stock of a
         subsidiary  representing  approximately  a .0065 minority  interest for
         $1,650 of inventory.  This  interest had a book value of  approximately
         $200,  which  resulted  in a gain  on the  sale  of  the  stock  of the
         subsidiary  of  approximately  $1,450  included in other  income in the
         accompanying  consolidated  statement of operations  for the year ended
         December 31, 2003.

Note 9   STOCKHOLDERS' EQUITY

         Convertible Preferred Stock

                  DHB is authorized to issue 5,000,000 shares of Preferred Stock
         ("Preferred Stock"). On January 14, 2002, the principal  stockholder of
         the Company  exchanged  $3,000 of the  indebtedness due him for 500,000
         shares of Series A, 12% Convertible  Preferred Stock. The Series A, 12%
         Convertible  Preferred Stock has a dividend rate of $0.72 per share per
         annum,  an amount equal to the interest that would have been payable on
         the  exchanged  indebtedness.  Shares of the Series A, 12%  Convertible
         Preferred Stock are convertible,  on a one-to-one  basis, at the option
         of the holder, into shares of common stock. The shares of Series A, 12%
         Convertible Preferred Stock are redeemable at the option of the Company
         on December 15 of each year. The Preferred Stock may be redeemed at the
         option of the  Company at an amount in cash  equal to $6 per share,  as
         defined.

         Convertible Preferred Stock-continued

         In addition,  the Preferred  Stock has a  liquidation  preference at an
         amount equal to $6 per share, as defined.

         Common Stock

                  DHB has 100,000,000  shares authorized of its $0.001 par value
         common stock.

         Treasury Stock

                  On  December  1,  2000,  the  Company's   Board  of  Directors
         announced  the  directive  for the Company to purchase up to  2,000,000
         shares of its common  stock in the open market,  from time to time,  at
         its  discretion.  As of  December  31,  2004,  the  Company  still  has
         authorization  to purchase  1,264,395  shares of its common stock.  The
         Credit  Agreement,  as  described  in Note 6, limits the dollar  amount
         available  to purchase  treasury  shares based upon an excess cash flow
         calculation, as defined. All treasury shares repurchased by the Company
         are immediately retired.


                                      F-16


<PAGE>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (In thousands, except share and per share data)


Note 9   STOCKHOLDERS' EQUITY - Continued

         Earnings per common share

                  Basic Earnings per common share  calculations are based on the
         weighted  average  number  of common  shares  outstanding  during  each
         period:  41,217,312,  40,588,605,  and 37,275,920  shares for the years
         ended December 31, 2004, 2003, and 2002, 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:  45,735,023,  44,196,802,  and 42,304,254 shares for the years
         ended December 31, 2004, 2003 and 2002, respectively.

<TABLE>
<CAPTION>


                                                                       Income              Shares         Per Share
                                                                   (numerator)       (denominator)           Amount
                                                                   ----------        ------------         ---------
<S>                                                                   <C>              <C>                   <C>

         Basic EPS
          Income available for common stockholders                    $30,075          41,217,312            $ 0.73
             for the year ended December 31, 2004
            Add preferred stock dividends                                 360                  --
            Convertible preferred stock                                                   500,000
            Warrants                                                                    4,017,711                --
                                                                      -------          ----------            ------
         Diluted EPS                                                  $30,435          45,735,023            $ 0.67
                                                                      =======          ==========            ======

         Basic EPS
          Income available for common stockholders for the
            year ended December 31, 2003                              $14,812          40,588,605            $ 0.36
            Add preferred stock dividends                                 360                  --                --
            Convertible preferred stock                                    --             500,000                --
            Warrants                                                       --           3,108,197                --
                                                                      -------          ----------            ------
         Diluted EPS                                                  $15,172          44,196,802            $ 0.34
                                                                      =======          ==========            ======

         Basic EPS
          Income available for common stockholders For the
            year ended December 31, 2002                              $15,635          37,275,920            $ 0.42

            Add preferred stock dividends                                 345
            Convertible preferred stock
                                                                                          500,000
            Warrants                                                                    4,528,334                --
                                                                      -------          ----------            ------
         Diluted EPS                                                  $15,980          42,304,254            $ 0.37
                                                                      =======          ==========            ======

</TABLE>


         Stock option plan

                  The Company adopted a 1995 Stock Option Plan ("Plan") pursuant
         to which the Board of  Directors  is  authorized  to award  options  to
         purchase up to 5,000,000  shares of common stock to selected  officers,
         employees, agents, consultants and other persons who render services to
         the Company. All of the options granted are covered under the plan.


