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

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

                   For the fiscal year ended December 31, 1998

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

 

 For   the    transition    period  from_______ to________

                           Commission File No. 0-22429

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

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

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

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

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

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

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B  and  no  disclosure  will  be  contained,  to the  best  of the
registrant's  knowledge,  in the  definitive  proxy  or  information  statements
incorporated  by Reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB [ x ]

         Issuer's revenues for the most recent fiscal year: $41,834,425

Aggregate  market value of the voting stock held by  non-affiliates  computed by
reference  to the price at which the stock  sold,  or the  average bid and asked
price of such stock, as of March 22, 1999: $15,296,076.

Number of shares outstanding of the issuer's common equity, as of March 20, 1999
(exclusive of securities convertible into common equity) : 25,627,440
<PAGE>
Item 1.  BUSINESS
                               Business - History

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

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

DHB Armor Group

         The Company  entered the  body-armor  business by acquiring PACA at the
end of 1992. In August 1995, the Company, through a wholly-owned subsidiary, now
known as Point Blank Body Armor, Inc., a Delaware  corporation  ("Point Blank"),
acquired from a trustee in bankruptcy  certain assets (the "Point Blank Assets")
of Point Blank Body Armor, L.P., and an affiliated company  (collectively,  "Old
Point Blank"),  for a cash payment of  $2,000,000,  which was provided by a loan
from Mr.  Brooks.  Old  Point  Blank  had been a leading  U.S.  manufacturer  of
bullet-resistant  garments and related  accessories.  On February 28, 1997,  the
Company  exchanged a total of 666,000 shares of its  registered  common stock to
acquire 100% of the common stock of  Zunblindage  S.A. a privately  held Belgian
corporation.  In January 1999, the Company changed the name of Zunblindage  S.A.
to Point  Blank  International  SA. PB Int'l is engaged in the  manufacture  and
distribution of bullet  resistant  equipment,  apparel and related  products and
specializes in marketing,  distribution and sales of such products in Europe and
the Middle East. On February 9, 1998, the Company  purchased the common stock of
two privately  held Delaware  corporations  for $4.8 million which was funded by
loans from Mr.  Brooks.  See - "The  Company - Recent  Acquisitions".  LAP is an
innovative company having unique technological  capabilities in the development,
design,  testing and  manufacture of composite hard armor systems.  LAP has over
ten years of experience in the performance of armor research and development for
the U.S.  Department of Defense,  and more than seven years of experience in the
design,  manufacture testing and sale of products for specific armor systems and
components.  LAP's composite hard armor systems are based on patented and highly
proprietary ceramic / metal composite systems.
<PAGE>
DHB Sports Group

         On  December  20,  1994,  the  Company,   through  a  newly  organized,
wholly-owned subsidiary, DHB Acquisition, Inc., a Florida corporation, purchased
(the "Transaction") the assets (the "NDL Assets"),  free of all liabilities,  of
NDL Products,  Inc., a Delaware corporation and also purchased the assets of its
wholly-owned  subsidiaries  (collectively,  the "Seller"), for a cash payment of
$3,080,000,  net of cash  acquired,  at an auction held pursuant to Chapter 7 of
the   Bankruptcy   Code.   Prior  to  the   Transaction,   the   Seller   was  a
debtor-in-possession  under Chapter 11 of the United States Bankruptcy Code. The
transaction was consummated pursuant to an order of the United States Bankruptcy
Court,  Southern  District of Florida,  dated  December  20,  1994.  The Company
changed the name of DHB Acquisition, Inc., to "NDL Products, Inc."

         The Company expanded into the orthopedic products business by acquiring
the outstanding  capital stock of Orthopedic  Products Inc.,  ("OPI"), a Florida
corporation. The Company issued 270,000 shares of its registered Common Stock in
March 1996, in two  transactions,  in exchange for all the  outstanding  capital
stock of OPI. DHB initiated a lawsuit  against the former  shareholders  of OPI,
and as a result of that lawsuit being  settled by mediation,  45,250 shares were
returned.

DHB Electronics Group

         The other Delaware corporation  purchased by the Company on February 9,
1998, is Lanxide Electronics Components, Inc. ("LEC"). LEC designs, manufactures
and  sells  unique  and  heavily  patented  thermal  management,  packaging  and
structural components for the electronics  industry.  LEC's current products are
primarily based on silicon carbide / aluminum  composites which provide a unique
combination of desirable properties including,  high thermal  conductivity,  low
coefficient  of  thermal  expansion,  light  weight  and high  stiffness.  These
properties are ideally suited to provide a number of products including, but not
limited to, power module and amplifier heat sinks and baseplates, microprocessor
package lids,  heat  spreaders,  printed wiring board cores,  carriers,  package
bases and fluid cooled heat sinks. LEC has over seven years of experience in the
design,  manufacture  and sale of  electronic  component  parts  in the  hi-tech
electronics  industry.  On  May  29,  1998,  the  Company  acquired  a  Japanese
subsidiary,  DHB KK for a cash payment of $375,000.  This company  markets LEC's
products in Japan.

Recent Developments

         Point Blank  International.  In January  1999,  the name of our Belgian
Company,  Zunblindage S.A., was changed to Point Blank  International  S.A. ("PB
Int'l")

         NASDAQ Small Cap Listing.  On September 4, 1998,  the  Company's  stock
became listed on the NASDAQ Small Cap MarketTM listing.  The listing was granted
pursuant to satisfying  certain  conditions  the NASDAQ  Listing  Qualifications
Panel  required.  The  following  is a list of the  conditions  which the NASDAQ
required:  (1) David Brooks, the Chairman,  CEO, and majority shareholder placed
all shares beneficially owned by him into a three year voting trust administered
by a an  independent  trustee  who votes the shares  according  to the  majority
shareholders vote; (2) David Brooks will not buy or sell any shares beneficially
owned  by him for a three  year  period  (3)  David  Brooks  resigned  as  Chief
Executive  Officer;  (4)  David  Brooks  resigned  as a  Director  of the  Audit
Committee;  and (5) David Brooks would be Co-Chairman  along with an independent
Board Member; (6) Jeffrey Brooks,  David's brother, would lower his ownership of
the Company to not more than 4.9 percent of the  outstanding  shares by July 27,
1999, forgo buying any additional  shares of the Company for three years and all
the shares owned by him were placed into a Voting Trust.
<PAGE>
         Exclusive license and trademark agreement with Magnesystems. On January
16,  1998,  the Company  signed an exclusive  (except for certain  rights in the
field of  products  for  horses)  licensing  agreement,  to  make,  use and sell
magnetic  products  covered by certain US and Canadian  patents,  along with the
technical  know how  related  to the  magnetic  products  in the  possession  of
Magnesystems.

         Buyback of Common Stock. On February 4, 1998, the board of Directors of
the Company  announced its  authorization  for the Company to purchase up to one
million  additional shares of its common stock on the open market,  from time to
time, at its  discretion.  The Board of Directors had previously  authorized the
repurchase  of one million  shares of its common stock in October 1996. To date,
the  Company  has  repurchased  and  retired  1,284,854  shares  at  a  cost  of
$4,915,419.

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


                                    BUSINESS

DHB Armor Group ("the Armor Group")

         Products.  The Armor Group can be further  divided into the "soft" body
armor group  ("Soft  Armor  Group")  and the "hard"  armor  group  ("Hard  Armor
Group").  Point Blank, PACA, and PB Int'l comprise the soft body armor group and
they  manufacture  two basic types of body armor:  concealable  armor,  which is
designed to be worn beneath the user's  clothing,  and tactical armor,  which is
worn  externally  and is  designed to protect  against  more  serious  ballistic
threats. LAP is known as the "hard' armor group. Hard armor is manufactured from
ceramic/metal  composite  materials for use in various vehicles including ground
vehicles and aircraft, as well as personal body armor.

         With regards to the Soft Armor Group, both the concealable and tactical
vests are manufactured using multiple layers of KevlarTM and/or a combination of
KevlarTM, Gold FlexTM, SpectrashieldTM,  SpectraFibreTM,  ballistic fabric, then
covered and fully enclosed in an outer carrier.  Although some products of Point
Blank and PACA are competitive with each other, brand recognition, brand loyalty
and distribution  channels are expected to minimize the extent to which products
of the two companies may impact each other's sales.

         Concealable  vests are  contoured to closely fit the user's body shape.
The Soft Body Armor Group also sells a line of vests designed  specifically  for
the body shapes of women users.  Male vests are  manufactured  in standard sizes
and may also be custom-made.  Vests are fastened using Velcro-elastic strapping.
Concealable  vests may be  supplemented  for additional  protection and supplied
with a shock plate,  such as  SpectrashieldTM  trauma  plates or a new series of
plates which are  manufactured  by the Hard Body Armor  Group.  These plates are
becoming  more  integral  with the  supply of  concealable  armor.  Vests may be
supplemented with an additional armor plate made by the Hard Armor Group,  which
consists of either metal or certain  composite  materials  to withstand  greater
threat  levels  than the vest is  otherwise  designed  to protect  against.  The
DiamondliteTM  thin  plate is an ultra  lightweight  plate,  manufactured  using
proprietary  patented  processes  which when combined with Level II  ballistics,
achieves a  significant  leap in ballistic  protection  from  multiple hits from
steel penetration bullets, AK-47, 7.62 x 39 mm and similar threats.
<PAGE>
         During 1998, Point Blank introduced more than fifteen new NIJ (National
Institute of Justice)  certified vests.  Among the more notable was the updating
of the original  Hi-Lite line which now provided  Point Blank's law  enforcement
customers with exceptional  protection  (under one pound per square foot).  This
was a remarkable  improvement of an existing  excellent design and will continue
to be a Point Blank asset in the future.  In addition,  the  introduction of the
Fusion line provided Point Blank's  federal law  enforcement  customers with the
highest level of ballistic  protection in all NIJ threat levels available in the
body armor industry  today - incomparable  in today's body armor industry by all
standards.

         DHB Armor Group also introduced a new  Corrections  body armor division
in 1998.  DHB Armour Group  developed  and  distibuted  new catalogs  which were
devoted  exclusively to the Correctional Law Enforcement  Community.  A customer
service  department was expanded to add  representatives  who would support only
the Correctional division. The Counterpoint series of vests and Deflex series of
vests were a key product  introduction  in  conjunction  with this new division.
Counterpoint  combines  ballistic  protection  with  anti-stab  protection in an
unforeseen,  versatile manner. DHB Armor Group's full line of correctional vests
for anti-stab protection are derived from extensive research and the realization
that correction  officers have specific needs unique to law  enforcement.  Point
Blank was awarded the Delaware Corrections Officers Association contract.

         Point Blank's Goldflex Level II was rated #1 in wearability and comfort
during  yearlong  blind wear  testing by New York City  Police  Department  male
officers while PACA was most wearable by the female  officers.  Combined,  Point
Blank and PACA were the recipients of a five million dollar contract  awarded by
the New York City Police Department,  one of the most prestigious contracts ever
awarded in the industry (with possibly the exception of Interceptor.)

         With the updating of the Marine Corps  standard issue Flak Jacket - the
largest and most  progressive  contract of its kind was awarded to Point  Blank,
the  Interceptor  program.  This contract has the  potential  value in excess of
$150,000,000. In addition, although Interceptor has already been accepted by the
Marine Corps, with the cooperation of manufacturers such as DuPont,  Point Blank
is able to continue with unlimited, non-stop research and development to further
optimize the Interceptor project and levels of performance.

         As a result  of Point  Blank's  contract  awards  during  1998,  and in
anticipation of the increased volume with our government contracts,  Point Blank
has added an additional Gerber machine,  a computerized  cutting machine,  which
will more than  double  the  cutting  capacity  of the plant.  This will  enable
manufacturing to meet the higher  production  levels due to the increased demand
for Point Blank's products.

