U.S. SECURITIES EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                   FORM 10-QSB

(X)   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

( )   TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE   SECURITIES
      EXCHANGE ACT OF 1934

For Quarter Ended:               Commission File Number: 000-30105
  June 30, 2002


                     DEFENSE INDUSTRIES INTERNATIONAL, INC.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)



     NEVADA                                          84-1421481
------------------                       ------------------------------
(State or other jurisdiction of          (IRS Employer Identification
incorporation or organization)           Number)



                              Industrial Zone Erez
                                  P.O. Box 779
                             Ashkelon, Israel 78101
--------------------------------------------------------------------------------
(Address of Principal Executive Offices)                    (Zip Code)


                               011-972-8-689-1611
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required to file such  reports) and (2) has been subject to filing  requirements
for the past 90 days.
                                  Yes  X  No___
                                      ---

The number of shares of Common Stock, no par value per share,  outstanding as of
June 30, 2002 is 25,400,000.

Transitional Small Business Disclosure Format (check one):  Yes__  No X
                                                                     ---



                                      -1-
<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                     DEFENSE INDUSTRIES INTERNATIONAL, INC.
                      (FORMERLY PAWNBROKERS EXCHANGE, INC.)
                                AND SUBSIDIARIES
                             CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2002





                                      -2-
<PAGE>


                     DEFENSE INDUSTRIES INTERNATIONAL, INC.
             (FORMERLY PAWNBROKERS EXCHANGE, INC.) AND SUBSIDIARIES



                                    CONTENTS


PAGES       4 - 5    CONDENSED  CONSOLIDATED  BALANCE  SHEETS  AS OF JUNE  30,
                     2002 (UNAUDITED) AND DECEMBER 31, 2001

PAGE          6      CONDENSED   CONSOLIDATED   STATEMENTS   OF   INCOME   AND
                     COMPREHENSIVE  INCOME (LOSS) FOR THE THREE AND SIX MONTHS
                     ENDED JUNE 30, 2002 AND 2001 (UNAUDITED)

PAGE          7      CONDENSED    CONSOLIDATED   STATEMENT   OF   CHANGES   IN
                     SHAREHOLDERS'  EQUITY FOR THE SIX  MONTHS  ENDED JUNE 30,
                     2002 (UNAUDITED)

PAGE          9     CONDENSED  CONSOLIDATED  STATEMENTS OF CASH FLOWS FOR THE
                     SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (UNAUDITED)

PAGES      10 - 19   NOTES  TO  CONDENSED  CONSOLIDATED  FINANCIAL  STATEMENTS
                     (UNAUDITED)





                                      -3-
<PAGE>



                     DEFENSE INDUSTRIES INTERNATIONAL, INC.
             (FORMERLY PAWNBROKERS EXCHANGE, INC.) AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>





                                             ASSETS
                                                                                    December 31,
                                                                 June 30, 2002         2001
                                                                  (Unaudited)      (As Restated)
                                                                ---------------   --------------
<S>                                                            <C>               <C>
CURRENT ASSETS
 Cash and cash equivalents                                     $       540,054   $      781,996
 Trade accounts receivable, net                                      1,692,195        2,461,671
 Trade accounts receivable - related parties, net                      140,728          181,059
 Shareholder note receivable                                           400,000             -
 Other receivables and debit balances                                  410,610          274,840
 Inventories                                                         1,945,054        1,956,072
 Deferred taxes                                                        105,219           97,761
                                                                 ---------------   --------------
     Total Current Assets                                            5,233,860        5,753,399
                                                                 ---------------   --------------

PROPERTY, PLANT AND EQUIPMENT, NET                                   1,826,348        1,951,147
                                                                 ---------------   --------------

OTHER ASSETS
 Investment in marketable securities                                   521,526          616,105
 Deposits for the severance of employer-employee relations             384,536          472,421
 Deferred taxes, long-term                                             278,847          400,689
 Intangible assets                                                      52,099           61,452
                                                                 ---------------   --------------
     Total Other Assets                                              1,237,008        1,550,667
                                                                 ---------------   --------------

Total assets                                                   $     8,297,216   $    9,255,213
------------
                                                                 ===============   ==============

</TABLE>



                                      -4-
<PAGE>


                     DEFENSE INDUSTRIES INTERNATIONAL, INC.
             (FORMERLY PAWNBROKERS EXCHANGE, INC.) AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>