                                      F-17


<PAGE>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (In thousands, except share and per share data)


Note 9   STOCKHOLDERS' EQUITY - Continued

         Stock warrants

                  In 2004,  the Company  issued to each of the six board members
         50,000  unregistered  five  year  common  stock  warrants   immediately
         exercisable at $5.88 per share.  These warrants may either be exercised
         at the option of the holder for cash or pursuant to a cashless exercise
         based upon the  average  stock  price five days prior to  exercise.  In
         November  2004,  the  members of  the Board of  Directors  and   Sandra
         Hatfield,  the Company's Chief Operating Officer,  exercised  4,555,000
         common  stock  warrants   pursuant  to  a  cashless  exercise  yielding
         4,261,799  shares  of common  stock.  Included  in the above  mentioned
         warrants  is the  exercise  by David H.  Brooks,  the  Company's  Chief
         Executive Officer of 3,875,000  warrants  yielding  3,669,757 shares of
         common stock,  Dawn Schlegel,  the Company's Chief Financial Officer of
         205,000  warrants  yielding  177,006  shares of common stock and Sandra
         Hatfield,  the Company's  Chief Operating  Officer of 200,000  warrants
         yielding  180,119 shares of common stock.   In  December 2004,   Sandra
         Hatfield, the Company's Chief Operating Officer exercised an additional
         warrant of 100,000  shares  pursuant  to a cashless  exercise  yielding
         89,426 shares of common stock.  Employees exercised warrants for 63,895
         shares with  aggregate  proceeds of  $110,000.  A former  member of the
         Board of  Directors  exercised  a warrant  for 25,000  shares of common
         stock  with  aggregate  proceeds  of  $50,000.  An  outside  consultant
         exercised a warrant pursuant to a cashless  provision  yielding 100,280
         shares of common stock.

                  In  January  2003,  the  then  five  members  of the  Board of
         Directors  were each awarded 50,000  warrants  exercisable at $1.41 per
         share for five years.  In July 2003,  the new Board  member was granted
         50,000  warrants  exercisable  at $4.33 per share for five years.  Also
         during the year ended December 31, 2003, the Board of Directors awarded
         key employees 35,000 and 33,000 warrants exercisable at $2.01 and $3.85
         per share,  respectively,  which expire in February 2008 and July 2008.
         The Company also issued and subsequently canceled 10,000 warrants to an
         employee.

                  During the year ended  December 31, 2002,  the five members of
         the Board of Directors were each awarded 25,000 warrants exercisable at
         $7.11 per share for five years. Also during the year ended December 31,
         2002,  the Board of Directors  awarded key  employees  25,000  warrants
         exercisable at $7.11 per share, which expire in April 2007. The Company
         also issued and canceled 150,000 warrants to an employee.

                  On June 4, 2002, the Company  issued  275,000  warrants to its
         investor relations firm with an exercise price of $4.95 per share. This
         warrant  expires  June 4,  2006.  The fair  value of this  warrant  was
         determined to be  approximately  $646,000 which is included in selling,
         general and  administrative  expenses  for the year ended  December 31,
         2002. The Black-Scholes warrant pricing model used for this warrant had
         the following  assumptions:  Risk-free interest rate of 4.67%, expected
         volatility of common stock of 59.83% and a 4-year option term.

                  During the year ended December 31, 2002, the  CEO/Chairman and
         his wife exercised warrants totaling 5,593,751 shares.