         PACA was awarded a  prestigious  contract  from the State of California
with a value in excess of $1.8 million. This contract is further proof of PACA's
proven ability to design, develop and produce innovative,  concealable soft body
armor at competitive  prices.  One of PACA's new innovative  products utilizes a
new weave in ballistic  fabric which resulted in a lightweight  ballistic  vest.
Other contracts awarded to PACA were the US Federal Drug Enforcement  Agency and
the US  Immigration  and  Naturalization  Service  contract which it shares with
Point Blank.

         PACA's wholesale prices for concealable vests range from  approximately
$150 to approximately  $375. Point Blank's  wholesale prices for its concealable
vests range from  approximately  $215 to $540,  and PB Int'l's prices range from
$300 to $500. The Soft Body Armor Group expects to continue these price levels.
<PAGE>
         Tactical  vests are  designed to give  all-around  protection  and more
coverage around the neck,  shoulders and kidneys than concealable  vests.  These
vests contain pockets to incorporate small panels constructed from, for example,
hard composite materials and high-alumina  ceramic tiles (made by the Hard Armor
Group),  all of which  provide  additional  protection  against high power rifle
fire.  Tactical vests come in a variety of styles,  including  tactical  assault
vests,  high-coverage armor, and flak jackets,  each of which is manufactured to
protect against varying degrees of ballistic threats.  The DiamondliteTM  series
of plates also includes a tactical  plate made from novel  composite  materials.
Specifically,  DiamondliteTM  tactical plates are made from DIMOX-HTTM composite
armor, a high  performance  ceramic matrix  composite  manufactured  by the Hard
Armor  Group.  The  DiamondliteTM  Tactical  Plate is only 1/2" thick and weighs
under six pounds, far less than the commonly used alternative plates which weigh
8-10  pounds.  According  to NIJ body armor  Standards,  the  tactical  plate is
certified  as Level IV when used in  conjunction  with a Level IIIA  vest.  PACA
hired an ex-navy seal and former police training  officer,  Howard Wasdin to add
his  expertise  in  tactical  body  armor and head the sales  and  research  and
development  for  PACA's  tactical  series.  PACA's  wholesale  prices  of these
products range from  approximately $370 to approximately  $1,200.  Point Blank's
wholesale  prices for its tactical  garments  range from  approximately  $500 to
$1,350,  and PB Int'l prices range from $700-$1,400.  The Armor Group expects to
continue these price levels.

         The Soft Armor Group's  other  body-armor  products  include a tactical
police  jacket,  military  field  jacket,  executive  vests,  NATO-style  vests,
fragmentation vests and attack vests. Bomb and fragmentation vests and pants are
designed to  specifications  in U.S.  government  contracts to offer  protection
against materials and velocities  associated with the fragmentation of explosive
devices such as grenades and artillery shells.  PACA was awarded a contract from
the United  States  Army  Soldier  Command for the design and  development  of a
technologically  advanced  countermine  suit  "Basis  P31 CE".  This  five  part
contract will reach revenues in excess of $8.5 million. In general,  concealable
vests sold to law enforcement  agencies and  distributors are designed to resist
bullets from handguns. Bomb gear utilizes a variety of designs and materials and
patterns slightly  different from  bullet-resistant  vests. The Soft Armor Group
also manufactures a variety of accessories for use with its body armor products.

         The Hard Armor Group's or LAP's products,  which are primarily based on
novel  and  patented  ceramic  matrix  composite  technologies,  are  used  when
ballistic  protection  must be achieved using  economically  priced light weight
armor.  When weight is not critical,  lower cost metallic armors are used. While
weight is important in the full spectrum of armor  protection,  i.e., small arms
to tank rounds,  the most important  applications  for LAP's armor,  in the near
term, are for  protection  against  threats up to 14.5 mm armored  piercing (AP)
projectiles  and heavy  artillery  fragments.  The most  important  markets  are
personnel  armor,  aircraft  armor and armor for light land  vehicles  including
armored  personnel  carriers  (APC).  LAP is  fundamentally  a  composite  armor
company,  i.e., LAP makes ceramic matrix  composite  materials which are used as
hard  materials  in armor and also makes  armor  panels and parts which use hard
materials,  e.g., ceramic matrix composites,  ceramics and metals in conjunction
with fiber reinforced plastic or metals.

         Initial  production  of armor  started in 1991 during the Gulf War. LAP
manufactures  ceramic matrix composite tiles and armor panels for U.S.  military
cargo  aircraft.  In 1997  LAP  developed  and  commercialized  personnel  armor
products  combining  ceramic  composite plates  encapsulated  within a specially
designed fiber reinforced composite.
<PAGE>
         Potential Product Liability.  The products  manufactured or distributed
by the Armor Group, e.g.,  bullet-resistant  vests, are used in situations which
could result in serious personal injuries or death, as a potential result of the
failure of such  products,  or  otherwise.  The Armor  Group  maintains  product
liability  insurance for PACA,  Point Blank and LAP in the amount of $20,000,000
each per  occurrence,  and  $22,000,000  in the  aggregate  less a deductible of
$5,000 for each company.  PB Int'l maintains product liability  insurance in the
amount of  $2,000,000  for each  occurrence.  There is no  assurance  that these
amounts  would be sufficient  to cover the payment of any  potential  claim.  In
addition,  there is no assurance that this or any other insurance  coverage will
continue to be available or, if available,  that PACA,  Point Blank and PB Int'l
would be able to obtain it at a reasonable cost. Any substantial  uninsured loss
would have to be paid out of the Armor Group's  assets,  as applicable,  and may
have a material adverse effect on the Company's  financial condition and results
of  operations on a  consolidated  basis.  In addition,  the inability to obtain
product liability  coverage would prohibit PACA, Point Blank, LAP or PB Int'l as
applicable, from bidding for orders from certain governmental customers, because
many governmental agencies require such coverage,  and any such inability to bid
would have a material  adverse effect on the Company's  financial  condition and
results of operations on a consolidated basis.

         Raw  Materials  and  Manufacturing.  The Soft Armor Group  manufactures
substantially all of their respective  bullet-,  bomb- and  projectile-resistant
garments and other  ballistic-protection  devices. The primary raw material used
by the Soft  Armor  Group  in 55% of its  manufacturing  of  ballistic-resistant
garments  is  Kevlar(TM),  a patented  product of E.I.  Du Pont de Nemours & Co.
Spectrashield(TM), GoldFlexTM, and SpectraFibre(TM), which are patented products
of  Allied  Signal  are  used  in  approximately  45% of all  vests.  GoldFlexTM
represents  the latest in ballistic  technology  from Allied  Signal.  Utilizing
Allied Signal's patented, non-woven Shield technology,  GoldFlexTM is softer and
thinner  than  traditional  ballistic  materials  while  offering the maximum in
multi-hit  and  angled  shot  protective  capabilities.  The  Soft  Armor  Group
purchases  cloth  woven from these  materials  from  three  independent  weaving
companies.  The woven fabric is placed on tables,  layered  over  patterns for a
particular  component of a garment (for  example,  the front or back of a vest),
cut using  computerized  cutting  machines  and  electric  knives,  and then are
stitched together.  The Soft Armor Group utilizes several hundred patterns based
upon size,  shape and style  (depending  upon  whether the garment is a bullet-,
bomb-    or    fragmentation-resistant     garment).    KevlarTM,    GoldFlexTM,
SpectrashieldTM,  SpectraFibreTM and Twaron differ in their pliability, strength
and cost, such that the materials are combined to suit a particular application.
In the opinion of  management,  the Soft Armor Group enjoys a good  relationship
with its suppliers of KevlarTM, SpectrashieldTM and SpectraFibreTM. If, however,
Du Pont or its European  licensee were to cease, for any reason,  to manufacture
and  distribute  the  bullet-resistant  fabrics,  the Soft Armor  Group would be
required to utilize other fabrics,  and the  specifications  of some of the Soft
Armor  Group's  products  would have to be modified.  Until the Soft Armor Group
selected an alternative  fabric and appropriate  ballistic tests were performed,
its operations would be severely  curtailed and the Soft Armor Group's financial
condition and results of operations would be adversely affected.

         The Hard  Armor  Group  manufactures  all of its  composite  hard armor
materials.  Products include individual  ballistic tiles that measure 4" x 4" up
to composite  ballistic  panels that measure 36" x 36". Key  ingredients  in the
manufacture of hard armor materials  include  silicon  carbide and aluminum,  as
well as many of the materials used by the Soft Armor Group.  While many of these
materials are supplied by sole sources, management believes that these materials
will continue to be available to the Hard Armor Group.
<PAGE>
         The Armor Group  purchases  other raw materials used in the manufacture
of their products from a variety of sources and believes  additional  sources of
supply for these materials are readily available.

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

         Customers.  The Soft Armor  Group's  products are sold to United States
law enforcement agencies and the military and internationally to governments and
distributors.   Sales  to  domestic  law  enforcement  agencies,   security  and
intelligence  agencies,  police  departments,  federal  and  state  correctional
facilities, highway patrols and sheriffs' departments accounted for 44% and 42%,
respectively,  of the Soft Armor  Group's  revenues  in each of the years  ended
December 31, 1998 and 1997. One customer,  the New York City Police  Department,
accounted  for  approximately  8% and 5% of PACA's  sales  for the  years  ended
December  31,  1998 and  1997,  respectively.  New York City  Police  Department
accounted  for  approximately  14% of Point  Blank's  sales  for the year  ended
December  31,  1998.   Besides   domestic   customers,   Point  Blank  also  has
international  customers  which  accounted  for 6.24 % and 17% of Point  Blank's
sales for the years ended December 31, 1998 and 1997  respectively.  The loss of
any one customer would not be expected to have a significant  impact on the Soft
Armor  Group's  continuing  financial  results,  due to the Soft  Armor  Group's
constant submission of bids for new contracts.  Sales to the United States armed
forces  directly or as a  subcontractor  accounted for 5% and 8% of revenues for
the years ended December 31, 1998 and 1997, respectively.

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

         PACA and Point Blank,  as GSA Contract  vendors,  are obligated to make
all sales  pursuant to such  contracts at its lowest unit price.  PACA's current
GSA Contract  expires July 31,  2001,  while Point  Blank's GSA Contract is from
July 31, 1997 through July 31, 2001.

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

         The Hard Armor Group  sells  composite  armor for  aircraft in the U.S.
military,  which has  already  defined  the need to armor a  specific  number of
additional  aircraft.  In addition to cargo aircraft sales, a major objective is
to add  sales in the  helicopter  armor  market.  LAP's  breast  plate  has been
selected by the U.S. Army for its' Land Warrior program.
<PAGE>
         Land vehicle armor is currently  dominated by metal  systems,  however,
there is an emerging  recognition of the importance of weight reduction for land
vehicle armor which will create an  opportunity  for light weight  ceramic armor
systems. Land vehicles represent a very large opportunity for LAP products.

         Marketing and Distribution. The Armor Group employs 12 customer support
representatives,  5 regional  sales  managers and in addition has 40 independent
sales representatives who are paid solely on a commission basis. These personnel
and  distributors  are responsible for marketing the Soft Armor Group's products
to law enforcement agencies in the United States. These individuals and entities
often call upon personnel  within these agencies who are  responsible for making
purchasing  decisions  in order to  provide  information  concerning  the  Armor
Group's   products.   Sales  are  made  primarily   through   independent  local
distributors. However, in areas in which there are no suitable distributors, the
Armor Group will fill orders directly.