                      LIABILITIES AND SHAREHOLDERS' EQUITY

                                                                                   December 31,
                                                                 June 30, 2002         2001
                                                                  (Unaudited)      (As Restated)
                                                                 ---------------   --------------
<S>                                                            <C>               <C>
CURRENT LIABILITIES
 Short-term bank credit                                        $       693,560   $      894,981
 Trade accounts payable                                              1,092,729        1,551,470
 Current portion of long-term debt                                     349,525          371,344
 Other accounts payable and credit balances                            963,307        1,011,062
                                                                 ---------------   --------------
     Total Current Liabilities                                       3,099,121        3,828,857
                                                                 ---------------   --------------

LONG-TERM LIABILITIES
 Long-term loans                                                       650,045        1,295,440
 Long-term loan - related party                                           -              47,432
 Provision for the severance of employer-employee relations            418,884          431,522
 Minority interest                                                     600,445          572,106
                                                                 ---------------   --------------
     Total Long-Term Liabilities                                     1,669,374        2,346,500
                                                                 ---------------   --------------

Total liabilities                                                    4,768,495        6,175,357
                                                                 ---------------   --------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
 Common stock, no par value, 300,000,000 shares authorized,
  25,400,000 and 21,000,000 issued and outstanding,
  respectively                                                       2,069,485        1,147,485
 Retained earnings                                                   3,018,499        2,396,616
 Accumulated other comprehensive loss                                 (680,263)        (464,245)
 Deferred consulting fees                                             (879,000)            -
                                                                 ---------------   --------------
     Total Shareholders' Equity                                      3,528,721        3,079,856
                                                                 ---------------   --------------


Total liabilities and shareholders' equity                     $     8,297,216   $    9,255,213
------------------------------------------
                                                                 ===============   ==============

</TABLE>



                                      -5-
<PAGE>



                     DEFENSE INDUSTRIES INTERNATIONAL, INC.
             (FORMERLY PAWNBROKERS EXCHANGE, INC.) AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
                           COMPREHENSIVE INCOME (LOSS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>


                                            For the       For the
                                              Three         Three      For the       For the
                                             Months        Months      Six Months    Six Months
                                           Ended June    Ended June    Ended June    Ended June
                                            30, 2002      30, 2001      30, 2002      30, 2001
                                           ------------  ------------  ------------  ------------
<S>                                      <C>           <C>           <C>           <C>
REVENUES                                 $  2,692,415  $    942,188  $  5,313,635  $  2,039,258
 Cost of sales and processing               1,663,279       616,126     3,267,108     1,373,989
                                           ------------  ------------  ------------  ------------
 Gross profit                               1,029,136       326,062     2,046,527       665,269
                                           ------------  ------------  ------------  ------------

OPERATING EXPENSES

 Selling expenses                             228,016        40,292       322,683       101,897
 General and administrative expenses          333,121       182,296       599,165       264,568
                                           ------------  ------------  ------------  ------------

TOTAL OPERATING EXPENSES                      561,137       222,588       921,848       366,465
                                           ------------  ------------  ------------  ------------

INCOME FROM OPERATIONS                        467,999       103,474     1,124,679       298,804
                                           ------------  ------------  ------------  ------------

OTHER INCOME (EXPENSE)
 Financial income (expense), net              (33,144)      (41,012)      (66,295)      (30,046)
 Other income - net                            11,915        31,116        12,920        49,028
                                           ------------  ------------  ------------  ------------

TOTAL OTHER INCOME (EXPENSE)                  (21,229)       (9,896)      (53,375)       18,982
                                           ------------  ------------  ------------  ------------

INCOME BEFORE INCOME TAXES                    446,770        93,578     1,071,304       317,786
 Income tax expense                           185,888        14,766       408,081        97,743
                                           ------------  ------------  ------------  ------------

INCOME BEFORE MINORITY INTEREST               260,882        78,812       663,223       220,043
 Minority interest                            (18,254)       (7,313)      (41,340)       (7,313)
                                           ------------  ------------  ------------  ------------

NET INCOME                               $    242,628  $     71,499  $    621,883  $    212,730
                                           ------------  ------------  ------------  ------------

OTHER COMPREHENSIVE INCOME (LOSS)
 Foreign currency translation gain
  (loss), net of minority interest
  translation loss                             10,272        15,702      (163,128)      (58,142)
 Unrealized gain (loss) on
  available-for-sale securities               (61,260)       31,023       (52,890)      (93,982)
                                           ------------  ------------  ------------  ------------
 Other comprehensive income (loss)            (50,988)       46,725      (216,018)     (152,124)
 before tax
 Income tax (expense) benefit related
  to items of other comprehensive
  income                                       18,356       (16,821)       77,766        54,765
                                           ------------  ------------  ------------  ------------

TOTAL OTHER COMPREHENSIVE INCOME
 (LOSS), NET OF TAX                           (32,632)       29,904      (138,252)      (97,359)
                                           ------------  ------------  ------------  ------------