                  A summary of the status of the  Company's  stock  warrants  is
         presented in the table below:


                                      F-18


<PAGE>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (In thousands, except share and per share data)


Note 9   STOCKHOLDERS' EQUITY - Continued

<TABLE>
<CAPTION>

                                                                    For the Year Ended December 31,
                                                     2004                         2003                        2002
                                            ----------------------------------------------------------------------------------
                                                           Weighted                     Weighted                      Weighted
                                                            Average                      Average                       Average
                                                           exercise                     exercise                      exercise
                                                 Shares       price           Shares       price             Shares      price
                                            -----------    --------        ---------    --------        -----------   --------
<S>                                           <C>           <C>            <C>           <C>             <C>            <C>

         Warrants outstanding -
             beginning of year                5,123,000     $1.51          5,163,857     $1.64           13,620,689     $1.72
         Granted                                300,000     $5.88            378,000     $2.08              625,000     $5.15
         Exercised                          (4,540,400)     $1.36           (248,390)    $2.61           (8,931,832)    $0.58
         Cancelled/expired                    (375,600)     $2.48           (170,467)    $5.09             (150,000)    $2.92
                                            -----------     -----          ---------     -----            ---------     -----
         Warrants  outstanding  - end of
             year                               507,000     $5.00          5,123,000     $1.51            5,163,857     $1.64
                                            ===========     =====          =========     =====            =========     =====


         Warrants Exercisable - end of
             year                               475,000     $4.83          4,215,000     $1.60            3,438,857     $1.90
                                            ===========     =====          =========     =====            =========     =====

</TABLE>



                  The following  table  summarizes  information  regarding stock
         warrants outstanding at December 31, 2004.

<TABLE>
<CAPTION>


                                                            Weighted
                                                             Average     Weighted
                                          Number of        Remaining      Average        Number of          Weighted
                Exercise Price             Warrants      Contractual     Exercise           Shares           Average
                    Range               Outstanding             Life        Price      Exercisable    Exercise Price
<S>               <C>                       <C>                <C>          <C>            <C>                 <C>

                  0 to $1.00                     --               --        $1.00               --             $1.00
                $1.01 to $1.50                   --               --        $1.41               --             $1.41
                $1.51 to $2.00              100,000             1.75        $2.00          100,000             $2.00
                $2.01 to $2.50               10,000             3.10        $2.01               --             $2.01
                $2.51 to $3.00                   --               --        $3.00               --             $3.00
               $3.01 and above              397,000             1.73        $5.61          375,000             $5.94
                                            -------             ----        -----          -------             -----

                    Totals                  507,000            $5.00        $5.00          475,000             $4.83
                                            =======            =====        =====          =======             =====

</TABLE>



                                      F-19


<PAGE>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (In thousands, except share and per share data)


Note 10  RELATED PARTY TRANSACTIONS

                  A summary of  related  party  transactions  paid or accrued to
         DHB's principal shareholder for the years ended December 31, 2004, 2003
         and 2002 is as follows:

<TABLE>
<CAPTION>


                                                                      2004           2003            2002
                                                                      ----           ----            ----
<S>                                                                   <C>          <C>             <C>

              Repayment of note payable stockholder                   $ --         $1,500          $5,500
              Interest expense                                           7             95             710
              Rent expense                                             396            811           1,060
              Deferred rent included above                             (27)          (118)           (350)
              Dividends                                                360            360             345
</TABLE>


                  The  Company  formerly  leased  an  office  and  manufacturing
         facility from an entity  indirectly owned by the principal  stockholder
         of DHB pursuant to a lease  expiring  December  31, 2010.  Rent expense
         included in the accompanying  consolidated  statement of operations was
         approximately $396, $811 and $1,060 during the years ended December 31,
         2004,  2003  and  2002,  respectively.  This  property  was  sold to an
         unrelated third party in July 2004, whom the Company now rents from. In
         addition,  included in rental  expense  was a non-cash  expense of $27,
         $118 and $350 relating to the straight lining of the rent for the years
         ended December 31, 2004, 2003 and 2002, respectively.

              The  Company  has been  purchasing  certain  products,  which  are
         components of ballistic resistant apparel, manufactured and sold by the
         Company,  from a  corporation  owned by a  shareholder  and the wife of
         DHB's  principal  stockholder.  The total of such purchases  during the
         years  ended  December  31,  2004,  2003,  and 2002  was  approximately
         $17,627,  $29,243,  and $7,975,  respectively.  The Company  also sells
         certain components to this entity,  which are used in manufacturing the
         products that the Company purchases from this entity. In addition, this
         entity sub-leases a portion of the Company's  Tennessee  facility,  for
         which the Company  received  approximately  $40, $40 and $40 during the
         years ended December 31, 2004, 2003 and 2002, respectively. The Company
         also sold to this  entity  $6,559  worth of  inventory  during the year
         ended December 31, 2004.