         Substantially  all of the Soft Armor  Group's  advertising  is directed
toward law  enforcement  agencies in the form of catalogs,  trade  magazines and
trade  shows.  The Soft Armor Group  advertises  its  products  primarily in law
enforcement trade magazines and at trade shows.  During the years ended December
31, 1998 and 1997,  advertising  expenditures  were  approximately  $465,000 and
$697,000, respectively.

         Government  and  Industry   Regulations  and  Standards.   Bullet-  and
bomb-resistant garments and accessories manufactured and sold by the Armor Group
are  not  currently  the  subject  of  government   regulations.   However,  law
enforcement  agencies and the military  publish  invitations  for bidding  which
specify certain  standards of performance  the bidders'  products must meet. The
National  Institute  of  Justice,  under  the  auspices  of  the  United  States
Department  of  Justice,  has  issued a  revised  voluntary  ballistic  standard
(NIJ0101.03) for  bullet-resistant  vests of several categories.  The Soft Armor
Group  regularly  submits its vests to  independent  laboratories  for ballistic
testing under this voluntary ballistic standard and all of its products have, at
the time of  manufacture,  met or exceeded  such  standards in their  respective
categories.

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

         Competition.   The  ballistic-resistant   garment  business  is  highly
competitive  and the number of United  States  manufacturers  is estimated to be
less  than 20.  Management  is not aware of  published  reports  concerning  the
market,  and most  companies are privately  held.  Nevertheless,  the Soft Armor
Group  believes,  based upon its  experience in the  industry,  that the largest
manufacturer  of  ballistic-resistant  garments in the United States is the Soft
Armor Group. In the future, the Company may face other and unknown  competitors,
some of whom may have  substantially  greater  financial,  marketing  and  other
resources than the Company.
<PAGE>
         The  Soft  Armor  Group   believes  that  the  principal   elements  of
competition  in the  sale of  ballistic-resistant  garments  are its  innovative
design,  price and quality.  In dealings with law  enforcement  agencies and the
military,  PACA,  Point  Blank,  and PB Int'l  bid for  orders  in  response  to
invitations for bidding which set forth  specifications for product performance.
The Soft Armor Group believes its products are  competitive as to both price and
quality  with  the  products  of  its  competitors   having  similar   ballistic
capabilities. The Soft Armor Group's ability to remain competitive in pricing is
due to its relatively lower labor and production costs. In addition, the Company
believes that the Soft Armor Group enjoys a favorable reputation in the industry
with over 20 years of supplying  federal,  state and municipal  governments  and
agencies. These factors, combined with the financial resources made available to
the Soft Armor Group by the Company,  which are expected to continue will reduce
interest  expenses,   improve  production  efficiencies  and  capacity,  control
purchasing costs and permit the Soft Armor Group to viably compete.

         The Hard Armor Group  competes  against  traditional  ceramic and metal
materials.  The  Hard  Armor  Group  believes  that  its  advantage  lies  in  a
combination of ballistic  performance and price. The primary competitive threats
would be high priced  ceramic  materials  (e.g.  boron  carbide)  becoming  less
expensive and / or lower priced metals or ceramics (e.g. aluminum oxide) gaining
in ballistic performance.

         The Armor  Group's  Backlog.  As of  February  28,  1999 the backlog is
approximately  $16,200,000.  As of  December  31,  1998,  the Armor  Group had a
backlog of approximately  $16,200,000,  as compared to $4,500,000 as of December
31, 1997. Backlog at any one date is not a reliable indicator of future sales or
sales trends.

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

         Employees.  As of February 28, 1999,  there were three  officers of the
Armor Group,  18 persons  employed in supervisory  capacities,  287 employed for
manufacturing,  shipping  and  warehousing,  19  technical/research  development
personnel and 30 were office  personnel.  All of the Armor Group's employees are
employed  full time. In the opinion of  management,  the Armor Group enjoys good
relationships with its employees.


DHB SPORTS GROUP.

         On December 20, 1994, the Company,  through a wholly-owned  subsidiary,
acquired  the NDL  Assets for a cash  payment of  $3,080,000,  and  renamed  the
acquiring  subsidiary  "NDL  Products,  Inc." NDL is  engaged in  business  as a
manufacturer and distributor of specialized  protective  athletic  equipment and
apparel.  NDL's protective sports apparel and fitness products and related items
are sold  under  the brand  names  NDL(TM),  Grid(TM),  Magnesystems,  Dr.  Bone
Savers(TM),  Hitman(TM) and Flex Aid(TM). NDL has hired new executives for sales
and marketing,  production,  and new product research and  development.  NDL has
moved  its  corporate,  manufacturing  and  warehouse  operations  into a single
building  in Oakland  Park,  Florida.  See  "Properties  -  NDL/Point  Blank/OPI
Facility." In March 1996, the Company exchanged a total of 270,000 shares of its
<PAGE>
common  stock with a value of  approximately  $579,000  to  acquire  100% of the
common  stock  of  Orthopedic  Products  Inc.,  a  Florida   corporation.   This
transaction  was accounted for by the purchase  method of accounting.  In August
1996, the Company commenced a lawsuit against the former shareholders of OPI and
as a result  45,250  shares of the  Company's  common  stock were  returned  and
retired. OPI is engaged in the manufacture and sale of orthopedic products,  and
the   distribution  and  sale  of  general  medical  supplies  to  orthopedists,
orthopedic  clinics,  hospitals,  sports medicine centers and orthopedic medical
practices.

         DHB Sports Group's Marketing and Distribution. The Sports Group employs
6 sales  executives who are responsible for sales  throughout the United States,
Western  Europe,  Asia,  the Middle East and Latin  America,  and  supervise  30
independent  sales  representatives  who are paid solely on a commission  basis.
These representatives  solicit customers,  who are generally major retailers and
distributors.   Sports  Group  also  sells  to  local  distributors  and  has  a
telemarketing  staff of 6. 

         DHB Sports Group's Potential Products  Liability.  Some of the products
manufactured  or  distributed  by the Sports Group are used in situations  where
serious personal injuries could occur,  whether on account of the failure of the
Sports  Group's  products  or  otherwise.  The Sports  Group  maintains  product
liability  insurance in the amount of $20,000,000 per occurrence and $22,000,000
in the aggregate,  including legal fees, subject to a $5,000  deductible.  There
can be no assurance  that these  amounts would be sufficient to cover payment of
potential claims, and there can be no assurance that this or any other insurance
coverage would continue to be available, or if available,  that The Sports Group
would be able to obtain it at reasonable  cost. Any  substantial  uninsured loss
would have to be paid out of The Sports Group's assets and could have a material
adverse effect on the Company's financial condition and results of operations.

         Employees. As of February 28, 1999, there was one officer of the Sports
Group,  7  persons   employed  in  supervisory   capacities,   86  employed  for
manufacturing,  shipping and warehousing,  and 19 were office personnel.  All of
the  Sports  Group's  employees  are  employed  full  time.  In the  opinion  of
management, The Sports Group enjoys good relationships with its employees.

DHB ELECTRONICS GROUP

         On February  9, 1998,  the Company  purchased  the common  stock of two
privately held Delaware  Corporations for $4.8 million which was funded by loans
from Mr. Brooks.  One of these  corporations was Lanxide  Electronic  Components
Inc. and the other was Lanxide  Armor  Products  Inc. LEC is a  manufacturer  of
unique and patented thermal management, packaging, and structural components for
the electronics industry.  LEC has over seven years of experience in the design,
manufacture,  and sale of products in the electronics industry. On May 29, 1998,
the  Company  acquired a  Japanese  subsidiary,  DHB KK,  for a cash  payment of
$375,000. This Company markets LEC's products in Japan.

Products  - LEC's  current  products  are  based  on  silicon  carbide  particle
reinforced   aluminum  composite   technology  applied  to  thermal  management,
packaging,  and structural components for the electronics industry.  The silicon
carbide/aluminum   composites   provide  a  unique   combination   of  desirable
properties:  High thermal  conductivity,  low coefficient of thermal  expansion,
light weight, and high stiffness. These properties are ideal for products useful
<PAGE>
in a wide variety of electronic  applications:  Power Module and Amplifier  Heat
Sinks or Baseplates,  microprocessor  package lids and heat  spreaders,  printed
wiring board cores, carriers,  package bases, and fluid cooled heat sinks. Power
Module and Amplifier Heat Sinks provide  excellent heat  dissipation and thermal
expansion  characteristics  which  minimize  thermal  stresses.  These  features
provide  both  high  performance  and  great   reliability  when  used  in  this
application.  Microprocessor  Package  Lids and Heat  Spreaders  have low  cost,
provide heat dissipation,  and matched  expansion  properties which are critical
characteristics  for these components.  LEC's  lightweight  Printed Wiring Board
Cores are used extensively for constraining surface mount assemblies, where they
provide  improved  reliability,   excellent  thermal  performance,   and  weight
reductions of up to 70% of conventional  cores. LEC's carriers provide high heat
dissipation  and weight  savings,  while matching the thermal  expansion of many
semiconductor  devices  and  ceramic  substrates.  Major  weight  savings can be
obtained by  substituting  LEC's  package  bases for those made of  conventional
materials for various package  applications.  For applications  requiring higher
levels of heat  dissipation,  LEC produces unique  flow-through  heat sinks with
internal cooling passages for air or liquid cooling.  LEC markets these products
under the trade names PRIMECOOL(TM) and PRIMEFLO(TM) composite components.

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

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

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

LEC has the lowest production costs. Based on competitive bidding experience and
feedback from customers who have closely evaluated alternative SiC/A1 processing
methods,  LEC's technology appears to offer the lowest production costs for high
volume  applications.  LEC will  continue to  aggressively  drive down its costs
through  improved  manufacturing  processes  and  yields  to  maintain  its cost
advantage.
<PAGE>
LEC has received credibility from major product acceptances.  In particular,  to
name only a few,  the  selection of LEC's  products by Toyota Motor  Company and
Delco  Electronics  for their  power  modules  and by  Motorola  for the Iridium
satellite network provides strong confirmation of product  effectiveness for new
customers.

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

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

LEC's Potential Products Liability. Most of the products manufactured by LEC are
used as components in a wide variety of thermal  management  applications in the
electronics industry. LEC maintains product liability insurance in the amount of
$20,000,000  per occurrence and  $22,000,000 in the aggregate,  including  legal
fees,  subject  to a $5,000  deductible.  There can be no  assurance  that these
amounts would be sufficient to cover payment of potential claims,  and there can
be no assurance that this or any other  insurance  coverage would continue to be
available,  or if  available,  that LEC would be able to obtain it at reasonable
cost. Any  substantial  uninsured loss would have to be paid out of LEC's assets
and could have a material  adverse effect on the Company's  financial  condition
and results of operations.

Backlog.  As of February 28, 1999, LEC's backlog was  approximately  $1,600,000.
Backlog at any one date is not a  reliable  indicator  of future  sales or sales
trends.

Employees.  As of August 31, 1998,  there was one officer of LEC, Inc., 5 people
employed in supervisory capacities, 22 employed for manufacturing,  shipping and
receiving.  All of LEC's  employees  are  employed  full  time.  LEC  shares the
administrative  staff with LAP.  In the opinion of  management,  LEC enjoys good
relationships with its employees.

