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

[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, 1997 

[ ] 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 [  ]

         Issuer's revenues for the most recent fiscal year: $33,271,607

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 20, 1998: $26,067,436.

Number of shares outstanding of the issuer's common equity, as of March 20, 1998
(exclusive of securities convertible into common equity) : 24,837,229
<PAGE>
The filing  Form  10-KSB/A  No. 1 amends the Annual  Report on Form 10KSB  Dated
March  20,  1998 of DHB  Capital  Group  Inc.  (the  Company).  The  undersigned
Registrant  hereby amends the following  items,  the weighted  average number of
shares on the  statements of operations  and retained  earnings in the financial
statements on Form 10-KSB dated March 20, 1998. 

                    DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
                              FINANCIAL STATEMENTS






                                    CONTENTS

                                     


INDEPENDENT AUDITORS' REPORT                                           


Consolidated Balance Sheets as of December 31, 1997 and 1996           


Consolidated Statements of Operations for the years ended
         December 31, 1997 and 1996                                    


Consolidated Statements of Stockholders' Equity for the years ended
         December 31, 1997 and 1996                                    


Consolidated Statements of Cash Flows for the years ended December 31,
         1997 and 1996                                                 

Consolidated Notes to the Financial Statements                         

Schedule II Valuation and  Qualifying Accounts                         


<PAGE>
INDEPENDENT AUDITORS' REPORT



The Board of Directors of
DHB Capital Group Inc.

We have audited the accompanying consolidated balance sheet of DHB Capital Group
Inc.  and  Subsidiaries  as of December  31,  1997 and the related  consolidated
statements of operations,  stockholders' equity and cash flows for the year 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 audit.

We conducted our audit 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 audit provides a reasonable  basis
for our opinion.

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



/s/Paritz and Company P.A.
-------------------------
Paritz and Company P.A.
Hackensack, New Jersey
March 11, 1997
<PAGE>
INDEPENDENT AUDITORS' REPORT


The Board of Directors of
DHB Capital Group Inc.

We have audited the accompanying consolidated balance sheet of DHB Capital Group
Inc.  and  Subsidiaries  as of December  31,  1996 and the related  consolidated
statements of operations,  stockholders' equity and cash flows for the year 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 audit.

We conducted our audit 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 audit provides a reasonable  basis
for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  financial  position of DHB Capital  Group Inc. and
Subsidiaries  as of December 31, 1996 and the results of its  operations and its
cash flows for the year ended  December  31,1996 in  conformity  with  generally
accepted accounting principles.



/s/Capraro, Centofranchi, and Kramer Co P.C.
--------------------------------------------
Capraro, Centofranchi, and Kramer Co P.C.
So. Huntington, NY
March 21, 1997
<PAGE>
<TABLE>
<CAPTION>
                             DHB CAPITAL GROUP INC. AND SUBSIDIARIES
                                    CONSOLIDATED BALANCE SHEETS
                                           DECEMBER 31,
                                                                         1997            1996
                                                                     -----------     -----------
<S>                                                                  <C>             <C>
                               ASSETS
CURRENT ASSETS
   Cash and cash equivalents .....................................   $   882,884     $ 1,249,655
   Marketable securities .........................................     1,703,806       1,342,027
   Accounts receivable, less allowance for doubtful
         accounts of $353,320 and $303,320 .......................     6,285,181       3,499,535
   Inventories ...................................................    12,543,474       7,290,205
   Prepaid expenses and other current assets .....................       727,421         255,218
                                                                     -----------     -----------

                  Total Current Assets ...........................    22,142,766      13,636,640
                                                                     -----------     -----------

   PROPERTY AND EQUIPMENT, at cost, net of accumulated
         depreciation and amortization ...........................     2,374,085       1,834,777
                                                                     -----------     -----------

   OTHER ASSETS
     Intangible assets, net ......................................       588,017         214,213
     Investments in non-marketable securities ....................     1,688,750       2,316,750
     Deferred tax assets .........................................       455,300         819,300
     Deposits and other assets ...................................       425,711         338,739
                                                                     -----------     -----------