COMPREHENSIVE INCOME (LOSS)              $    209,996  $    101,403  $    483,631  $    115,371
---------------------------
                                           ============  ============  ============  ============

 Net income per ordinary share - basic
  and diluted                            $       0.01  $       0.00  $       0.03  $       0.01
                                           ============  ============  ============  ============

 Weighted average number of shares
  outstanding during the period -
  basic and diluted                        25,149,171    20,099,993    23,314,917    20,025,407
                                           ============  ============  ============  ============

</TABLE>



                                      -6-
<PAGE>

                     DEFENSE INDUSTRIES INTERNATIONAL, INC.
             (FORMERLY PAWNBROKERS EXCHANGE, INC.) AND SUBSIDIARIES
       CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                     FOR THE SIX MONTHS ENDED JUNE 30, 2002
                                   (UNAUDITED)

<TABLE>
<CAPTION>


                                                                                                Accumulated
                                                                                                   Other
                                     Common Stock                 Retained       Deferred       Consulting     Comprehensive
                                       Shares        Amount       Earnings         Fees        Income (Loss)        Total
                                    ------------   -----------   ------------   ------------   ---------------   -------------
<S>                                 <C>          <C>           <C>            <C>                   <C>        <C>
Balance, January 1, 2002
 (as previously reported)           21,000,000   $ 1,147,485   $  2,468,669   $       -             (464,245)  $   3,151,909

Prior period adjustment - error
 in depreciation expense                  -             -           (72,053)          -                 -            (72,053)
                                    ------------   -----------   ------------   ------------   ---------------   -------------

Balance, January 1, 2002 (as
 restated)                          21,000,000     1,147,485      2,396,616           -             (464,245)      3,079,856

Common stock transferred in
 recapitalization                    4,000,000          -              -              -                 -               -

Common stock issued for services       400,000       922,000           -          (879,000)             -             43,000

Foreign currency translation loss         -             -              -              -             (163,128)       (163,128)

Unrealized loss on available for
 sale securities                          -             -              -              -              (52,890)        (52,890)

Net income 2002                           -             -           621,883           -                 -            621,883
                                    ------------   -----------   ------------   ------------   ---------------   -------------

BALANCE, JUNE 30, 2002              25,400,000   $ 2,069,485   $  3,018,499   $   (879,000)         (680,263)  $   3,528,721
----------------------              ============   ===========   ============   ============   ===============   =============

</TABLE>



                                      -7-
<PAGE>

                     DEFENSE INDUSTRIES INTERNATIONAL, INC.
             (FORMERLY PAWNBROKERS EXCHANGE, INC.) AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>


                                                                        For The        For The
                                                                      Six Months     Six Months
                                                                      Ended June     Ended June
                                                                       30, 2002       30, 2001
                                                                      ------------   ------------
<S>                                                                 <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Income                                                        $    621,883   $    212,730
  Adjustments to reconcile net income to net cash provided by
   operating activities:
  Depreciation and amortization                                          140,983         55,431
  Stock issued for services                                               43,000           -
  Minority interest in income of subsidiary                               28,339           -
  Gain from sale of fixed assets                                            -           (15,377)
  Decrease (increase) in deposits for employee severance                  87,885          1,426
  Decrease (increase) in deferred taxes                                  114,384            221
  Decrease (increase) in trade accounts receivable                       809,806       (337,345)
  Decrease (increase) in other receivables and debit balances           (135,769)         4,486
  Decrease (increase) in inventory                                        11,018         22,860
  Increase (decrease) in trade accounts payable                         (458,741)       (51,457)
  Increase (decrease) in other accounts payable and credit
  balances                                                               (47,755)       109,082
  Increase (decrease) in provision for employee severance                (12,638)         7,676
                                                                      ------------   ------------
      Net Cash Provided By Operating Activities                        1,202,395          9,733
                                                                      ------------   ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                                     (58,312)       (60,927)
  Proceeds from sale of property and equipment                             3,167         17,392
  Investment in marketable securities                                    (17,421)       (18,397)
  Cash acquired in acquisition of Achidatex                                 -            39,147
  Funds advanced on behalf of shareholder                               (400,000)          -
  Advances related to acquisition, net                                      -            56,820
  Loan to subsidiary                                                        -          (480,000)
                                                                      ------------   ------------
      Net Cash Used in Investing Activities                             (472,566)      (445,965)
                                                                      ------------   ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Short-term bank credit, net                                           (201,421)       515,141
  Payments on long term debt                                            (667,214)       (10,885)
  Loan payable - related party                                           (47,432)          -
                                                                      ------------   ------------
      Net Cash Provided By (Used In) Financing Activities               (916,067)       504,256
                                                                      ------------   ------------