<PAGE>
Segment Information

 As described in detail above, the Company operates in three principal segments:
Ballistic-resistant    equipment,    Electronic    Components   and   Protective
athletic/medical  equipment.  The  Company  designs,  manufacturers  and markets
products in both  segments as  described  above.  Financial  information  on the
Company's business segments was as follows:
<TABLE>
<CAPTION>

Net Sales                                             1998             1997
---------                                        ------------      -------------
<S>                                              <C>               <C>         
Ballistic-resistant equipment ..............     $ 28,695,127      $ 26,805,471
Electronic components ......................        8,398,107              --
Protective athletic & medical equipment ....        8,388,544         7,094,808
                                                 ------------      ------------
                                                   45,481,778        33,900,279
Less inter-segment sales ...................       (3,647,353)         (628,672)
                                                 ------------      ------------
Consolidated Net Sales .....................     $ 41,834,425      $ 33,271,607
                                                 ============      ============

Income from Operations
Ballistic-resistant equipment ..............     $  2,485,395     $  2,017,281
Electronic components ......................         (782,908)             --
Protective athletic & medical equipment ....        1,207,743           498,062
Corporate and Other (1) ....................       (1,508,027)       (1,039,316)
                                                 ------------      ------------
Consolidated Operating Income ..............     $  1,402,203      $  1,476,027
                                                 ============      ============

Identifiable Assets (2)
Ballistic-resistant equipment ..............     $ 23,743,604      $ 17,572,698
Electronic components ......................        5,749,438                --
Protective athletic & medical equipment ....        8,844,627         6,322,150
                                                 ------------      ------------
                                                   38,337,669        23,894,848
Corporate and Other ........................        4,762,866         3,779,781
                                                 ------------      ------------
Consolidated Net Assets ....................     $ 43,100,535      $ 27,674,629
                                                 ============      ============
</TABLE>
Foreign sales accounted for 12% and 10%,  respectively of the total revenues for
the  years  ended  December  31,  1998 and  1997.  Foreign  identifiable  assets
accounted for 5% and 2% of the total assets at December 31, 1998 and 1997.

(1)  Corporate and Other includes corporate general and administrative expenses

(2)  Corporate assets are principally cash, marketable securities,  and deferred
     charges


<PAGE>
Item 2.  PROPERTIES

         Corporate  Headquarters.  On January 17, 1996, the Company  purchased a
one-story building on a two acre lot at 11 Old Westbury Road, Old Westbury,  New
York, and relocated its corporate  headquarters to that site on or about January
19, 1996.

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

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

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

         Lanxide  Facility.  LAP and LEC lease an 82,000  square foot office and
warehouse  facility located at 1300 Marrows Road,  Newark,  Delaware and a 3,500
square foot  ballistic  testing range at Forge Dr.,  Newark,  Delaware  which is
adjacent to the  manufacturing  facility.  The  Marrow's  road space is occupied
pursuant  to a lease which  provides  for annual  base  rentals of $420,000  and
expires in March  2001.  In January,  1999 the  sublessor  filed for  bankruptcy
protection and the Trustee has not yet decided on the assumption or rejection of
the LAP or LEC leases.

 Item 3.  PENDING LITIGATION

         On or about July 1998,  DL Cromwell  Investments  Inc.  filed an action
against the Company in the United States District Court Eastern  Division of New
York in connection  with the breach of a consulting  agreement.  The Company and
its  attorneys  believe the case is  meritless  and on January 8, 1999 the Court
dismissed this action.
<PAGE>
         On or about January 20, 1999, DL Cromwell  Investments,  Inc. commenced
an action  against DHB Capital  Group Inc. and David Brooks in the Supreme Court
of New York, County of Nassau. The Plaintiff claims it was fraudulently  induced
to enter into a consulting  agreement  with the  defendant and for breach of the
consulting agreement and a supplemental  agreement and for quantum merit for the
fair and reasonable value of services  rendered.  The Company believes this case
is  meritless  and  intends  to  vigorously   defend  the  claim  and  pursue  a
counterclaim.

         The Company  initiated a lawsuit against Bioflex Medical  Magnetics for
patent  infringement,  unfair competition under federal and state law and breach
of contract.  Bioflex Medical Magnetics  commenced an action against NDL and DHB
Capital in the US District Court for the Southern  District of Florida.  Bioflex
claims patent and trademark  infringement,  as well as, breach of contract.  NDL
has  filed a claim  with  its  general  liability  insurance  carrier,  and they
acknowledge  that it is  their  duty  to  defend  this  action.  At  this  time,
discussions  regarding  a  comprehensive  settlement  of these two  actions  are
ongoing, which if completed, would provide for a net payment to NDL/DHB from the
Bioflex  parties.  However,  no assurance can be given that the above settlement
will be completed on favorable terms to the Company.

          Thomas "Hitman"  Hearns filed a complaint  against NDL Products in the
US  District  court  for  the  Eastern  District  of  Michigan  alleging  unfair
competition,  and  violation  of Mr.  Hearn's  right of  publicity  and  seeking
cancellation of NDL's "Hitman" trademark. NDL has filed a claim with its general
liability  insurance carrier.  Due to the preliminary status of this litigation,
counsel  to DHB is unable to predict  the  outcome  of this  litigation.  In the
opinion of management of DHB, the ultimate  outcome of this  litigation will not
have a material adverse effect on the financial condition of DHB.

         Barry Finn,  the former  president  of NDL  Products  Inc.,  obtained a
judgment in the amount of $330,825  against NDL  Products  Inc.  and DHB Capital
Group Inc. in March 1999. The Company intends to vigorously  appeal the Decision
and in the opinion of counsel,  the appellate issues  identified appear to favor
NDL.

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


Item 4.  Submission  of  Matters  to a Vote of  Security  Holders.  There was no
         meeting of Security Holders in 1998.


<PAGE>
                                     Part II

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

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

                                                       Low              High
                                                       ---              ----
 1997:      1st Quarter                                1.75             3.00
            2nd Quarter                                1.75             4.25
            3rd Quarter                                3.31             6.00
            4th Quarter                                3.25            4.375

1998        1st Quarter                                3.88            5.063
            2nd Quarter                                4.00            4.500
            3rd Quarter                                4.00            4.9375
            4th Quarter                                4.5625          5.6875

1999        1st Quarter                                 3.25           5.25
              (through  March 20, 1999)
                           
 
                  No cash dividend were declared for the last two years.  If the
Company  generates  earnings,  the Company will retain such earnings for further
development  of its business.  The payment of cash  dividends in the future will
depend upon the earnings and financial requirements of the Company and all other
relevant  factors,  including  approval  of  such  dividends  by  the  Board  of
Directors.

         The number of holders of record of the Company's  Common Stock on March
22,  1999 was 144;  however,  the number of holders of record  includes  several
brokers  and  depositories  for the  accounts  of their  customers.  The Company
estimates that shares of Common Stock are held by approximately 1,600 beneficial
owners.

         Recent Sales of Unregistered Securities

         In July and August 1998, the Company sold 60,000 shares of common stock
in a private placement to accredited  investors for proceeds of $240,000.  These
proceeds were used for general working capital requirements.  The offering price
per common share was $4.00.  There was no underwriting  discounts or commissions
and the Company relied on the exemption to registration provided by Regulation D
pursuant to the Securities Act of 1933, as amended.

         In November and  December  1998,  the Company  sold  686,500  shares of
common stock in a private  placement  to  accredited  investors  for proceeds of
$2,506,000.  These proceeds were used for general working capital  requirements.
The offering  price per common share was $4.00. A commission of $40,000 was paid
and the Company relied on the exemption to registration provided by Regulation D
pursuant to the Securities Act of 1933, as amended.
<PAGE>
Item 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND    
         RESULTS OF OPERATIONS


         The following analysis of the Company's financial condition and results
of  operations  should be read in  conjunction  with the  financial  statements,
including the notes thereto, contained elsewhere in this document.

General

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

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

         The  discussion  that  follows  must be read in  conjunction  with  the
financial statements, including the notes thereto.

Results of Operations

         Year Ended December 31, 1998, compared to year ended December 31, 1997.
Consolidated  net sales of the  Company  for the year ended  December  31,  1997
increased by  $8,562,818  to  $41,834,425.  This  increase was the result of the
acquisitions  made this year, as well as,  increased  growth in sales volume for
Point Blank and NDL.  Gross profit in 1998  increased  $3,349,932 to $14,467,614
The Company's gross profit percentage  increased from 33% in 1997 to 35% in 1998
due to increased sales volumes as well as a change in the product mix being sold
that  yield  higher  margins.  The  Company  had a  consolidated  net  income of
approximately  $130,000  for 1998 as  compared to a  consolidated  net income of
approximately  $1,541,000  for  1997.  The  decrease  in net  income in 1998 was
primarily  due  to  the  acquisition  of  Lanxide  Armor  Products  and  Lanxide
Electronic  Components.  The Company has cut their operating cost  significantly
throughout  1998 and  believes  these  companies  will not  impact net income as
negatively in 1999.
<PAGE>
         The Company's selling, general and administrative expenses ("S, G & A,"
expenses")  for 1998  increased to  $13,065,411  from  $9,641,655  in 1997. As a
percentage of net sales,  the S,G, & A expenses were 31% in 1998 compared to 28%
in 1997.  This  increase  of  approximately,  $3,424,000  was due  mainly to the
acquisitions made during 1998.

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

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

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

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

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

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

Liquidity and Capital Resources.

         The Company's primary capital  requirements over the next twelve months
are to assist PACA,  Point Blank,  NDL,  OPI, PB Int'l,  LAP, LEC and DHB KK, in
financing their working capital  requirements.  PACA, Point Blank, PB Int'l, LEC
and NDL sell the majority of their  products on 60 - 90 day terms,  and OPI, LAP
and DHB KK sells the  majority of its  products on 30-60 day terms,  and working
capital  is  needed  to  finance  the  receivables,  manufacturing  process  and
inventory.  Working  capital at December  31, 1998 was  $18,982,541  compared to
$13,621,014  at  December  31,  1997 and its ratio of current  assets to current
liabilities was 2.46:1 and 2.59:1, respectively, on such dates.
<PAGE>
         Cash, cash equivalents and marketable  securities totaled $1,048,445 at
December  31,  1998  compared  to  $2,586,690  at December  31,  1997.  The cash
generated by the net income for the year ended  December 31, 1997,  was utilized
to repurchase  the Company's  common stock in the open market which  amounted to
approximately  $2,145,000  for the year ended December 31, 1997. The Company has
repurchased and retired an additional  700,995 shares of its common stock in the
open  market for  approximately  $2,770,002  in 1998.  The Company has a loan of
$4,175,000 from the Bank of New York coming due in May 1999, bearing interest at
6.965% per year. This is a $1,500,000  increase over last year's line of credit.
There is no  assurance  that the Company will be able to roll over such loans as
they become due. The Company expects to renew this loan, at prevailing  interest
rates, when it becomes due.

         The Company's  principal  commitments at December 31, 1997 consisted of
obligations under their operating leases for its facilities.

         The Company's capital expenditures for 1998 were $1,423,267 as compared
to $801,150 for 1997.  The Company  purchased  LAP and LEC in February  1998 for
$4.8 million  dollars,  DHB KK in May 1998 for $375,000 and PB Int'l in February
1997 by issuing stock in lieu of a cash payment.

Special Note Regarding Forward-Looking Statements

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

Item 7.  Financial Statements: See Index to Consolidated Financial Statements
         Appearing in the Consolidated Financial Statement Annexed Hereto.

Item 8.  Changes In and Disagreements with Accountants on Accounting and 
         Financial Disclosure.

         On January 23, 1998, the firm of Paritz and Company P.A. was engaged as
the Company's principal certifying accountant,  replacing Capraro, Centofranchi,
Kramer & Co., P.C. who resigned December 9, 1997.

                                    Part III

Item 9.  Directors, Executive Officers, Promoters and Control Persons; 
         Compliance with Section 16(a) of the Exchange Act.