              The  Company  owed $71 and $108 to this  entity  at  December  31,
         2004 and 2003,  respectively, for purchases made,  which is included in
         accounts payable in the accompanying  consolidated  balance sheets. The
         Company has a  receivable  from this entity for $6,559 at December  31,
         2004,  which is  included in accounts  receivable  in the  accompanying
         consolidated  balance sheets.  DHB's principal  stockholder's wife also
         owned another  company that received  revenues of $560 and $43 from the
         Company during the year ended December 31, 2003 and 2002, respectively,
         for stitching  work.  In 2003,  this company has since been merged into
         the other entity.

                  The Company had  indebtedness to the principal  stockholder as
         described in Note 5. On January 14, 2002, the principal  stockholder of
         the company  exchanged  $3,000 of the  indebtedness due him for 500,000
         shares of Series A, 12% convertible preferred Stock. (See Note 9)


                                      F-20


<PAGE>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (In thousands, except share and per share data)


Note 10  RELATED PARTY TRANSACTIONS-continued

                  Pursuant to a compensation committee resolution, the principal
         shareholder  is  entitled  to charter  fees for the use of an  airplane
         owned by a corporation related to the principal shareholder. In lieu of
         charter fees during 2004,  the Company  paid  certain  direct  expenses
         related to the airplane.  During 2004, the Company paid direct expenses
         for the use of the airplane to unrelated third parties of approximately
         $696. In addition,  expenses of $161 were paid to the  corporation  who
         owned the airplane.

                  Pursuant  to the  CEO's  employment  agreement  and a  related
         compensation  committee  resolution,  the CEO is  entitled  to  certain
         living  expenses for his Florida  residence,  since the majority of the
         operations  are in Florida.  Pursuant to this  resolution,  the Company
         paid direct expenses to unrelated third parties of  approximately  $171
         and  reimbursed  the company which owns the  residence  $129 during the
         year ended December 31, 2004.

         During 2003, the son of the COO, provided legal services to the Company
         and was compensated $95.

Note 11  CONCENTRATIONS

                  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  75%,  77% and 76% for the years ended  December
         31, 2004, 2003 and 2002, respectively,  of DHB's sales were made to the
         United States Government or its agencies.

                  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
         four  independent  weaving or  manufacturing  companies.  If any of the
         manufacturers  ceases 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 tests would
         need 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 12  SEGMENT INFORMATION

                  As described in Note 1, the Company  operates in two principal
         segments:  ballistic-resistant equipment and protective athletic/sports
         products.  Financial  information on the Company's business segments is
         as follows:


                                      F-21


<PAGE>

<TABLE>
<CAPTION>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (In thousands, except share and per share data)


Note 12  SEGMENT INFORMATION-continued

Net Sales                                                             2004               2003               2002
---------                                                         --------           --------           --------
<S>                                                               <C>                <C>                <C>

Ballistic-resistant equipment                                     $333,029           $224,152           $124,860
Protective athletic & sports products                                7,051              5,859              5,492
                                                                  --------           --------           --------
                                                                   340,080            230,011            130,352
Less inter-segment sales                                               (5)                 --                (5)
                                                                  --------           --------           --------
Consolidated net sales                                            $340,075           $230,011           $130,347
                                                                  ========           ========           ========

Income before other income (expense)
Ballistic-resistant equipment                                     $ 61,290           $ 33,618           $ 17,534
Protective athletic & sports products                                1,017                426                563
Corporate and other (1)                                           (12,736)            (8,028)            (4,274)
                                                                  --------           --------           --------
Consolidated income before other income (expense)
                                                                  $ 49,571           $ 26,016           $ 13,823
                                                                  ========           ========           ========

Depreciation and Amortization Expense
Ballistic-resistant equipment                                     $    662           $    350           $    289
Protective athletic & sports products                                  119                 64                 86
                                                                  --------           --------           --------
                                                                       781                414                375
Corporate and other                                                    197                150                 88
                                                                  --------           --------           --------
Consolidated depreciation and amortization expense                $    978           $    564           $    463
                                                                  ========           ========           ========

Interest Expense
Ballistic-resistant equipment                                     $  1,367           $  1,238           $    935
Protective athletic & sports products                                   --                 --                 --
Corporate and other (2)                                                  7                106                710
                                                                  --------           --------           --------
Consolidated interest expense                                     $  1,374           $  1,344           $  1,645
                                                                  ========           ========           ========