Effect of exchange rate changes on cash                                  (55,704)       (33,315)
                                                                      ------------   ------------

Net increase (decrease) in cash and cash equivalents                    (241,942)        34,709

Cash and cash equivalents - beginning of period                          781,996        663,295
                                                                      ------------   ------------

Cash and cash equivalents - end of period                           $    540,054   $    698,004
-----------------------------------------
                                                                      ============   ============

INTEREST PAID                                                       $     69,546   $     43,665
                                                                      ============   ============

TAXES PAID                                                          $     59,521   $     59,407
                                                                      ============   ============

</TABLE>



                                      -8-
<PAGE>


                     DEFENSE INDUSTRIES INTERNATIONAL, INC.
            (FORMERLY PAWNBROKERS EXCHANGE, INC.) AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)




SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:

On March 25,  2002,  the Company  issued  21,000,000  shares of common  stock to
acquire Export Erez USA, Inc.

On April 8,  2002,  the  Company  issued  100,000  shares  of  common  stock for
consulting services  aggregating $172,000 of which $43,000 has been expensed and
$129,000 has been deferred at June 30, 2002.

On April 30, 2002,  the Company  issued  300,000  shares of common stock under a
consulting  agreement  valued at  $750,000.  No  consulting  services  have been
performed to date in  connection  with this  agreement and the entire amount has
been deferred.






                                      -9-
<PAGE>


                     DEFENSE INDUSTRIES INTERNATIONAL, INC.
            (FORMERLY PAWNBROKERS EXCHANGE, INC.) AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 1      BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

     (A) Basis of Presentation

     The accompanying  condensed consolidated financial statements are presented
     in United States dollars under accounting  principles generally accepted in
     the United States of America.

     (B) Principles of Consolidation

     The  condensed  consolidated  financial  statements  for 2002 include the
     accounts of Defense Industries International,  Inc. (formerly Pawnbrokers
     Exchange,  Inc. (see Note 7)) and its wholly owned  subsidiaries,  Export
     Erez, USA, Inc., Export Erez, Ltd., Mayotex,  Ltd. and Dragonwear Trading
     Ltd.   and  its   76%   owned   subsidiary   Achidatex   Nazareth   Elite
     (collectively,  the  "Company").  The minority  interest  represents  the
     minority shareholders' proportionate share of Achidatex.

     The  consolidated  financial  statements for 2001 include the accounts of
     Export Erez,  USA, Inc. and its wholly owned  subsidiaries,  Export Erez,
     Ltd.,  Mayotex,  Ltd.  and  Dragonwear  Trading  Ltd.  and its 76%  owned
     subsidiary  Achidatex  Nazareth  Elite  from June 18,  2001,  the date of
     acquisition (See Note 5).

     All  intercompany   accounts  and  transactions  have  been  eliminated  in
     consolidation.

     (C) Use of Estimates

     The  preparation  of financial  statements  in conformity  with  Accounting
     principles  generally  accepted  in the United  States of America  requires
     management  to make  estimates  and  assumptions  that effect the  reported
     amounts of assets and  liabilities  and disclose  the nature of  contingent
     assets and  liabilities  at the date of the  financial  statements  and the
     reported  amounts of revenues and expenses  during the  reporting  periods.
     Actual results could differ from those estimates.

     (D) Per Share Data

     Basic net income per common share is computed based on the weighted average
     common shares  outstanding  during the year.  Diluted net income per common
     share is computed  based on the weighted  average  common shares and common
     stock equivalents  outstanding during the year. The computation of weighted
     average  common  shares   outstanding  gives  retroactive   effect  to  the
     recapitalization   discussed   in  Note  4.  There  were  no  common  stock
     equivalents  outstanding  because the  exercise  price of the common  stock
     equivalents exceeded the average market price of the stock. Accordingly,  a
     reconciliation  between  basic  and  diluted  earnings  per  share  is  not
     presented.

                                      -10-
<PAGE>

     (E) Interim Consolidated Financial Statements

     The condensed consolidated financial statements as of June 30, 2002 and for
     the three and six months ended June 30, 2002 and 2001 are unaudited. In the
     opinion of management,  such condensed  consolidated  financial  statements
     include all  adjustments  (consisting  only of normal  recurring  accruals)
     necessary for the fair presentation of the consolidated  financial position
     and the consolidated  results of operations.  The  consolidated  results of
     operations  for the three and six months  ended June 30,  2002 and 2001 are
     not necessarily indicative of the results to be expected for the full year.
     The condensed  consolidated  balance sheet  information  as of December 31,
     2001  was  derived  from  the  audited  consolidated  financial  statements
     included in the Company's annual report Form 10-KSB.  The interim condensed
     consolidated  financial  statements should be read in conjunction with that
     report.