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

         David H. Brooks, age 44, has served as the Chairman and Chief Executive
Officer of the Company  since its  inception  in 1992.  In September  1998,  Mr.
Brooks  resigned  his  position  as CEO and COB as a  condition  for  listing on
NASDAQ. He is currently serving as Co-Chairman of the Board. Mr. Brooks has been
the  Chairman of the Board,  President  and a Director of Brooks  Industries  of
L.I., Inc. ("Brooks Industries"),  since October 1988, a New York corporation of
which he is the sole shareholder and through which he makes investments.  Brooks
Industries  engages in the venture capital  business and in securities  trading.
Mr. Brooks  received a bachelor of science  degree in  accounting  from New York
University  in 1976.  Since  that  time he has been  engaged  principally  as an
investor for his own account.

         Mary  Kreidell,  age 46,  has  served as  Treasurer,  Secretary,  and a
Director of the  Company  since its  inception.  She has  functioned  in various
positions within the Company's in operations and finances.  Mrs. Kreidell became
a Certified Public Accountant in 1991. She worked for Israeloff,  Trattner & Co.
CPA'S,  P.C., a certified public  accounting firm, for four years prior thereto.
She presently serves on the audit committee.

         Leonard  Rosen,  age 61,  is a  founder  of PACA and has  served as its
President since its inception in 1975. He is actively  involved in all facets of
PACA's  operations,  from  production to sales.  Mr. Rosen has experience in the
apparel  industry  for over 35 years.  He worked  closely  in the  research  and
development of ballistic-resistant  soft body armor and helmets with the Federal
Government,  including  serving  as a  charter  member  of  the  committee  that
conceived the National  Institute of Justice "0l"  Standard for  ballistic  body
armor.

         Sandra  Hatfield,  age 45,  has been  President  of Point  Blank  since
October 1996. For more than 5 years prior thereto, she was the Vice President of
Production at PACA.

         Joseph Giaquinto,  age 35, has been President of NDL since March, 1995.
For more  than 7 years  prior  thereto,  he was a Vice  President  of Sales  for
Tru-Fit Marketing, of Boston, Massachusetts.

         Gary Nadelman,  age 47, has been the president of Synari,  Inc., of New
York, NY, a privately held  manufacturer  and distributor of women's  sportswear
and other apparel,  for more than 5 years.  Mr.  Nadelman has been a director of
the Company  since 1995 and he became  Co-Chairman  of the Company in  September
1998. He presently serves on the audit committee.

         Morton A.  Cohen,  age 63,  has over ten years  experience  in  venture
capital and over twenty-five years experience in the public securities industry,
both as a securities analyst and a investment banker.  Also, he has successfully
managed  several  emerging  growth  companies.  Mr.  Cohen  has  been  Chairman,
President and Chief Executive  Officer of Clarion Capital Corp.  since 1982. Mr.
Cohen  served  as  Governor  of the  Montreal  Stock  Exchange,  is a  Chartered
Financial  Analyst and holder of a M.B.A. from the Wharton School of Business of
the  University of  Pennsylvania.  Mr. Cohen was a member of the Small  Business
Investment  Advisory of Small Business  Investment  Companies and is a member of
the Small Business  Investment  Advisory Council.  He is the Chairman of Monitek
Technologies,  Inc.  (NASDAQ),  Chairman of Cohesant  Technologies  (NASDAQ) and
Director of Gothic  Energy  (NASDAQ)  and a director of Zemex Corp  (NYSE).  Mr.
Cohen has been a director of the Company since 1996. He presently  serves on the
audit committee.
<PAGE>
         Robert Beckel,  age 49, has had an active consulting  practice advising
corporations,  trade  associations and labor unions on  communication  strategy,
consensus-building  and public  policy for the last twelve  years.  He is one of
Washington's  leading political analysts,  the on-air American political analyst
for Britian's  Independent  Television  Network. He also is the co-host of CNN's
Crossfire Sunday and a political analyst for CBS's This Morning Show. Mr.
Beckel became a director in January 1998.

         Because  of the  relatively  small size of the  Company,  the loss of a
senior  executive may have a materially  adverse effect upon the Company until a
suitable replacement can be found.

Item 10.  Executive Compensation.

         Summary  Compensation  Table.  The  following  table sets forth certain
summary  information  regarding the compensation of the executive officers whose
total salary and bonus for the year ended December 31, 1998, and 1997,  exceeded
$100,000:
<TABLE>
<CAPTION>
                                                                                                         Long-term
                                                                                                       Compensation
                                                                      Annual Compensation                  Awards
                                                             --------------------------------------   ----------------
                                                                                           Other        
                                                              Annual                    underlying        Securities
        Name and Principal Position         Year             Salary(1)       Bonus     Compensation    Options/SAR's(4)
        ---------------------------         ----             ---------       -----     ------------    ----------------
<S>                                         <C>               <C>             <C>           <C>               <C>  
        David Brooks,(2)                    1998               50,000
        Co-Chairman                         1997              191,917          0             0                 0

        Mary Kreidell                       1998              100,000          0             0                 0
        Chief Financial Officer             1997              100,000

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

        Joseph Giaquinto President of       1998              107,886          0             0                 0
        NDL                                 1997              100,000

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

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

(3)  Mr.  Rosen is the  lessor of PACA's  premises  in  Norris,  Tennessee.  See
     "Properties" and "Certain  Transactions." The Company does not consider the
     lease  payments to be  compensation,  because they are not in excess of the
     fair market value of the lease.
<PAGE>
(4)  In October 1995,  the Company  adopted a plan (the "1995 Stock Option Plan"
     or the "Plan") pursuant to which the Board of Directors or a committee (the
     "committee") of the Board is authorized to award up to 3,500,000  shares of
     Common Stock,  after giving  effect to the 50% stock  dividend paid on July
     16, 1996, to selected officers,  employees,  agents,  consultants and other
     persons who render  services to the  Company.  The options may be issued on
     such terms and conditions as determined by the Board or Committee,  and may
     be issued so as to  qualify  as  incentive  stock  options  under  Internal
     Revenue  Code Section  422A.  The  directors  who are  authorized  to award
     options are not eligible to receive options under the Plan. The Company has
     filed a  registration  statement  with  respect  to the  Plan,  and  shares
     ("Option  Shares") of Common Stock acquired under the Plan are eligible for
     resale by non-affiliates without further registration under the Act; Option
     Shares   acquired  by   affiliates  of  the  Company  are  subject  to  the
     registration requirements of the Act.

         Employment  Agreements.  Mr.  Brooks,  Co-Chairman  of the Board of DHB
Capital  Group Inc. is employed  pursuant  to a five year  employment  agreement
which was entered  into April 1, 1996.  Pursuant  to the  agreement  Mr.  Brooks
receives an annual salary of $250,000  through April 1997, with annual increases
of $25,000.  The terms of Mr. Brooks' contract provides for 750,000 warrants per
year  exercisable  at $2.33 for five years.  As the Company  has  businesses  in
Florida and requires Mr. Brooks to spend  considerable time there, this contract
includes  provisions  for certain of his Florida living  expenses.  In September
1998,  Mr. Brooks'  employment  agreement was amended to reflect his position as
Co-chairman. There were no other changes to Mr. Brooks' employment agreement.

         Mr. Rosen is employed pursuant to a five-year employment agreement with
PACA  which  was  entered  into at the time the  Company  acquired  PACA,  i.e.,
November 6, 1992.  Pursuant to the agreement,  Mr. Rosen receives an annual base
salary of $115,000 in 1993 with annual increases,  plus certain fringe benefits.
Mr. Rosen is currently employed under the same terms and conditions.

         Mr.  Giaquinto,  had a three year employment  contract  entered into in
February  1995,  providing  for an annual base salary of $100,000 and options to
purchase 49,500 shares of common stock at a price of $1.33 per share exercisable
at the rate of not more than 16,500 shares per year. Mr.  Giaquinto is currently
employed under the same terms and conditions.

         In 1997,  the  Company  entered  into an  employment  agreement  with a
salesman for DHB Armor Group, expiring in 2000 with an annual salary of $100,000
plus certain fringe benefits.

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

         Section  16(a) of the  Securities  Exchange  Act of 1934  requires  the
Company's  directors and executive  officers,  and persons who own more than ten
percent of a registered  class of the Company's  equity  securities to file with
the Securities and Exchange  Commission initial reports of ownership and reports
of changes of  ownership  of Common  Stock and other  equity  securities  of the
Company.
<PAGE>
         To the  Company's  knowledge,  based  solely on review of the copies of
such reports furnished to the Company and written  representations that no other
reports  were  required  during the fiscal year ended  December  31,  1997,  all
Section 16(a) filing  requirements  applicable  to its  officers,  directors and
greater-than-ten-percent beneficial owners were complied with.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

         The  following  table  sets  forth  the  beneficial  ownership  of  the
Company's  Common Stock as of March 22,  1999,  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 investment and voting power are held by the
persons named as the owners.
<TABLE>
<CAPTION>
                                                              Number of Shares
         Name                      Address                   Beneficially Owned               Percent Owned (1)
         ----                      -------                   ------------------               -----------------
<S>                     <C>                                      <C>                                <C>
David Brooks (2,3)      11 Old Westbury Rd                       17,750,6002                        55%
                        Old Westbury, NY 11568

Jeffrey Brooks (3)      1500 South Ocean Blvd.                     2,158,038                         6%
                        Boca Raton, FL 33234

Mary Kreidell           11 Old Westbury Rd                           84,3754                          *
                        Old Westbury, NY 11568

Leonard Rosen           148 Cedar Place                             120,1425                          *
                        Norris, TN

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

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

Mark Mortenson          1300 Marrows Road Newark, DE                   5,000                          *
                        19714

Gary Nadelman           11 Old Westbury Rd                           235,000                          *
                        Old Westbury, NY

Morton Cohen (7)        11 Old Westbury Rd                          450,0007                          *
                        Old Westbury, NY

All officers and Directors as a group                            18,762,9178                        58% (8)
</TABLE>
<PAGE>
1.       Based upon 25,627,440 shares outstanding as of March 22, 1999 increased
         by the currently  exercisable  options and warrants of 6,362,500 shares
         of common stock held by directors  and officers for an aggregate  total
         of 31,989,940  shares.  Currently  exercisable  options or warrants are
         those which are exercisable  within 60 days after the date of this form
         10-KSB.

2.       Consists of 7,500,600 shares owned by Mr. Brooks and 4,500,000 owned by
         his wife as custodian  for his minor  children,  and  4,250,000  shares
         which may be  acquired  by Mrs.  Brooks  upon  exercise  of a currently
         exercisable  warrant and 1,500,000  shares which may be acquired by Mr.
         Brooks at $2.33 per share  upon  exercise  of a  currently  exercisable
         warrant. All of these shares are in a voting trust for three years with
         independent  trustee  who votes the shares  according  the votes of the
         other shareholders.

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

4.       Includes 75,000 shares acquirable under currently  exercisable warrants
         awarded to Mrs. Kreidell.

5.       Includes 75,000 shares acquirable under currently  exercisable warrants
         awarded  to Mr.  Rosen;  does not  include  4,350  shares  owned by Mr.
         Rosen's wife, as to which Mr. Rosen disclaims beneficial ownership.

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

7.       These  shares  are owned by Clarion  Capital  Corporation  and  Clarion
         Partners of which  Morton  Cohen is the  director,  President,  CEO and
         Chairman.