                  Total Other Assets .............................     3,157,778       3,689,002
                                                                     -----------     -----------

                  TOTAL ASSETS ...................................   $27,674,629     $19,160,419
                                                                     ===========     ===========

                   LIABILITIES AND STOCKHOLDERS' EQUITY

    CURRENT LIABILITIES
     Note payable - bank .........................................   $ 2,675,000     $ 1,400,000
     Current maturities of long term debt ........................        65,192          61,664
     Accounts payable ............................................     5,072,929       3,019,804
     Accrued expenses and other current liabilities ..............       708,631         254,774
                                                                     -----------     -----------

                  Total Current Liabilities ......................     8,521,752       4,736,242
                                                                     -----------     -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                             DHB CAPITAL GROUP INC. AND SUBSIDIARIES
                                    CONSOLIDATED BALANCE SHEET
                                           DECEMBER 31,
                                                                         1997            1996
                                                                     -----------     -----------
<S>                                                                  <C>             <C>
  LONG TERM LIABILITIES
    Long term debt, net of current maturities ....................       111,258         144,091
    Notes Payable  shareholder  ..................................     1,300,000       1,300,000
                                                                     -----------     -----------

                  Total Long Term Debt ...........................     1,411,258       1,444,091
                                                                     -----------     -----------

                  Total Liabilities ..............................     9,933,010       6,180,333
                                                                     -----------     -----------

   COMMITMENTS AND CONTINGENCIES

   STOCKHOLDERS' EQUITY ..........................................    17,741,619      12,980,086
                                                                     -----------     -----------

   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ....................   $27,674,629     $19,160,419
                                                                     ===========     ===========
</TABLE>
                     See accompanying notes to financial statements.


<PAGE>
<TABLE>
<CAPTION>
                             DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
                              CONSOLIDATED STATEMENTS OF OPERATIONS
                                 FOR THE YEARS ENDED DECEMBER 31,

                                                                       1997             1996
                                                                  ------------      -----------
<S>                                                               <C>               <C>
Net sales ...................................................     $ 33,271,607      $ 23,378,698

Cost of sales ...............................................       22,153,925        19,027,741
                                                                  ------------      ------------

      Gross Profit ..........................................       11,117,682         4,350,957

 Selling, general and administrative expenses ...............        9,641,655         8,668,950
                                                                  ------------      ------------

      Income(Loss) before other income (expense) ............        1,476,027        (4,317,993)
                                                                  ------------      ------------

Other Income (Expense)
      Interest expense, net of interest income ..............         (339,754)         (327,347)
      Other income ..........................................           51,599            24,350
      Write-down of net assets in Subsidiary ................             --            (529,578)
      Loss on holding of equity investments .................          372,000        (1,000,000)
      Realized gain on marketable securities ................          (72,175)          381,337
      Unrealized gain on marketable securities ..............          449,702            69,168
                                                                  ------------      ------------

               Total Other Income (Expense) .................          461,372        (1,382,070)
                                                                  ------------      ------------

      Income (loss) before income taxes (benefit) ...........        1,937,399        (5,700,063)

      Income taxes (benefit) ................................          396,509          (834,191)
                                                                  ------------      ------------

      Net Income (loss) .....................................     $  1,540,890      $ (4,865,872)
                                                                  ============      ============

      Earnings (loss) per common share
               Primary ......................................     $       0.06      ($      0.22)
                                                                  ============      ============
               Fully Diluted ................................     $       0.05      ($      0.20)
                                                                  ============      ============

      Primary weighted average number of shares outstanding .       24,837,771        22,530,504
      Warrants ..............................................        2,695,719         2,349,017
                                                                  ------------      ------------
      Fully Diluted weighted average number of shares     
         outstanding ........................................       27,533,490        24,879,521
                                                                  ============      ============
</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, 1997 AND 1996