     (F) Prior Period Adjustment

     The accompanying  condensed  consolidated  balance sheet as of December 31,
     2001 has been  restated  to  correct  an error  for the  understatement  of
     depreciation  expense  during 2001.  The effect of the  restatement  was to
     decrease net income for 2001 by $72,053.  Retained  earnings and  property,
     plant and  equipment,  net in the  December 31, 2001  consolidated  balance
     sheet and  retained  earnings in the  consolidated  statement of changes in
     shareholders' equity have been restated for the effects of the prior period
     adjustment.

NOTE 2      INVENTORY

     Inventory consisted of the following:
<TABLE>
<CAPTION>


                                     June 30, 2002      December 31, 2001
                                     --------------     -----------------
<S>                                <C>                   <C>
     Raw materials                 $    1,325,855        $   1,166,086
     Work in process                      276,717              491,237
     Finished goods                       342,481              298,749
                                     --------------        -------------
                                   $    1,945,054        $   1,956,072
                                     ==============        =============
</TABLE>

NOTE 3      SHAREHOLDER LOAN RECEIVABLE

     On  January  15,  2002,  the  Company  loaned  $400,000  to  the  Company's
     controlling  shareholder.  The note is for a term of eleven months maturing
     December 15, 2002,  bears  interest of 8% and  requires  quarterly  prepaid
     interest  payments  only.  Interest on this loan was not paid until  August
     2002 and approximately  $10,000 of interest income has been accrued for the
     period ended June 30, 2002.


                                      -11-
<PAGE>

                     DEFENSE INDUSTRIES INTERNATIONAL, INC.
             (FORMERLY PAWNBROKERS EXCHANGE, INC.) AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 4      SHAREHOLDERS' EQUITY

     (A) Recapitalization

     On March 25, 2002,  Pawnbrokers Exchange,  Inc. ("PEI"), a reporting public
     company with no assets, liabilities or operations at that time, consummated
     a share exchange  agreement (the  "Agreement")  with Export Erez USA, Inc.,
     ("Export  USA") a  company  incorporated  in  Delaware  whereby  all of the
     shareholders  in Export  USA had their  shares  converted  into  21,000,000
     shares or 84% of the common stock of PEI.

     Under   generally   accepted   accounting   principles,   a  company  whose
     stockholders  receive  over  fifty  percent  of the stock of the  surviving
     entity in a business  combination is considered the acquirer for accounting
     purposes.  Accordingly, the transaction was accounted for as an acquisition
     of  the  Company  and a  recapitalization  of  Export  USA.  The  condensed
     consolidated financial statements subsequent to the acquisition include the
     following:  (1) the balance sheet consists of the net assets of the Company
     at historical  costs (zero at the  acquisition  date) and the net assets of
     Export USA at historical cost. (2) the statement of operations  consists of
     the operations of Export USA for the period presented and the operations of
     the Company from the recapitalization date.

     As a result  of the  recapitalization,  $1,146,169  was  reclassified  from
     additional  paid-in  capital to common stock in the  accompanying  June 30,
     2002 balance sheet. For comparative  purposes,  $1,146,169 was reclassified
     from  additional  paid-in  capital  to  common  stock  in the  accompanying
     December  31, 2001  balance  sheet in order to conform to the June 30, 2002
     presentation.

     (B) Issuances of Common Stock

     On April 8, 2002,  the Company  entered  into a one-year  agreement  with a
     consultant  whereby the Company  issued  100,000  shares of common stock in
     return for future  consulting  services.  The 100,000 shares were valued at
     $172,000, the fair market value of the common stock on the grant date based
     on  the  prevailing  market  price.   Consulting  expense  of  $43,000  was
     recognized  as of June 30,  2002 and  $129,000 is  reflected  as a deferred
     consulting expense component of equity.

     On April 30, 2002,  the Company  entered into a one-year  agreement  with a
     consultant  whereby the Company  issued  300,000  shares of common stock in
     return for future  consulting  services.  The 300,000 shares were valued at
     $750,000  the fair market value of the common stock on the grant date based
     on the prevailing  market price. The contract is in dispute and no services
     have been performed to date.  Counsel for the Company is confident that the
     Company will prevail and receive its 300,000  shares  back.  Therefore,  no
     consulting  expense  was  recognized  as of June 30,  2002 and  $750,000 is
     reflected as a deferred consulting expense component of equity.