8.       Includes 5,950,000 currently  exercisable warrants of common stock held
         by directors and officers.

Item 12.  CERTAIN  RELATIONSHIPS AND RELATED TRANSACTIONS

         The Company has funded certain of its  acquisitions  through the use of
term loans from Mr. David H. Brooks,  Chairman of the Board of the Company,  and
Mrs.  Terry Brooks,  his wife. On February 6, 1998 Mr. Brooks loaned the Company
$6 million,  $4.8 million of which was connection  with the purchases of LAP and
LEC. The balance of the  shareholder  loans at December 31, 1998 is $11,527,604.
These shareholders loans expire in April 2000 bearing interest at 12% per annum.
The interest paid on shareholder loans to date is $475,447. In 1998, the Company
granted warrants to purchase 500,000 shares of Common Stock, at a price of $3.50
per  share  and  expiring  in 2001,  to Mrs.  Brooks  in  consideration  for the
outstanding  and  additional  loans lent to the  Company in February  1998.  The
Company entered into an employment  agreement in April 1996 with Mr. Brooks, See
- "Employment Agreements".
<PAGE>
         NDL,  Point  Blank and OPI  operate at a 67,000  square foot office and
warehouse  facility (the  "Facility")  located at 4031 N.E.  12th Terrace,  Fort
Lauderdale, Florida 33334, which it leases from V.A.E. Enterprises ("V.A.E."), a
partnership  controlled by Mrs.  Brooks and  beneficially  owned by Mr. and Mrs.
Brooks'  minor  children,  which  purchased  the Facility on or about January 1,
1995.  The lease is a 5-year  net-net lease  expiring in 2000;  with annual base
rental is $480,000 and is scheduled to increase by 4% per year. The Company,  as
lessee, is responsible for all real estate taxes and other operating and capital
expenses. In the opinion of management, the rental is fair and reasonable and is
approximately  at the same  rate that  could be  obtained  from an  unaffiliated
lessor for property of similar type and location.

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

Item 13. Exhibits and Reports on Form 8K: See Exhibits  annexed hereto after the
financial statements.
<PAGE>
                    DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
                     CONSOLIDATED FINANCIAL STATEMENTS INDEX






                                    CONTENTS



                                                                        Page
                                                                        ----


INDEPENDENT AUDITORS' REPORT                                             F-1


Consolidated Balance Sheets as of December 31, 1998 and 1997             F-2


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


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


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

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

Notes to the Consolidated Financial Statements                        F-7 - F-16

Schedule II Valuation and  Qualifying Accounts                           F-17

<PAGE>
INDEPENDENT AUDITORS' REPORT



The Board of Directors of
DHB Capital Group Inc.

We have  audited the  accompanying  consolidated  balance  sheets of DHB Capital
Group Inc.  and  Subsidiaries  as of December  31, 1998 and 1997 and the related
consolidated statements of operations, stockholders' equity comprehensive income
and cash flows for the years then ended. These consolidated financial statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an  opinion  on these  consolidated  financial  statements  based on our
audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of DHB
Capital  Group Inc.  and  Subsidiaries  as of December 31, 1998 and 1997 and the
consolidated  results  of its  operations  and its cash flows for the year ended
December 31, 1998 and 1997 in  conformity  with  generally  accepted  accounting
principles.




/s/Paritz and Company P.A.
--------------------------
Paritz and Company P.A.
Hackensack, New Jersey
March 19, 1999


                                      F-1
<PAGE>
<TABLE>
<CAPTION>
                        DHB CAPITAL GROUP INC. AND SUBSIDIARIES
                              CONSOLIDATED BALANCE SHEETS

                                                                    DECEMBER 31,
                                                           ---------------------------
                                                                1998          1997
                                                           -----------     -----------
<S>                                                        <C>             <C>        
ASSETS

CURRENT ASSETS
Cash and cash equivalents ............................     $   519,117     $   882,884
Marketable securities ................................         529,328       1,703,806
Accounts receivable, less allowance for doubtful
   accounts of $507,739 and $353,320 .................       8,997,354       6,285,181
Inventories ..........................................      20,001,547      12,543,474
Prepaid expenses and other current assets ............       1,948,347         727,421
                                                           -----------     -----------

Total Current Assets .................................      31,995,693      22,142,766
                                                           -----------     -----------

PROPERTY AND EQUIPMENT ...............................       7,104,233       2,374,085
                                                           -----------     -----------

OTHER ASSETS
Intangible assets, net ...............................       1,271,668         588,017
Investments in non-marketable securities .............       1,688,750       1,688,750
Deferred tax assets ..................................         455,300         455,300
Deposits and other assets ............................         584,891         425,711
                                                           -----------     -----------

Total Other Assets ...................................       4,000,609       3,157,778
                                                           -----------     -----------

TOTAL ASSETS .........................................     $43,100,535     $27,674,629
                                                           ===========     ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
<S>                                                        <C>             <C>        
Note payable .........................................     $ 4,175,000     $ 2,675,000
Current maturities of long term debt .................         159,607          65,192
Accounts payable .....................................       6,233,131       5,072,929
Accrued expenses and other current liabilities .......       2,445,414         708,631
                                                           -----------     -----------

Total Current Liabilities ............................      13,013,152      8,521,752
                                                           -----------     -----------
LONG TERM LIABILITIES
Long term debt, net of current maturities ............         387,512         111,258
Note Payable - stockholder ...........................      11,527,604       1,300,000
                                                           -----------     -----------

Total Long Term Debt .................................      11,915,116       1,411,258
                                                           -----------     -----------

Total Liabilities ....................................      24,928,268       9,933,010

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY .................................      18,172,267      17,741,619
                                                           -----------     -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...........     $43,100,535     $27,674,629
                                                           ===========     ===========

</TABLE>
                 See accompanying notes to financial statements


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

                                                        For The Years Ended December 31,
                                                              1998              1997
                                                         ------------      ------------
<S>                                                      <C>               <C>         
Net sales ..........................................     $ 41,834,425      $ 33,271,607

Cost of sales ......................................       27,366,811        22,153,925
                                                         ------------      ------------

Gross Profit .......................................       14,467,614        11,117,682

Selling, general and administrative expenses
                                                           13,065,411         9,641,655
                                                         ------------      ------------

Income before other income (expense) ...............        1,402,203         1,476,027
                                                         ------------      ------------

Other Income (Expense)
Interest expense, net of interest income ...........       (1,278,867)         (339,754)
Other income .......................................           40,393           51,599
Settlement of employment contract ..................         (220,000)               --
Loss on holding of equity investments ..............             --             372,000
Realized gain (loss) on sale of marketable
securities .........................................          154,155           (72,175)
Unrealized gain on marketable securities ...........           52,967           449,702
                                                         ------------      ------------

Total Other Income (Expense) .......................       (1,251,352)          461,372
                                                         ------------      ------------

Income before income taxes .........................          150,851         1,937,399

Income taxes .......................................           21,049           396,509
                                                         ------------      ------------

Net Income .........................................     $    129,802      $  1,540,890
                                                         ============      ============
Earnings per common share
Primary ............................................     $      0.005      $       0.06
                                                         ============      ============
Fully Diluted ......................................     $      0.004      $       0.05
                                                         ============      ============

Weighted average number of common share outstanding:
Primary ............................................       24,982,394        24,837,771
                                                         ============      ============
Fully Diluted ......................................       29,685,262        28,053,959
                                                         ============      ============
</TABLE>
                    See accompanying notes to financial statements.

                                          F-3
<PAGE>
<TABLE>
<CAPTION>
                                           DHB CAPITAL GROUP INC. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                        FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997



                                                   Number of                  Additional       Common Stock        Foreign
                                                     Common         Par          Paid-in       Subscription       Currency  
                                                     Shares         Value        Capital         Receivable      Translation
                                                     ------        -----         -------         ----------      -----------
<S>                                                 <C>            <C>          <C>                <C>              <C>    
Balance January 1, 1997                             23,146,008     $23,146      $17,956,030        $(227,500)       $ 0          

Net Income for the year ended 12-31-97                       -           -                -                 -              -     
Issuance of stock to purchase subsidiary               666,000         666          999,334                 -              -     
Stock issued to purchase lease                         144,200         144          209,856                 -              -     
Sale of common stock                                 1,825,000       1,825        3,639,004           227,500              -     
Stock issued for services                               13,500          13           67,487                 -              -     
Exercise of warrants                                   100,000         100          149,900                 -              -     
Stock issued in settlement of a lawsuit                 75,000          75          149,925                 -              -     
Stock returned in settlement of a lawsuit             (38,625)        (38)         (73,596)                 -              -     
Effect of foreign currency translation                       -           -                -                 -        (6,135)     
Purchase of treasury stock                           (583,859)       (584)      (2,144,833)                 -              -     
                                                     ---------       -----      -----------         ---------      ---------     

Balance December 31, 1997                           25,347,224    $ 25,347     $ 20,953,107                 0      $ (6,135)     

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

Balance December 31, 1998                           25,447,440    $ 25,447   $ 21,215,849                   0      $ 31,869      
                                                    ==========    ========   ==============         =========      ==========    
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
                     DHB CAPITAL GROUP INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997




                                                      Retained                          
                                                      Earnings          Total           
                                                      --------          -----           
<S>                                                 <C>              <C>               
Balance January 1, 1997                             $(4,771,590)     $12,980,086       
                                                                                       
Net Income for the year ended 12-31-97                 1,540,890       1,540,890       
Issuance of stock to purchase subsidiary                       -       1,000,000       
Stock issued to purchase lease                                 -         210,000       
Sale of common stock                                           -       3,868,329      
Stock issued for services                                      -          67,500       
Exercise of warrants                                           -         150,000       
Stock issued in settlement of a lawsuit                        -         150,000       
Stock returned in settlement of a lawsuit                      -        (73,634)       
Effect of foreign currency translation                         -         (6,135)       
Purchase of treasury stock                                     -      (2,145,417)      
                                                     -----------     -----------       
                                                                                       
Balance December 31, 1997                            $(3,230,700)    $17,741,619      
                                                                                       
Net Income for the year ended 12-31-98                   129,802         129,802      
Sale of common stock                                                   2,706,000       
Stock issued for services                                                260,844       
Exercise of warrants                                                      66,000       
Effect of foreign currency translation                                    38,004       
Purchase of treasury stock                                     -      (2,770,002)      
                                                     -----------     -----------       
                                                                                       
Balance December 31, 1998                            $(3,100,898)    $18,172,267     
                                                     ============    ===========       
                                                    
</TABLE>
                 See accompanying notes to financial statements.

                                      F-4
<PAGE>
<TABLE>
<CAPTION>
                                DHB CAPITAL GROUP INC. AND SUBSIDIARIES
                                        STATEMENTS OF CASH FLOWS



                                                                             FOR THE YEARS ENDED
                                                                                  DECEMBER 31,
CASH FLOWS FROM OPERATING ACTIVITIES                                         1998             1997
                                                                        ------------      ------------
<S>                                                                     <C>                <C>       
Net Income                                                                   $129,802      $1,540,890

Adjustments to reconcile net income to net cash provided
   by operating activities:
Depreciation and amortization .....................................          756,608           440,650
Valuation allowances/reserves .....................................             --            (372,000)
Stock issued for services .........................................          260,844            67,500
Stock issued in settlement of a lawsuit ...........................             --             150,000
Stock returned in settlement of a lawsuit .........................             --             (73,596)
Stock issued to purchase a lease ..................................             --             210,000
Unrealized gain on transfer from investment in non-marketable .....             --            (598,900)
securities to marketable securities
Deferred income taxes .............................................             --             364,000
Changes in assets and liabilities (Increase) Decrease in: .........             --
Accounts receivable ...............................................       (1,993,667)       (2,663,565)
Marketable securities .............................................        1,174,478         1,237,121
Inventories .......................................................       (6,084,399)       (5,018,686)
Prepaid expenses and other current assets .........................       (1,208,688)         (472,203)
Deposits and other assets .........................................         (136,900)          (86,972)
Increase (decrease) in:
Accounts payable ..................................................            2,694         2,013,134
Accrued expenses and other current liabilities ....................          957,554           439,377
State income taxes payable ........................................          124,124           (14,134)
                                                                        ------------      ------------
Net cash used by operating activities .............................       (6,017,550)       (2,837,384)
                                                                        ------------      ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Payments for purchase of assets of subsidiary, net of cash acquired       (4,924,073)          134,356
Payments made for property and equipment ..........................       (1,423,267)         (801,150)
                                                                        ------------      ------------
Net Cash used by investing activities .............................       (6,347,340)         (666,794)
                                                                        ------------      ------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of note payable- bank ....................................        1,500,000         1,275,000
Proceeds of note payable- shareholder .............................       10,227,604              --
Proceeds from the issuance of long term debt ......................          250,000              --
Principal payments on long-term debt ..............................          (16,483)          (45,657)
Proceeds from the exercise of warrants - common stock .............           66,000           150,000
Foreign Currency Translation ......................................           38,004            (6,135)
Purchase of treasury stock ........................................       (2,770,002)       (2,145,417)
Net proceeds from sale of common stock ............................        2,706,000         3,909,616
                                                                        ------------      ------------
Net cash provided by financing activities .........................       12,001,123         3,137,407
                                                                        ------------      ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                DHB CAPITAL GROUP INC. AND SUBSIDIARIES
                                        STATEMENTS OF CASH FLOWS