                                                                                                                                    
                                                 Number of                            Number of                       Additional    
                                                 Preferred          Par               Common            Par            Paid-in      
                                                   Shares          Value              Shares           Value            Capital     
                                                   ------          -----              ------           -----            -------     
<S>                                               <C>           <C>                 <C>             <C>               <C>     
Balance December 31, 1995 ...............           21,875      $        219        20,761,991      $     20,762      $ 12,123,470

Net Loss for the year ended Dec 31, 1996              --                --                --                --                --   
Issuance of stock to purchase subsidiary              --                --             180,000               180           578,820
Stock issued to buy-out lease ...........             --                --               6,000                 6            79,994
Sale of common stock ....................             --                --           1,345,000             1,345         4,806,154
Conversion of preferred stock
into Common Stock .......................          (21,875)             (219)           43,750                44               175
Common Stock - 50% dividend .............             --                --             717,828               718              --   
Preferred Dividend - Common Stock .......             --                --               7,939                 8              --   
Fee for services regarding dividends ....             --                --                --                --              (5,000)
Stock issued for services ...............             --                --              83,500                83           372,417
                                                   -------      ----------          ----------      ------------      ------------
Balance December 31, 1996 ...............                0                0         23,146,008      $     23,146      $ 17,956,030


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         3,648,175
Stock issued for services ...............             --                --              13,500                13            67,487
Exercise of warrants ....................             --                --             100,000               100           149,900
Fee for services regarding stock issued .             --                --                --                --              (9,171)
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 currencytranslation ...             --                --                --                --                --   
Purchase of treasury stock ..............             --                --            (583,859)             (584)       (2,144,833)
                                                   -------      ----------          ----------      ------------      ------------

Balance December 31, 1997 ...............                0               0          25,347,224      $     25,347      $ 20,953,107
                                                   =======      ==========        ============      ============      ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                   Common                                                 
                                                   Stock            Foreign                               
                                                Subscription        Currency         Retained             
                                                 Receivable         Translation       Earnings      Total 
                                                 ----------         -----------       --------      ----- 
 <S>                                          <C>               <C>               <C>               <C>
Balance December 31, 1995 ...............     $   (437,500)     $        0        $     95,017      $ 11,801,968

Net Loss for the year ended Dec 31, 1996              --                --        $ (4,865,872)     $ (4,865,872)
Issuance of stock to purchase subsidiary              --                --                --             579,000
Stock issued to buy-out lease ...........             --                --                --              80,000
Sale of common stock ....................          210,000              --                --           5,017,499
Conversion of preferred stock
into Common Stock .......................             --                --                --                --
Common Stock - 50% dividend .............             --                --                (718)             --
Preferred Dividend - Common Stock .......             --                --                 (17)               (9)
Fee for services regarding dividends ....             --                --                --              (5,000)
Stock issued for services ...............             --                --                --             372,500

                                              ------------      -----------       ------------      ------------
Balance December 31, 1996 ...............     $   (227,500)     $        0      $ (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 ....................          227,500              --                --           3,877,500
Stock issued for services ...............             --                --                --              67,500
Exercise of warrants ....................             --                --                --             150,000
Fee for services regarding stock issued .             --                --                --              (9,171)
Stock issued in settlement of a lawsuit .             --                --                --             150,000
Stock returned in settlement of a lawsuit             --                --                --             (73,634)
Effect of translation ...................             --              (6,135)             --              (6,135)
Purchase of treasury stock ..............             --                --                --          (2,145,417)
                                              ------------      ------------      ------------      ------------

Balance December 31, 1997 ...............                0            (6,135)     $ (3,230,700)     $ 17,741,619
                                              ============      ============      ============      ============
                                        
</TABLE>
                           See accompanying notes to financial statements.