                                      -12-
<PAGE>
                     DEFENSE INDUSTRIES INTERNATIONAL, INC.
             (FORMERLY PAWNBROKERS EXCHANGE, INC.) AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)



NOTE 5      BUSINESS COMBINATION

     Effective June 18, 2001, the Company acquired 76% of the total common stock
     of Achidatex  Nazareth Elite (1977) Ltd.  ("Achidatex").  Accordingly,  the
     results  of   operations   of  Achidatex  are  included  in  the  condensed
     consolidated financial statements for the six months ended June 30, 2002.

     For comparative purposes,  following are the summarized unaudited pro forma
     condensed  consolidated results of operations for the six months ended June
     30, 2001,  assuming  the  acquisition  had taken place at the  beginning of
     2001.  The unaudited pro forma  results are not  necessarily  indicative of
     future  earnings  or  earnings  that  would  have  been  reported  had  the
     acquisition been completed when assumed.

<TABLE>
<CAPTION>

<S>                                                              <C>
     Net revenues                                                $  5,157,674
     Income before income taxes                                  $    683,574
     Income tax expense (benefit)                                $   (607,530)
     Minority interest, net of tax                               $    264,368
     Net income                                                  $  1,026,736
     Net income per share                                        $       0.05

</TABLE>

NOTE 6      SEGMENT INFORMATION

     The Company has two strategic  business units:  the civilian market and the
     military  market.  The military market is further broken down between local
     and  export  sales in order to better  analyze  trends in sales and  profit
     margins.  The Company does not allocate  assets  between  segments  because
     several assets are used in more than one segment and any  allocation  would
     be impractical.

<TABLE>
<CAPTION>
                           Civilian    Military     Military
                             Local       Local        Export     Consolidated
                           ----------  -----------  -----------  ------------
<S>                      <C>         <C>          <C>          <C>
     June 30, 2002
      Net Sales          $ 2,011,659 $ 2,506,343  $   795,633  $  5,313,635
      Income from
       operations           560,312      392,739      171,628     1,124,679

     June 30, 2001
      Net Sales          $  960,620  $   804,102  $   274,536  $  2,039,258
      Income from
       operations           177,604       94,086       27,114       298,804

</TABLE>

                                      -13-
<PAGE>

                     DEFENSE INDUSTRIES INTERNATIONAL, INC.
             (FORMERLY PAWNBROKERS EXCHANGE, INC.) AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 7      SUBSEQUENT EVENT

     Effective July 8, 2002, the Company changed its corporate domicile from the
     State of Utah to the State of Nevada (the "re-incorporation").  In order to
     accomplish  the  re-incorporation,  the  Company  merged  with and into its
     wholly-owned subsidiary,  Defense Industries International,  Inc., a Nevada
     corporation.  As a result of the  re-incorporation,  the Company's name was
     effectively changed from Pawnbrokers  Exchange,  Inc. to Defense Industries
     International,  Inc.  Each share of  Pawnbrokers  capital  stock issued and
     outstanding  on the effective date was converted into and exchanged for one
     share of Defense Industries capital stock. Defense Industries is authorized
     to issue 250,000,000 shares of $.0001 par value common stock and 50,000,000
     shares of $.0001 par value preferred stock.



                                      -14-
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

Cautionary   Statement  Pursuant  to  Safe  Harbor  Provisions  of  the  Private
Securities Litigation Reform Act of 1995:

This  Quarterly  Report on Form 10-QSB for the  quarterly  period ended June 30,
2002 contains "forward-looking"  statements within the meaning of Section 27A of
the Securities Act of 1933, as amended,  including  statements  that include the
words  "believes",  "expects",  "anticipates",  or  similar  expressions.  These
forward-looking   statements   may  include,   among   others,   statements   of
expectations,  beliefs,  future  plans  and  strategies,  anticipated  events or
trends,  and similar  expressions  concerning  matters  that are not  historical
facts.  The  forward-looking  statements in this Quarterly Report on Form 10-QSB
for the quarterly  period ended June 30, 2002 involve  known and unknown  risks,
uncertainties and other factors that could the cause actual results, performance
or achievements  of the Company to differ  materially from those expressed in or
implied by the forward-looking statements contained herein.

OVERVIEW

The strategic objective of Defense Industries  International,  Inc. is to be the
leading global provider of personal military and civilian  protective  equipment
and  supplies.  We  intend  to  realize  our  strategic  objective  through  the
following:

     -Pursue   Strategic   Acquisitions:   We  intend  to   selectively   pursue
acquisitions that enhance our product lines and geographic presence in an effort
to consolidate our highly  fragmented  industry and to create a more diverse and
global reach for our company in the marketplace.