                                              (continued)



                                                                             FOR THE YEARS ENDED
                                                                                  DECEMBER 31,
CASH FLOWS FROM OPERATING ACTIVITIES                                         1998             1997
                                                                        ------------      ------------
<S>                                                                     <C>                <C>       
NET DECREASE IN CASH AND EQUIVALENTS ..............................         (363,767)         (366,771)

CASH AND CASH EQUIVALENTS - BEGINNING .............................          882,884         1,249,655
                                                                        ------------      ------------

CASH AND CASH EQUIVALENTS - END ...................................     $    519,117      $    882,884
                                                                        ============      ============

</TABLE>
                 See accompanying notes to financial statements
                                      F-5
<PAGE>
<TABLE>
<CAPTION>

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

                                                      For the years ended
                                                          December 31,
                                                -------------------------------
                                                      1998               1997
                                                -----------         -----------

<S>                                             <C>                 <C>        
Net Income ............................         $   129,802         $ 1,540,890

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

Comprehensive Income ..................         $   167,806         $ 1,534,755
                                                ===========         ===========

</TABLE>

See accompanying notes to financial statements.


                                      F-6


<PAGE>
                             DHB CAPITAL GROUP INC.

                          NOTES TO FINANCIAL STATEMENTS

Note 1      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

            Principles of consolidation

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

            Business description

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

            Uses of estimates in the preparation of financial statements

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

            Revenue recognition

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

            Inventories

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

            Property, plant and equipment and depreciation

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

                                      F-7
<PAGE>
Note 1        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

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

            Marketable/Non-Marketable Securities

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

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

            Intangible assets

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

            Income taxes

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

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

            Stock based compensation

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

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

              Impairment of long-lived assets

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


Note 2        SUPPPLEMENTAL CASH FLOW INFORMATION

                     Cash paid for:                        1998            1997
                                                         -------         -------
                          Interest                       308,282         269,450
                            Taxes                         78,877          11,971

                      During the year  ended  December  31,  1998,  the  Company
              purchased  LEC and LAP for a cash  payment of $4.8  millin less of
              cash acquired,  $250,927.  The Company also purchased DHB KK for a
              cash  payment of  $375,000.  The total cash paid for  acquisitions
              during 1997, net of cash acquired total $4,924,073.

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


Note 3        BUSINESS ACQUISITIONS

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

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

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

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


                                     F-9
<PAGE>
Note 4        MARKETABLE SECURITIES/NON-MARKETABLE SECURITIES

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

                                                 1998            1997
                                             ----------       ----------
                  Cost                       $  476,361       $1,254,104
                  Unrealized gain                52,967          449,702
                                             ----------       ----------
                  Market Value               $  529,328       $1,703,806
 
                      The   Company   has   acquired   minority   interests   in
              non-marketable  securities,  at December  31, 1997 the  historical
              cost was $2,316,750  reduced by a valuation  allowance of $628,000
              to  bring  the  carrying  value  of  these  securities  to the net
              realizable value of $1,688,750.


Note 5        INVENTORIES

                  Inventories consist of the following:
<TABLE>
<CAPTION>

                                                        1998                1997
                                                    -----------        ------------
<S>                                                  <C>                <C>         
                  Finished goods                     $ 7,901,221        $  5,776,562
                  Work in process                      5,533,648           1,646,610
                  Raw materials and supplies           6,566,678           5,120,302
                                                     -----------        ------------
                                                     $20,001,547        $ 12,543,474
                                                     ===========        ============
</TABLE>
Note 6    PROPERTY, PLANT AND EQUIPMENT

                      A  summary  of  property,  plant  and  equipment  and  the
              estimated  lives used in the  computation  of  depreciation  is as
              follows:
<TABLE>
<CAPTION>
                                                                                                Estimated
                                                               1998              1997           useful life
                                                               ----              ----           -----------
<S>                                                        <C>               <C>             <C>         
             Land                                             $47,500           $47,500                --
             Buildings                                        427,500           427,500        39   years
             Machinery and equipment                        6,709,810         1,225,812      5-30   years
             Furniture, fixtures and
             computer equipment                               796,049           819,019      5-7    years
             Transportation equipment                         231,579           244,510      3-5    years
             Leasehold improvements                           549,746           480,928      5-31.5 years
                                                              -------           -------
                                                            8,762,184        3,245,269
             Less accumulated depreciation and
             amortization                                   1,657,951           871,184
                                                            ---------           -------
                                                           $7,104,233        $2,374,085
                                                           ==========        ==========
</TABLE>
                                      F-10
<PAGE>
Note 7        INTANGIBLE ASSETS

                      A summary of  intangible  assets and the  estimated  lives
              used in the computation of amortization is as follows:
<TABLE>
<CAPTION>
                                                                                          Estimated
                                                             1998             1997       useful life
                                                          ----------       ---------     -----------

<S>                                                       <C>              <C>           <C>     
               Goodwill                                   $1,194,473       $ 694,473      15 years
               On-going
               government                                    612,106          312,086     1-5 years
               contracts
               Other                                         178,261          129,563     1-7 years
                                                          ----------       ----------
                                                           1,984,840        1,136,122
               Less accumulated amortization                 713,172          548,105
                                                          ----------       ----------
                                                          $1,271,668       $  588,017
                                                          ==========       ==========
</TABLE>

Note 8          NOTES PAYABLE - BANK

              Notes payable - bank are due on demand and are  collateralized  by
              marketable  securities  owned by the majority  stockholder  of the
              Company.  The weighted  average  interest rate on these borrowings
              was 6.965% at December 31, 1998.

Note 9        NOTES PAYABLE STOCKHOLDER

              These  notes  bear  interest  at 12% per  annum  and are  due,  as
              extended, in April 2000 (see Note 15 in connection with additional
              loans made by the majority stockholder in 1998.)

Note 10       LONG-TERM DEBT

<TABLE>
<CAPTION>
                  Long-term debt consists of the following:                               1998              1997
                                                                                         -------           --------
<S>                                                                                      <C>               <C>     
                           Notes payable in monthly  principal  installments  of         $65,998           $112,798
                           $3,600.   Interest  at  the  rate  of  9%  per  annum           
                           accrues and is payable upon maturity in 2001.

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

                           Note  payable  in  monthly   installments  of  $4,729         201,097
                           inclusive of interest at 5.1%.

                           Other                                                          41,634             63,652
                                                                                          ------             ------
                                                                                         547,119            176,450
                           Less Current Portion                                          159,607             65,192
                                                                                         -------             ------
                                                                                        $387,512           $111,258
                                                                                        ========           ========
</TABLE>
                                      F-11

<PAGE>
 Note 10       LONG-TERM DEBT - Continued

                           Long-term debt matures as follows:

                                           1999               $159,607  
                                           2000                149,035  
                                           2001                125,646  
                                           2002                107,741  
                                           2003                  5,090  
                                                              --------          
                                                              $547,119  
                                                              ========  

Note 11   STOCKHOLDERS' EQUITY


          Common and preferred stock

              DHB has  100,000,000  shares  authorized  of its  $.001  par value
              Common.  At December 31, 1998 and 1997,  25,447,440 and 25,347,224
              were outstanding,  respectively. In addition, DHB is authorized to
              issue 1,500,000 shares of Class A 10% convertible Preferred Stock,
              none of which was issued and  outstanding at December 31, 1998 and
              1997.

          Stock option plan

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

              Stock warrants

                      During 1997,  the Board of Directors  granted 50,000 stock
              warrants exercisable at $2.00 per share to a key employee expiring
              in June 2000. Pursuant to employment agreements (See Note 14), the
              Company has 1,549,500  stock warrants  outstanding  exercisable at
              $1.33  per  share and  expiring  in 2001.  In  December  1994,  in
              consideration  for  monies  loaned  to the  Company,  the Board of
              Directors  granted a relative of the majority  stockholder,  stock
              warrants to purchase  3,750,000  shares of common  stock for $1.33
              per share for a five year period commencing  December 19, 1994. In
              1998,  all of the  warrants to the  majority  stockholder  and his
              relatives  were extended until  September  2003, the length of the
              NASDAQ  agreement.  In June 1993,  the Board of Directors  granted
              stock  warrants  to certain  individuals  and  organizations  with
              150,000  warrants  still  outstanding  exercisable  at  $1.33  and
              expiring in June 1999.


                                      F-12
<PAGE>
Note 12   RELATED PARTY TRANSACTIONS

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

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

              Interest paid or accrued on a loan from
              DHB's majority stockholder.                 992,359        177,340
</TABLE>
              See Note 14 for details of the lease with a related party


Note 13   RISKS AND UNCERTAINTIES

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

                  Approximately  18% and 27% for the years  ended  December  31,
              1998 and  1997,  respectively,  of DHB's  sales  were  made to the
              United States Government or its agencies.

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

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

                                      F-13
<PAGE>
Note 14  FAIR VALUES OF FINANCIAL INSTRUMENTS

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

Note 15  SEGMENT INFORMATION

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

         Financial  information  on  the  Company's  business  segments  was  as
         follows:
<TABLE>
<CAPTION>
        Net Sales                                    1998               1997
                                                 ------------      ------------- 
<S>                                              <C>               <C>        
Ballistic-resistant equipment ..............     $ 28,695,127      $ 26,805,471
Electronic components ......................        8,398,107              --
Protective athletic & medical equipment ....        8,388,544         7,094,808
                                                 ------------      ------------
                                                   45,481,778        33,900,279
Less inter-segment sales ...................       (3,647,353)         (628,672)
                                                 ------------      ------------
Consolidated Net Sales .....................     $ 41,834,425      $ 33,271,607
                                                 ============      ============

Income from Operations
Ballistic-resistant equipment ..............     $  2,485,395      $  2,017,281
Electronic components ......................         (782,908)               --
Protective athletic & medical equipment ....        1,207,743          498,062
Corporate and Other (1) ....................       (1,508,027)       (1,039,316)
                                                 ------------      ------------
Consolidated Operating Income ..............     $  1,402,203      $  1,476,027
                                                 ============      ============

Identifiable Assets (2)
Ballistic-resistant equipment ..............     $ 23,743,604      $ 17,572,698
Electronic components ......................        5,749,438              --
Protective athletic & medical equipment ....        8,844,627         6,322,150
                                                 ------------      ------------
                                                   38,337,669        23,894,848
Corporate and Other ........................        4,762,866         3,779,781
                                                 ------------      ------------
Consolidated Net Assets ....................     $ 43,100,535      $ 27,674,629
                                                 ============      ============
</TABLE>
         Foreign  sales  accounted  for 12% and 10%,  respectively  of the total
         revenues  for the years  ended  December  31,  1998 and  1997.  Foreign
         identifiable  assets  accounted  for 5% and 2% of the  total  assets at
         December 31, 1998 and 1997.