Expenditures for additions to long-lived assets
Additions to Property and Equipment
Ballistic-resistant equipment                                     $  1,147           $    592           $    250
Protective athletic & sports products                                   --                 57                 35
Corporate and other                                                    644                 92                 82
                                                                  --------           --------           --------
                                                                  $  1,791           $    741           $    367
                                                                  ========           ========           ========

Income Taxes (Benefit)
Ballistic-resistant equipment                                     $ 15,227           $ 14,341           $     22
Protective athletic & sports products                                   --                182                  2
                                                                  --------           --------           --------
Corporate and other (2)                                              2,346            (3,425)            (3,696)
                                                                  --------           --------           --------
Consolidated tax (benefit) expense                                $ 17,573           $ 11,098           $ (3,672)
                                                                  ========           ========           ========

Identifiable Assets
Ballistic-resistant equipment                                     $138,370           $ 88,503
Protective athletic & sports products                                5,018              3,186
                                                                  --------           --------
Corporate and other (2)                                              2,469              1,739
                                                                  --------           --------
Consolidated assets                                               $145,857           $ 93,428
                                                                  ========           ========

                  Foreign  sales  accounted  for  3%,  1% and  2% of  the  total
         revenues  for the  years  ended  December  31,  2004,  2003  and  2002,
         respectively. Foreign identifiable assets accounted for 1% of the total
         assets in December 31, 2002.

<FN>

         (1)  Corporate and other  includes  corporate  general,  administrative
         expenses.

         (2) Corporate  assets are  principally  deferred  income tax
         assets and property and equipment.

</FN>
</TABLE>


                                      F-22


<PAGE>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (In thousands, except share and per share data)


Note 13  COMMITMENTS AND CONTINGENCIES

         Leases
                  The Company has non-cancelable  operating leases, which expire
         through 2014. These leases generally require the Company to pay certain
         costs,  such as real estate taxes. As further described in Note 10, the
         Company  leases an office  and  manufacturing  facility  from an entity
         which was owned by a related party. In addition,  the Company subleased
         a portion  of one of its  facilities  to an  entity  owned by a related
         party as described in Note 10. Pursuant to such sublease, which expired
         on December 31, 2003, the Company received sublease income of
         approximately $40 for the years ending December 31, 2004 and 2003.

                  In  December  2003,  the Company  entered  into a lease for an
         additional  facility for the purpose of expanding its operations.  This
         lease  expires  on April  30,  2014 and  requires  annual  base  rental
         payments of $723.

                  As of December  31, 2004,  future  minimum  lease  commitments
         (excluding   renewal   options)   under   non-cancelable   leases   are
         approximately:

                                     For the Years Ending December 31,
                                   -------------------------------------
                                   2005                          $ 1,983
                                   2006                            1,943
                                   2007                            1,984
                                   2008                            1,913
                                   2009                            1,760
                                   Thereafter                      4,298
                                                                 -------
                                                                 $13,881

                  Rent expense on operating  leases for the years ended December
         31, 2004, 2003 and 2002  aggregated  approximately  $2,464,  $1,890 and
         $1,508, respectively.

         Employment agreements

                  The Company is party to an employment  agreement dated July 1,
         2000 with its  principal  stockholder,  which  expires in July 2005 and
         provides for an initial base salary of $500 per annum.  The base salary
         is  increased  $50  each  year  on  the  anniversary.   The  employment
         agreement  also  provides for the payment of his residence in the state
         of Florida and the Compensation  Committee formalized this provision in
         2004,  allowing  for the monthly  payment of rental fees to the company
         that owns the residence at the  comparable  market rate less any direct
         expenses paid by the Company.

         Litigation

                  The Company is currently  the subject of an  investigation  by
         the Securities and Exchange  Commission with respect to certain related
         party  transactions and executive  compensation  matters  regarding DHB
         affiliates  of Mr.  David H.  Brooks  (the  Company's  Chief  Executive
         Officer).


                                      F-23


<PAGE>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (In thousands, except share and per share data)


Note 13  COMMITMENTS AND CONTINGENCIES - Continued


         Litigation -continued

                  In January  2005,  the Company was served with a class  action
         lawsuit  by a  police  organization  and  individual  police  officers,
         because of concerns  regarding the effectiveness and durability of body
         armor with high  concentrations  of Zylon.  In  February,  the  Company
         reached a preliminary settlement with respect to this lawsuit,  subject
         to a final court approval.  The Company does not expect this settlement
         to have a material adverse effect on its financial position.