     -Focus on Internal Growth: We intend to focus on internal  expansion of our
businesses,  thereby  placing  our  company in a position  to offer an even more
comprehensive  portfolio of products to satisfy all of our customers' protective
equipment needs.

     -Capitalize On Increased  Demand for Company  Products.  As a result of the
terrorist  attacks on September  11, 2001,  and other  recent world  events,  an
increased  emphasis  on safety and  protection  now exists  worldwide.  This has
translated into increased spending on personal military and civilian  protective
equipment and supplies. We expect a continued increase in volume for our current
government  programs  and expect to  participate  in other  existing  and future
government  programs  that  require  our  products.  We also  expect a continued
increase in sales to the growing civilian market for our products.

     -Expand  Marketing  Efforts:  In the  wake  of  the  terrorist  attacks  of
September 11, 2001, and other recent world events, a greater global  recognition
regarding the need for our products has materialized. We intend to capitalize on
this increased  interest in our products by broadening our marketing  efforts in
an  attempt to create  better  global  brand and  recognition  awareness  of our
company and our products.

     -Expand Distribution Network and Product Offerings:  We intend to widen our
distribution  network through strategic  acquisitions and the development of new
products.  We believe that a broader  product line will enable us to  strengthen
our relationship  with existing  customers and attract new customers at the same
time.

RESULTS OF OPERATIONS

  Three Months Ended June 30, 2002 Compared to Three Months Ended June 30,2001
  ----------------------------------------------------------------------------

     SALES AND GROSS PROFIT MARGIN

     Sales in the three months ended June 30, 2002  increased to  $2,692,415  or
185.8%  from  $942,188  for the same three  months in 2001.  We  attribute  this
increase in sales to the  acquisition  of Achidatex,  Ltd. in June 2001, and the
increased  demand for our products.  The breakdown of sales for the three months
ended June 30 is as follows:

<TABLE>
<CAPTION>
                                            2002 ($)   2001 ($)
                                           --------  ---------
<S>                                       <C>          <C>
Sales to the local market-civilian        1,034,046    474,474
Sales to the local market-military        1,119,535    287,481
Export sales-military                       538,835    180,233

      Totals      $                        2,692,416   942,188

</TABLE>

                                      -15-
<PAGE>

     Gross  profit  for the  three  months  ended  June 30,  2002  increased  to
$1,029,136  or 215.7%  from  $326,062  for the same three  months in 2001.  This
increase in gross profit is explained  partly by the  acquisition  of Achidatex,
Ltd. in June 2001, and the increased  demand for our products.  The gross margin
for the three  months  ended June 30, 2002  improved to 38% as compared to 34.6%
for the same three months in 2001.



<PAGE>

     The cost of  production  for the  three  months  ended  June  30,  2002 was
$1,663,279  compared to $616,126 for the same three months in 2001.  This change
in cost of production is explained partly by the acquisition of Achidatex, Ltd..

     GENERAL AND ADMINISTRATIVE EXPENSES

     General and  administrative  costs in the three  months ended June 30, 2002
were  $333,121  compared to  $182,296  for the same three  months in 2001.  This
change is explained partly by the acquisition of Achidatex, Ltd.

     INCOME TAX EXPENSE

     Income tax expense for the three months ended June 30, 2002 was $185,888 or
41.6% of income before  income taxes,  as compared to $14,766 or 15.8% of income
before income taxes for the three months ended June 30,2001.

     The  effective  income tax rate  increased in 2002 as compared to 2001 as a
result of several  factors.  Certain  stock-based  non-cash  operating  expenses
incurred in 2002 at the US holding company level were not deductible against the
income  generated  at the  Israel  subsidiaries  for  income  tax  purposes.  In
addition,  depreciation  expense with  respect to fixed assets of  approximately
$1,441,000  acquired in  conjunction  with the  acquisition of a 76% interest in
Achidatex  Nazareth Elite (1977) Ltd.  effective June 18, 2001 is not deductible
against income generated in Israel for income tax purposes. Depreciation expense
with  respect to these  fixed  assets was  approximately  $36,000  for the three
months ended June 30, 2002.  There was no similar  depreciation  expense for the
three months ended June 30, 2001.

     FINANCIAL INCOME / (EXPENSES), NET

     Financial  income  (expense),  net in the three  months ended June 30, 2002
were $33,144 compared to $41,012 for the same three months in 2001.