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

                                                                            1997             1996  
                                                                        -----------      -----------
<S>                                                                     <C>              <C>  
CASH FLOWS FROM OPERATING ACTIVITIES
   Net Income (loss) ..............................................     $ 1,540,890      $(4,865,872)

   Adjustments to reconcile net income to net
     cash  provided  by  operating activities:
          Depreciation and amortization ...........................         440,650          343,564
          Valuation allowances/reserves ...........................        (372,000)       2,462,898
          Stock issued for services ...............................          67,500          452,500
          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 securities to marketable securities         (598,900)            --
          Deferred income taxes ...................................         364,000         (843,000)
          Changes in assets and liabilities (Increase) Decrease in:
          Accounts receivable .....................................      (2,663,565)          86,716
          Marketable securities ...................................       1,237,121          487,829
          Inventories .............................................      (5,018,686)        (134,006)
          Prepaid expenses and other current assets ...............        (472,203)         (46,708)
          Deposits and other assets ...............................         (86,972)        (177,918)
          Increase (decrease) in:
          Accounts payable ........................................       2,013,134          172,114
          Accrued expenses and other current liabilities ..........         439,377          (57,304)
          State income taxes payable ..............................         (14,134)         (39,772)
                                                                        -----------      -----------
Net cash used by operating activities .............................      (2,837,384)      (2,158,959)
                                                                        -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES
          Payments for purchase of assets of subsidiary,
             net of cash acquired .................................         134,356             --
          Payments made for property and equipment ................        (801,150)      (1,123,739)
                                                                        -----------      -----------
Net Cash (used) by investing activities ...........................        (666,794)      (1,123,739)
                                                                        -----------      -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                               DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
                                       STATEMENTS OF CASH FLOWS
                                   FOR THE YEARS ENDED DECEMBER 31,

                                                                            1997             1996  
                                                                        -----------      -----------
<S>                                                                     <C>              <C>   
CASH FLOWS FROM FINANCING ACTIVITIES
          Proceeds (Repayments) of note payable- bank .............       1,275,000       (1,150,000)
          Proceeds from issuance of long-term debt ................            --            243,573
          Repayments of note payable- shareholder .................            --           (590,000)
          Principal payments on long-term debt ....................         (45,657)         (37,818)
          Dividends Paid ..........................................            --             (7,656)
          Proceeds from the exercise of warrants - common stock ...         150,000             --
          Foreign Currency Translation ............................          (6,135)            --
          Purchase of treasury stock ..............................      (2,145,417)            --
          Net proceeds from sale of common stock ..................       3,909,616        5,599,146
                                                                        -----------      -----------
Net cash provided (used) by financing activities ..................       3,137,407        4,057,245
                                                                        -----------      -----------

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS ...................        (366,771)         774,547

CASH AND CASH EQUIVALENTS - BEGINNING .............................       1,249,655          475,108
                                                                        -----------      -----------

CASH AND CASH EQUIVALENTS - END ...................................     $   882,884      $ 1,249,655
                                                                        ===========      ===========
</TABLE>

                            See accompanying notes to financial statements
<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 two major divisions,  DHB Armor Group and
            DHB Sports Group.  DHB Armor Group  consists of  Protective  Apparel
            Corporation (PACA), Point Blank Body Armor Inc. and Zunblindage S.A.
            DHB Sports Group  consists of NDL Products Inc. (NDL) and Orthopedic
            Products  Inc.  (OPI).  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, and related ballistic
            accessories.   DHB  Sports  Group   manufactures   and   distributes
            specialized protective athletic apparel and equipment and orthopedic
            products.

            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,  consisting of merchandise  purchased for resale,
            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.
<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 that 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,  of
            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.
<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.

            Reclassification

                  Certain  items  on the 1996  financial  statements  have  been
            reclassified to conform to 1997 presentation..



Note 2      SUPPPLEMENTAL CASH FLOWS INFORMATION
<TABLE>
<CAPTION>
                                                        1997             1996
                                                      -------           -------
<S>                                 <C>               <C>               <C>
                  Cash paid for:
                                    Interest          269,450           535,859
                                    Taxes              11,971            33,301
</TABLE>
          During the years ended  December  31,  1997 and 1996,  the Company had
          non-cash  investing  activities when in issued common stock to acquire
          all of the outstanding stock of Zunblindage and of OPI, respectively.


Note 3    BUSINESS ACQUISITIONS

                  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.   ZSA   manufactures  and
            distributes bullet resistant equipment, apparel and related products
            generally in Europe and the Middle East.