(1)  Corporate and Other includes corporate general and administrative expenses.

(2)  Corporate assets are principally cash,  marketable  securities and deferred
     charges

                                      F-14
<PAGE>
Note 16       COMMITMENTS AND CONTINGENCIES

              Leases

                      DHB leases a warehouse and  manufacturing  facility from a
              partnership  indirectly owned by the majority  stockholder of DHB.
              The lease  provides for annual rentals of $480,000 for 1996 and 4%
              annual increases through expiration in 1999. In addition, DHB must
              pay real  estate  taxes and  certain  operating  expenses  of this
              property.

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

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

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

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

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

              Employment agreements

                      The Company is  committed  under an  employment  agreement
              with its majority  stockholder  which  expires in April,  2001 and
              provides for an annual salary of $250,000 through April,  1997 and
              annual increases of $25,000 thereafter.  In addition, the contract
              provides for the annual grant of 750,000 warrants to the principal
              stockholder,  which are  exercisable at $2.33 per share and expire
              five years from date of grant.  In  September  1998,  Mr.  Brook's
              employment  agreement  was  amended to  reflect  his  position  as
              Co-chairman

              Year 2000.

                  Many computer  systems were  originally  designed to recognize
              calendar  years by their last two digits.  Calculations  performed
              using these shortened fields may not work properly with dates from
              the year 2000 and beyond.  The Company is undertaking a review and
              evaluation  of its  existing  computerized  systems  as  part of a
              program  to bring  such  systems  into Year 2000  compliance.  The
              Company  expects,  to the extent  necessary,  to either  modify or
              upgrade third party software to ensure Year 2000  compliance.  The
              Company has not yet determined the total cost of  modifications to
              its  computerized  systems;  however,  based  upon the  review and
              evaluations  conducted  to date,  the Company  believes  the costs
              associated  with this  process  will not have a  material  adverse
              effect on the Company's results of operations or liquidity.

                                      F-15
<PAGE>
Note 16       COMMITMENTS AND CONTINGENCIES -  Continued

              Litigation

                      DHB is a defendant in a lawsuit filed in the United States
              District Court for the Southern  District of New York. The lawsuit
              alleging   breach  of   contract,   seeks  among   other   things,
              compensatory damages of not less than $2,500,000, punitive damages
              of not less than  $500,000 and an order  enabling the plaintiff to
              execute  certain stock purchase  warrants.  On January 8, 1999 the
              Court  dismissed  this  action.  The  Plaintiff  then filed in the
              Supreme  Court of New  York,  County of  Nassau.  DHB has filed an
              Answer and  Counter-Claim  and  intends to  vigorously  defend the
              claim  and  to  pursue  its  Counter-Claims.  In  the  opinion  of
              management of DHB, the ultimate  outcome of this  litigation  will
              not have a material  adverse effect on the financial  condition of
              DHB.

                      The   Company   initiated   a  lawsuit   claiming   patent
              infringement  and unfair  competition  under federal and state law
              and breach of contract.  The defendant  also filed a claim against
              NDL and DHB  Capital  in the US  District  Court for the  Southern
              District of Florida claiming patent and trademark infringement, as
              well  as,  breach  of  contract.  NDL has  filed a claim  with its
              general liability insurance carrier,  and they acknowledge that it
              is their duty to defend  this  action.  At this time,  discussions
              regarding  a  comprehensive  settlement  of these two  actions are
              ongoing,  which if  completed,  as  currently  contemplated  would
              provide for a net payment to NDL/DHB from the Plaintiff.  However,
              no  assurance  can be given  that  the  above  settlement  will be
              completed  on favorable  terms to the  Company.  In the opinion of
              management of DHB, the ultimate  outcome of this  litigation  will
              not have a material  adverse effect on the financial  condition of
              DHB.

                      The Company is a defendant in an action claiming breach of
              employment  contract filed in the Circuit Court of the Seventeenth
              Judicial Circuit in and for Broward County, Florida. The Case went
              to  trial  on  March 1  through  3,  1999 and a final  judgment of
              $330,825  was  entered  against  the  Company.   The  Company  has
              instructed their attorneys to appeal the decision.  In the opinion
              of the Company's counsel,  the appellate issues identified to date
              appear to favor the Company.  In the opinion of management of DHB,
              the ultimate  outcome of this  litigation will not have a material
              adverse effect on the financial condition of DHB.

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

<PAGE>
Note 17   INCOME TAXES

              Components of income taxes are as follows:
<TABLE>
<CAPTION>
                                                                     1998                 1997
                                                                 ------------         ------------
<S>                                                              <C>                  <C>     
Current:              Federal                                    $    110,000         $    455,000
                      State                                            24,400               22,509
                      Benefit of net operating
                         loss carryforward                           (110,000)            (455,000)
                                                                 ------------         ------------
                            Total current                              24,400               22,509

Deferred:             Federal                                               0              690,000
                      State                                                 0              430,700
                      Less: valuation allowance                             0          (1,494,700)
                                                                 ------------         ------------
                              Total Deferred                          355,800              374,000
                                                                 ------------         ------------
                   Total income taxes (benefits)                 $     24,400        $    396,509
                                                                 ============         ============
</TABLE>
Note 18    COMPREHENSIVE INCOMCE

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

                                      F-16
<PAGE>


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




Allowances deducted from related balance sheet accounts:
<TABLE>
<CAPTION>
                                                                                 Investment in     Net Write Down    
                                                  Accounts                      Non-marketable   of investment in   
                                                 Receivable       Inventory       securities       subsidiaries 
                                                -----------     -----------       -----------      ----------- 
<S>                                             <C>             <C>               <C>              <C>               
Balance at January 1, 1997 .........            $   303,230     $   700,000       $ 1,000,000      $   529,579       
                                                                                                                    
Additions charged to                                                                                                
     costs and  expenses ...........                 50,000              --                --               -- 
                                                                                                                    
Subtractions charged to                                                                                             
     costs and expenses ............                     --        (700,000)         (372,000)              --
                                                -----------     -----------       -----------      -----------       
                                                                                                                    
Balance at December 31, 1997 .......            $   353,230     $         0       $   628,000      $   529,579       
                                                                                                                    
Additions charged to                                                                                                
     costs and  expenses ...........                154,509              --                --               --   
                                                                                                                    
Subtractions charged to                                                                                             
     costs and expenses ............                     --              --                --               --  
                                                -----------     -----------       -----------      -----------       
                                                                                                                    
                                                                                                                    
Balance at December 31, 1998 .......            $   507,739     $         0       $         0      $   529,579       
                                                ===========     ===========       ===========      ===========       
                                               

</TABLE>
                                      F-17
<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 23rd day of
March, 1999.

                                                     DHB Capital Group Inc.

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

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities indicated on March 23, 1999.


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

/S/David H. Brooks       Co-Chairman of the Board,                March 23, 1999
-------------------      and Director
David H. Brooks                         


/S/Mary Kreidell         Treasurer/Director                       March 23, 1999
----------------         Principal Financial Officer
Mary Kreidell            Principal Accounting Officer


/S/Gary Nadelman         Co-Chairman and Director                 March 23, 1999
 -----------------
Gary Nadelman
<PAGE> 
Item 13 (a) Exhibits.


Exhibit                           Description

2.1   Securities  Purchase  Agreement  dated  November  6, 1992,  between the
      Company,  E.S.C.   Industries,   Inc.,  The  Thunder  Group,  Inc.  and
      Protective Apparel Corporation of America                                1

3.1   Certificate  of  Incorporation  of DHB Capital  Group Inc.,  a New York
      corporation (hereinafter, "DHB-New York")                                1

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

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

3.4   By-laws of DHB-New York                                                  2

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

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

3.6   By-laws of DHB Delaware                                                  2

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

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

4.1   Specimen Common Stock Certificate                                        1

4.2   Specimen Class A Preferred Stock Certificate                             1

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

7.1   Opinion regarding Liquidation Preference                                 1

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

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

10.3  Domestic and  International  Non-Competition  Agreement dated March 12,
      1990 between the Company and American Body Armor & Equipment, Inc. (the
      "American Body Armor Non-competition Agreement")                         1
<PAGE>
10.4  GSA Contracts dated January 21, 1991 and March 19, 1992                  1

10.5  Indemnification   Agreements   between   certain   officers  of  E.S.C.
      Industries,  Inc.,  Protective  Apparel  Corporation of America and the
      Company   regarding   Certain   Liabilities  in  Connection   with  the
      Acquisition of Protective Apparel Corporation of America                 1

10.6  Warrant to  purchase  2,000,000  shares of common  stock of The Thunder
      Group, Inc.                                                              1

10.7  Registration  Rights  Agreement  between  the  Company  and the Thunder
      Group, Inc.                                                              1

10.8  Loan Agreement  dated November 6, 1992,  between the Company and E.S.C.
      Industries, Inc.                                                         1

10.9  Security Agreement dated November 6, 1992 of TL Fasteners Corp.          1

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

10.11 Loan  and  Security   between  the  Company  and   Protective   Apparel
      Corporation of American dated December 7, 1992                           1

10.12 Chase Manhattan Bank, N.A. ("Chase") Loan dated November 24, 1992        1

10.13 Form  of  Registration   Rights  Agreement   between  the  Company  and
      participants in the Company's private placement                          1

10.14 Form of Unit Purchase Option                                             1

10.15 Agreement between the Company, Jeffrey Brooks Securities, Inc., Jeffrey
      Brooks, Paul Kazak and Jason Chang dated September 13, 1993              3

10.16 Agreement between the Company, Jeffrey Brooks Securities, Inc., Jeffrey
      Brooks, Paul Kazak and Jason Chang dated September 17, 1993              3

10.17 Promissory note,  general security agreement and related loan documents
      dated September 15, 1993 between the Company, PACA and Chase             4

10.18 Subscription  agreement  dated  March 17,  1994  (the "ID  Subscription
      Agreement"),  between the Company and Intelligent Data  Corporation,  a
      Nevada  corporation  ("ID"),  regarding  the purchase by the Company of
      shares of the common stock and preferred stock of ED                     5

10.19 Amendment dated March 30, 1994, of the ID Subscription Agreement         5

10.20 Shareholders'  agreement dated March 17, 1994,  among the Company,  ID,
      and  shareholders  of ID 5 10.21  Employment  agreement dated March 17,
      1994, between ID and Sam Balabon, including written termination thereof  5
      
10.22 Bill of sale dated December 20, 1994, made by N.D.L. Products,  Inc., a
      Delaware corporation, and its subsidiaries, N.D.L. International, Inc.,
      Dr.  Bonesavers,  Inc., Grid, Inc., Hitman,  Inc., and Flex-Aid,  Inc.,
      each being a Florida  corporation,  to DHB Acquisition,  Inc., covering
      the NDL Assets                                                           6
<PAGE>
10.23 Order Determining  Successful Bidder, etc., dated December 20, 1994, In
      Re N.D.L.  Products,  Debtor,  of the United States  Bankruptcy  Court,
      Southern  District of  Florida,  Case No.  9421458-BKC-RBR,  Chapter 11
      (Lead  Case),  jointly  administered  with Case Nos.  94-21459  through
      94-21463                                                                 6

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

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

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

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

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

10.29 1995 Stock Option Plan                                                   9

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

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

10.32 Employment Agreement with Michael Bell dated March 7, 1997.             12

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

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

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

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

1.   Incorporated by reference to the Company's  Registration  Statement on Form
     SB-2, No. 33-59764, which became effective on May 14, 1993.

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

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

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

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

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

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

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

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

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

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

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

13.  Incorporated  by reference to Current Report on Form 8-K filed February 25,
     1998.

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      * - Less than one (1%) percent