                  The Company is subject to other legal  proceedings and claims,
         which have arisen 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.

         Letters of Credit

                  As of December  31,  2004,  the  Company  had open  letters of
         credit for $145.

         Collective bargaining agreement and union pension plan

                  During the year ended December 31, 2004,  the Company  entered
         into an agreement  with a union which provided for 19% of the Company's
         employees  to be  subject  to a  collective  bargaining  agreement.  In
         connection with its collective bargaining agreement with the union, the
         Company participates with other companies in the union's multi-employer
         pension plan.  This plan covers all of the Company's  employees who are
         members of such union.  Total  contributions  to this plan were $18 for
         the year ended  December 31, 2004.  The Company  could,  under  certain
         circumstances, be liable for unfunded vested benefits or other expenses
         of jointly  administered  union/management  plans.  At this  time,  the
         Company has not  established  any  liabilities  for future  withdrawals
         because such withdrawals from these plans are not probable.

Note 14  INCOME TAXES

         Components of income tax expense (benefit) are as follows:

                                  2004                 2003                2002
                               -------               ------             -------
           Federal

           Current             $15,288               $6,143             $     0
           Deferred              (242)                3,521              (3,175)
                               -------               ------             -------

           Total federal       $15,046               $9,664             $(3,175)
                               =======               ======             =======

           State

           Current               2,552                1,043                  77
           Deferred               (25)                  391                (574)
                               -------               ------             -------
           Total state         $ 2,527               $1,434             $  (497)
                               =======               ======             =======


                                      F-24


<PAGE>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (In thousands, except share and per share data)


Note 14  INCOME TAXES-continued

                  A reconciliation  of the statutory federal income tax rates to
         the Company's  effective tax rate for the years ended December 31 is as
         follows:

<TABLE>
<CAPTION>

                                                                                 2004          2003          2002
                                                                                 ----          ----          ----
<S>                                                                             <C>          <C>           <C>

           Statutory U.S. income tax rate                                       35.00%        34.00%        34.00%
           Utilization of federal net operating loss carry forwards                --            --        (34.00)
           Utilization of state net operating loss carry forwards                  --            --         (5.00)
           Reduction of valuation allowance                                                                (23.39)
           Other                                                                 (2.3)          3.3           .08
           State and local income taxes (benefit), net of federal benefits        3.7           4.9         (1.52)
                                                                                 ----          ----        ------
           Effective tax rate                                                    36.4%         42.2%       (29.83)%
                                                                                 ====          ====        ======

</TABLE>


                  The   significant   components  of  deferred  tax  assets  and
         liabilities as of December 31 were as follows:

                                                               2004       2003
                                                               ----       ----
AMT credit                                                   $          $    7
Accumulated Depreciation                                        167
Accounts receivable reserve                                     271        437
Deferred rent                                                   419        187
Inventories                                                     161         --
Deferred compensation                                            58        178
Capital loss carryover                                                     641
                                                             ------     ------
                                                              1,076      1,450
Less valuation allowance                                        ---        641
                                                             ------     ------
Net deferred income tax assets                               $1,076     $  809
                                                             ======     ======

Less: Current portion of net deferred income tax asset        (483)       (372)
                                                             ------       -----

                                                             $  593     $  437
                                                             ======     ======

                  During the year ended December 31, 2002,  the Company  reduced
         approximately  $5,873 of valuation allowance placed on the U.S. portion
         of the  Company's  deferred  tax assets.  This  reduction  was based on
         updated  expectations  about future  years'  taxable  income to reflect
         continuing   improvements  in  operating  results   influenced  by  the
         Company's  continued revenue growth, and other indications that certain
         concerns that had previously  limited  management's  expectations about
         future taxable income no longer were applicable.