                  In March, 1996 DHB acquired 100% of the issued and outstanding
            common stock of Orthopedic  Products,  Inc. ("OPI"),  a manufacturer
            and distributor of orthopedic  products to the medical industry,  in
            exchange for 270,000 shares of DHB common stock. In 1997,  38,625 of
            these  shares were  returned as a result of a lawsuit  which DHB won
            against the former shareholders for  misrepresentation and violating
            a covenant  not to  compete.  An  additional  6,625  shares  will be
            returned in 1998.

                  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 Zunblindage
            resulted in goodwill of $541,000.
<PAGE>
Note 3      BUSINESS ACQUISITIONS (continued)

                  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 materially effect on the results of operations.

Note 4      MARKETABLE SECURITIES/NON-MARKETABLE SECURITIES
 
                  The  following is a comparison of the cost and market value of
            marketable securities included in current assets:
<TABLE>
<CAPTION>
                                        1997           1996
                                     ----------     ----------
<S>                                  <C>            <C>
                 Cost ..........     $1,254,104     $1,272,859
                 Unrealized gain        449,702         69,168
                                     ----------     ----------
                 Market Value ..     $1,703,806     $1,342,027
                                     ==========     ==========
</TABLE>

                  The   Company's   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>
                                              1997            1996
                                          -----------     -----------
<S>                                       <C>             <C>
           Finished goods ...........     $ 5,776,562     $ 2,638,256
           Work in process ..........       1,646,610         997,308
           Raw materials and supplies       5,120,302       3,654,641
                                          -----------     -----------
                                          $12,543,474     $ 7,290,205
                                          ===========     ===========
</TABLE>
<PAGE>
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
                                          1997           1996       useful life
                                      ----------     ----------     -----------
<S>                                   <C>            <C>            <C>
Land ............................     $   47,500     $   47,500          --
Buildings .......................        427,500        427,500     39 years
Machinery and equipment .........      1,225,812      1,025,072     5-10 years
Furniture, fixtures and
   computer equipment ...........        819,019        343,098     5-7 years
Transportation equipment ........        244,510        144,361     3-5 years
Leasehold improvements ..........        480,928        372,240     5-31.5 years
                                      ----------     ----------
                                       3,245,269      2,359,771
Less accumulated depreciation and
amortization ....................        871,184        524,994
                                      ----------     ---------- 
                                      $2,374,085     $1,834,777
                                      ==========     ==========
                                       
</TABLE>

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
                                        1997          1996        useful life
                                     ----------    ----------     -----------
<S>                                  <C>           <C>              <C>
   Goodwill ....................     $  694,473    $  226,209       15 years
   On-going government
       contracts ...............        312,086       312,086       1-5 years
   Other .......................        129,563       129,563       1-7 years
                                     ----------     ---------
                                      1,136,122       667,858
   Less accumulated amortization        548,105       453,645
                                     ----------     ---------
                                     $  588,017     $ 214,213
                                     ==========     =========
</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
            6.6% at December 31, 1997.
<PAGE>
Note 9      NOTE PAYABLE STOCKHOLDER

                  These  notes bear  interest  at 12% per annum and are due,  as
            extended,  in  November,  1999  (see  Note  15  in  connection  with
            additional loans made by the majority stockholder in 1998.)

Note 10     LONG-TERM DEBT

                  Long-term debt consists of the following:
<TABLE>
<CAPTION>
                                                                           1997               1996
                                                                         --------           --------
<S>                                                                      <C>                <C>
            Notes payable in monthly  principal  installments  of        $112,798           $155,998
            $3,600.   Interest  at  the  rate  of  9%  per  annum
            accrues and is payable upon maturity in 2001.

            Note  payable  in  monthly   installments  of  $1,876          32,754             49,757
            inclusive  of interest at 9.71% per annum.  This note
            is  collateralized  by certain  equipment  originally
            costing approximately $90,000.

            Capital   lease   obligation   payable   in   monthly          20,109                 --
            installments  of $432  inclusive  of  interest  at
            9.87%.   This  note  is   collateralized  by  certain
            equipment originally costing approximately $23,000.