                  On December 19, 2003, DHB's subsidiary Point Blank Body Armor,
         Inc.  ("Point  Blank")  issued to  Hightower  Capital  Management,  LLC
         ("Hightower")  shares  of  common  stock  of Point  Blank  representing
         approximately  1% of the  outstanding  capital stock of Point Blank, in
         consideration of which Hightower had transferred and delivered to Point
         Blank, on December 19, 2003 certain inventories of ballistic plates and
         other goods  usable in Point  Blank's  business.  The fair value of the
         inventory  received by Point  Blank was $1,650.  This value was used to
         calculate  the number of the shares of Point Blank issued to Hightower.
         DHB has retained rights of first  refusal and rights to repurchase  the


                                      F-25


<PAGE>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (In thousands, except share and per share data)


Note 14  INCOME TAXES-continued


         shares of Point Blank issued to Hightower,  either at the offered price
         (in the event of a proposed  sale by Hightower) or at fair market value
         (in the event of termination of the business relationship between Point
         Blank and Hightower). Due to the fact that the amount of the income tax
         benefit is uncertain, an estimated reserve of approximately  $3,500,000
         was  recorded as of  December  31,  2003 and  remains  unchanged  as of
         December 31, 2004.

Note 15  QUARTERLY RESULTS (UNAUDITED)

                  The following table presents  summarized  quarterly results of
         operations  for the Company for the years ended  December  31, 2004 and
         2003. The Company believes all necessary adjustments have been included
         in the amounts  stated below to present  fairly the following  selected
         information when read in conjunction  with the  consolidated  financial
         statements  and  notes  thereto  included   elsewhere  herein.   Future
         quarterly  operating  results may  fluctuate  depending  on a number of
         factors.  Results of  operations  for any  particular  quarter  are not
         necessarily  indicative of results of operations for a full year or any
         other quarter.

<TABLE>
<CAPTION>


                                                 First        Second         Third        Fourth
                                               Quarter       Quarter       Quarter       Quarter
                                               -------       -------       -------       -------
<S>                                            <C>           <C>           <C>           <C>

Year ended December 31, 2004

Net sales                                      $74,403       $86,066       $89,410       $90,196

Gross profit                                    20,765        23,880        24,873        24,617

Income available to common stockholders          6,269         7,570         8,058         8,178

Basic earnings per share                       $  0.15       $  0.19       $  0.20       $  0.19

Diluted earnings per share                     $  0.14       $  0.17       $  0.18       $  0.18



Year ended December 31, 2003

Net sales                                      $46,153       $56,525       $54,417       $72,916

Gross profit                                    12,968        15,524        14,818        20,031

Income available to common stockholders          4,929         3,961         3,160         2,762

Basic earnings per share                       $  0.12       $  0.10       $  0.08       $  0.07

Diluted earnings per share                     $  0.12       $  0.09       $  0.07       $  0.06

</TABLE>


                                      F-26


<PAGE>


                      DHB INDUSTRIES, INC. AND SUBSIDIARIES
                     SCHEDULE II TO THE FINANCIAL STATEMENTS
                        VALUATION AND QUALIFYING ACCOUNTS
                           DECEMBER 31, 2004 AND 2003
                                 (In thousands)


                  Allowances deducted from related balance sheet accounts:

                                                Accounts
                                              Receivable       Inventory
                                              ----------       ---------

Balance at December 31, 2001                      $  792           $  --

Additions charged to costs and expenses
                                                     379              --

Deductions/write-offs                               (101)             --
                                                  ------           -----

Balance at December 31, 2002                       1,070              --

Additions charged to costs and expenses               99             226

Deductions/write-offs                               (317)             --
                                                  ------           -----

Balance at December 31, 2003                      $  852           $ 226
                                                  ======           =====

Additions charged to costs and expenses                5              --
                                                                   -----


Deductions/write-offs                               (155)           (106)
                                                  ------           -----

Balance at December 31, 2004                      $  702           $ 120
                                                  ======           =====


                                      F-27


<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 17th day of
March 2005.



                                                     DHB Industries, Inc.



                                                     /s/ DAVID H. BROOKS
                                                     ---------------------------
                                                         David H. Brooks
                                                         Chief Executive Officer



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 and on the dates indicated.