            Other                                                          10,789                 --
                                                                         --------           --------
                                                                          176,450            205,755
            Less Current Portion                                           65,192             61,664
                                                                         --------           --------
                                                                         $111,258           $144,091
                                                                         ========           ========
</TABLE>
                  Long-term debt matures as follows:

                                 1998             $58,917
                                 1999              39,332
                                 2000               4,069
                                 2001               4,489
                                 2002               4,451
                                                  -------
                                                  111,258
                                                  =======
Note 11    STOCKHOLDERS' EQUITY

           Common and preferred stock

                       (1) During   1996,   DHB  amended  its   certificate   of
                           incorporation  increasing  the  number of  authorized
                           shares  of its  $.001 par  value  Common  Stock  from
                           25,000,000  to  100,000,000.   In  addition,  DHB  is
                           authorized to issue  1,500,000  shares of Class A 10%
                           convertible Preferred Stock.

                       (2) In July,  1996,  DHB declared a 50% stock dividend on
                           the outstanding Common Stock.
<PAGE>
Note 11     STOCKHOLDERS' EQUITY (continued)

            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
            is 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 this 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 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 1998.

Note 12    RELATED PARTY TRANSACTIONS

                  A summary of related  party  transactions  for the years ended
            December 31, 1997 and 1996 is as follows:

<TABLE>
<CAPTION>
                                                               1997             1996
                                                             --------          --------
<S>                                                          <C>               <C>
              Rental expense paid or accrued to the
              relatives of the majority stockholder          $546,000          $480,000

              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.                     177,340           170,142
</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.
<PAGE>
Note 13     RISKS AND UNCERTAINTIES (continued)

                  Approximately  27% and 23% for the years  ended  December  31,
            1997 and 1996, 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.
            All of the products sold by DHB are used in  situations  which could
            result in serious personal injuries or death,  whether on account of
            the failure of such products,  or otherwise.  Although DHB maintains
            substantial amounts of insurance coverage to cover such risks, there
            is no assurance  that these amounts would be sufficient to cover the
            payment of any potential claims. In addition,  there is no assurance
            that this or any other insurance  coverage will remain available or,
            if available,  that DHB would be able to obtain such  insurance at a
            reasonable  cost.  The inability to obtain such  insurance  coverage
            would  prohibit  DHB from  bidding  for  certain  orders  for bullet
            resistant products from certain governmental customers.

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

Note 14     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.  The lease provides for annual
            rentals of $43,200,  plus real estate  taxes.  The space is occupied
            pursuant to a five-year  lease which  expired in October 1997 and is
            currently leased on a month to month basis.

                  In April  1997,  the  Company  entered a one year  lease for a
            60,000  square  foot  warehouse  adjacent  to the  existing  Florida
            facility with an annual  rental of  approximately  $210,000,  and an
            option to extend the lease for four years.

                  In  association  with  the  acquisition  of  Zunblindage,  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.
<PAGE>
Note 14     COMMITMENTS AND CONTINGENCIES (continued)

                  Rent and real estate taxes expense  charged to operations  for
            the years ended December 31, 1997 and 1996 aggregated  approximately
            $962,000 and $616,000, 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.

                  Concurrent  with the purchase of PACA,  the  President of PACA
            was given a five year  employment  agreement  which expired in 1997.
            This  agreement  calls for annual  salaries of $115,000  with annual
            increases of $10,000 plus certain fringe  benefits.  During the year
            ended December 31, 1995, the vice president of NDL was given a three
            year  employment  contract.  This agreement calls for an annual base
            salary of $100,000 and 16,500 stock warrants per year exercisable at
            $1.33 and expiring in February 2001, as extended.

                  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.

            Litigation

                  DHB is a  defendant  in a lawsuit  filed in the United  States
            District  Court for the Southern  District of New York.  The lawsuit
            seeks,  among other  things,  compensatory  damages of not less than
            $2,500,000,  punitive  damages of not less than  $500,000  breach of
            contract  and an order  enabling the  plaintiff  to execute  certain
            stock purchase warrants.

                  DHB has filed an  Answer  and  Counter-Claim  and  intends  to
            vigorously defend the claim and to pursue its Counter-Claims.

                  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.

                  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 15   INCOME TAXES

                  Components of income taxes are as follows:
<TABLE>
<CAPTION>
                                       1997             1996
                                   -----------      -----------     
<S>                                <C>              <C>                                                
 Current:
    Federal ..................     $   455,000      $         0
    State ....................          22,509            8,809
    Benefit of net operating
       loss  carryforward             (455,000)          --
                                   -----------      -----------     
          Total current ......          22,509            8,809

 Deferred:
    Federal ..................         690,000       (1,686,000)
    State ....................         430,700         (562,000)
    Less: valuation allowance       (1,494,700)       1,406,000
                                   -----------      -----------      
            Total Deferred ...         374,000         (843,000)
                                   -----------      -----------      

 Total income taxes (benefits)     $   396,509      $  (834,191)
                                   ===========      ===========
</TABLE>


                  The  composition  of the federal and state  deferred  taxes at
            December 31, 1997 was arrived at as follows:
<TABLE>
<CAPTION>

<S>                                                               <C>                                                             
              Operating Loss Carryforward                         $ 1,762,600
              Allowance for Doubtful Accounts                         141,200
              Valuation Allowance - Non marketable securities          51,200
              Net write down of investment in subsidiaries            175,000
              Unrealized gain on Marketable Securities               (180,000)
                                                                   ----------
                      Subtotal                                      1,950,000
              Less: Valuation Allowance                             1,494,700
                                                                   ----------
                      Net Deferred Taxes                           $  455,300
                                                                   ==========
</TABLE>
<PAGE>


Note 16     SUBSEQUENT EVENTS

                  On January  16,  1998,  DHB 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 magenetic products in the possession of Magnesystems.

                  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
            increasing  loans  from  the  majority  shareholder  of $7  million,
            including  amounts  for  working  capital.  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.  This transaction
            was accounted for as a purchase.

                  Since  December  31,  1997,  the Company has  repurchased  and
            retired an additional  536,495 shares of the Company's  common stock
            in  open  market   transactions  for  approximately   $2,111,000  as
            authorized by the Board of Directors.  This was funded in part by an
            additional shareholder loan of $2.2 million.
<PAGE>
                     DHB CAPITAL GROUP INC. AND SUBSIDIARIES
                     SCHEDULE II TO THE FINANCIAL STATEMENTS
                        VALUATION AND QUALIFYING ACCOUNTS
                                DECEMBER 31, 1997




Allowances deducted from related balance sheet accounts:
<TABLE>
<CAPTION>



                                                   Additions         Subtractions
                                  Balance at       charged to        charged to         Balance
                                the beginning       costs and         costs and       at end of
                                  of the year       expenses          expenses           year
                                -------------     ------------       ------------    ----------
<S>                              <C>              <C>                <C>             <C>
Accounts Receivable ......       $  303,230       $   50,000             --          $  353,230
                                                                                              
Inventory ................          700,000             --           (700,000)                0

Investment in Non-
marketable securities ....        1,000,000                0         (372,000)          628,000

Net Write down of ........       $  529,578             --               --          $  529,578
Investment in subsidiaries

</TABLE>
<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 24th day of
August, 1998.

                                                     DHB Capital Group Inc.

                                                     /S/ David Brooks
                                                     ----------------
                                                     David Brooks
                                                     Chairman of the Board and
                                                     Chief Executive Officer 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities indicated on March 23, 1998.


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

/S/David H. Brooks                Chairman of the Board          August 24, 1998
-------------------               and Director
David H. Brooks

/S/Mary Kreidell                  Treasurer/Director             August 24, 1998
-----------------                 Principal Financial Officer
Mary Kreidell                     Principal Accounting Officer

/S/Gary Nadelman                  Director                       August 24, 1998
---------------- 
Gary Nadelman