Signature                  Capacity                           Date
---------                  --------                           ----



/s/ DAVID H. BROOKS        Chairman of the Board,             March 17, 2005
--------------------       and Director
    David H. Brooks


/s/ DAWN M. SCHLEGEL       Treasurer,                         March 17, 2005
--------------------       Principal Financial Officer
    Dawn M. Schlegel       Principal Accounting Officer


/s/  JEROME KRANTZ         Director                           March 17, 2005
--------------------
     Jerome Krantz


/s/ GARY NADELMAN          Director                           March 17, 2005
--------------------
    Gary Nadelman

/s/ BARRY BERKMAN          Director                           March 17, 2005
--------------------
    Barry Berkman

/s/ CARY CHASIN            Director                           March 17, 2005
--------------------
    Cary Chasin

/s/ LARRY ELLIS            Director                           March 17,2005
--------------------
    Larry Ellis

                                       43


<PAGE>

<TABLE>
<CAPTION>



                               Index of Exhibits.


Exhibit       Description
-------       -----------
<S>           <C>                                                                                                <C>

3.1           Certificate of Incorporation of DHB Capital Group Inc., a Delaware corporation.                      1

3.2           Certificate of Amendment to Certificate of Incorporation filed December 31, 1996                     2

3.3           Certificate of Amendment to Certificate of Incorporation filed July 24, 2001                         6

3.4           Certificate of Designations & Preference, an amendment to the Certificate of Incorporation filed     6
              on December 26, 2001

3.5           By-Laws                                                                                              1

4.2           Stock Subscription Agreement between the Registrant and David Brooks, dated December 14, 2001        6

4.3           Form of Warrant Agreement with respect to all Outstanding Warrants                                   3

10.1          Employment Agreement dated July 1, 2000 between DHB and David Brooks                                 3

10.2          Promissory Note between the Company and David Brooks dated November 6, 2000                          3

10.3          1995 Stock Option Plan                                                                               4

10.6          Sale agreement dated March 10, 2000 between DHB and DMC2 Electronic Components                       5

10.7          Lease agreement dated January 1, 2001 between Point Blank Body Armor and VAE Enterprises.            3

10.8          Lease agreement dated April 15, 2001 between DHB Capital Group and A&B Holdings, Inc.                3

10.9          Loan and Security Agreement dated September 24, 2001 with LaSalle Business Credit Inc.               7

10.10         First Amendment and Waiver to Loan and Security Agreement, dated June 28, 2002                       8

10.11         Second Amendment to Loan and Security Agreement, dated February 25, 2003                             9

10.12         Third Amendment to Loan and Security Agreement, dated as of August 30, 2003                          10

10.13         Fourth Amendment to Loan and Security Agreement, dated as of November 14, 2003

10.14         Industrial Lease dated December 5, 2003 between Point Blank Body Armor Inc. and Atlantic Business
              Center L.C.

10.15         Fifth Amendment to Loan and Security Agreement, dated as of December 22, 2003

10.16         Subscription and Restructuring Agreement dated as of December 19, 2003 by and among Point Blank
              Body Armor Inc., Hightower Capital Management, LLC and DHB.


                                       44


<PAGE>


10.17         Sixth amendment to Loan and Security Agreement dated March 15, 2004 with LaSalle Business Credit
              LLC

14            Code of Ethics

21            List of Subsidiaries

31.1          Certification of Chairman and Chief Executive Officer pursuant to Section 302 of The
              Sarbanes-Oxley Act of 2002

31.2          Certification of Chief Financial Officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002

32.1          Certification of Chairman and Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted
              pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2          Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to
              Section 906 of the Sarbanes-Oxley Act of 2002

              Notes to Exhibit Table:

1             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.

2             Incorporated by reference to Post-Effective Amendment No. #2 to the Company's Registration
              Statement on Form SB-2, File #33-59764, filed on Jan 31, 1997.

3             Incorporated by reference to the Company's Form 10-K for the year ended December 31, 2000, filed
              March 30, 2001.

4             Incorporated by reference to the Company's Registration Statement on Form S-8 filed on or about
              November 6, 1995.

5             Incorporated by reference to the Company's Current Report on Form 8-K filed March 23, 2000.

6             Incorporated by reference to the Company's Current Report on Form 8-K filed January 28, 2002.

7             Incorporated by reference to the Company's Form 10-Q for the quarter ended September 30, 2001,
              filed November 14, 2001.

8             Incorporated by reference to the Company's Current Report on Form 8-K filed July 12, 2002.

9             Incorporated by reference to the Company's Current Report on Form 8-K filed February 25, 2003.

10            Incorporated by reference to the Company's Form 10-Q for the quarter ended September 30, 2003,
              filed November 14, 2003.

</TABLE>



                                       45