     Six Months  Ended June 30, 2002  Compared to Six Months Ended June 30, 2001
     ---------------------------------------------------------------------------

     SALES AND GROSS PROFIT MARGIN

     Sales in the six months ended June 30, 2002  increased to  $5,313,635  from
$2,039,258  for the same six months in 2001. We attribute this increase in sales
to the acquisition of Achidatex, Ltd. and increased demand for our products. The
breakdown of sales for the six months ended June 30 is as follows:

<TABLE>
<CAPTION>
                                           2002 ($)     2001 ($)
                                           --------     -------
<S>                                       <C>           <C>
Sales to the local market-civilian        2,011,659     960,620
Sales to the local market-military        2,506,343     804,102
Export sales-military                       795,633     274,536

      Totals      $                       5,313,635   2,039,258

</TABLE>

     Sales to the local  market  increased  by 109.4% This  increase in sales is
explained partly by the acquisition of Achidatex,  Ltd. and the increased demand
for our  products.  The gross  margin for the six  months  ended June 30, 2002
improved to 39% as compared to 33% for the same six months in 2001.

     Gross profit for the six months ended June 30, 2002 increased to $2,046,527
from $665,269 for the same six months in 2001.  This increase in gross profit is
explained  partly by the  acquisition of Achidatex and increased  demand for our
products.

                                      -16-
<PAGE>

     The cost of production in the six months ended June 30, 2002 was $3,267,108
compared to $1,373,989  for the same six months in 2001.  This change in cost of
production  is explained  partly by the  acquisition  of Achidatex and increased
demand for our products.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     General and administrative costs in the six months ended June 30, 2002 were
$599,165  compared to $264,568  for the same six months in 2001.  This change is
explained partly by the acquisition of Achidatex,  Ltd. and the increased demand
for our products.

     Unfulfilled  open  orders  at June  30,  2002  totaled  $3,000,000  and are
scheduled for filling within the next three months.

     INCOME TAX EXPENSE

     Income tax expense for the six months  ended June 30, 2002 was  $408,081 or
38.1% of income before  income taxes,  as compared to $97,743 or 30.8% of income
before income taxes for the six months ended June 30, 2001.

     The  effective  income tax rate  increased in 2002 as compared to 2001 as a
result of several  factors.  Certain  stock-based  non-cash  operating  expenses
incurred in 2002 at the US holding company level were not deductible against the
income  generated  at the  Israel  subsidiaries  for  income  tax  purposes.  In
addition,  depreciation  expense with  respect to fixed assets of  approximately
$1,441,000  acquired in  conjunction  with the  acquisition of a 76% interest in
Achidatex  Nazareth Elite (1977) Ltd.  effective June 18, 2001 is not deductible
against income generated in Israel for income tax purposes. Depreciation expense
with  respect to these  fixed  assets was  approximately  $72,000  for the six
months ended June 30, 2002.  There was no similar  depreciation  expense for the
six months ended June 30, 2001.

     FINANCIAL INCOME / (EXPENSES), NET

     Financial income (expense),  net in the six months ended June 30, 2002 were
$66,295 compared to $30,046 for the same three months in 2001.

     LIQUIDITY AND CAPITAL RESOURCES

     Our  current  activities  are  financed  by short and long term bank  loans
balanced by short term deposits.  The decision regarding the amount of the short
term loans was derived from  considerations of the yield on the deposit which is
generally in foreign currency  (receipts from overseas  sales),  compared to the
cost of short term loans. We have positive  working capital (current assets less
current  liabilities).  Long term loans derived from  acquisition  of Achidatex,
Ltd. their due spread over five years.

     During  this year and the year  following,  we  anticipate  increasing  our
research  and  development  of  certain  items,  primarily,  ballistic  helmets,
stab-resistant  fabric,  ceramic ballistic  plates,  ballistic wall covering and
one-way  protective  windows.  We  anticipate  total  research  and  development
expenses  for  2002  and  2003  to  be  approximately  $1,950,000  and  $750,000
respectively.  We  anticipate  that in the year 2003  research  and  development
expenses will drop to approximately  $350,000. The development of these products
will be with staff engineers.  With respect to ballistic helmets,  we anticipate
that these products will be  approximately  in 20% production by the end of this
year,  increasing to full  production  by the year 2005.  We anticipate  that in
order to fund the research and development for these products,  we may effect an
offering of our equity securities. If we are unable to effect an offering of our
securities,  we may fund our  research  and  development  through our  operating
funds. In such event, the timing of our anticipated research and development and
subsequent production schedule would be slowed.

     RECENT ACCOUNTING PRONOUNCEMENTS AND CRITICAL ACCOUNTING POLICIES


     BASIS OF PRESENTATION

The accompanying  condensed  consolidated  financial statements are presented in
United States  dollars under  accounting  principles  generally  accepted in the
United States of America.

                                      -17-
<PAGE>

     PRINCIPLES OF CONSOLIDATION

The condensed consolidated financial statements for 2002 include the accounts of
Defense Industries International, Inc. (formerly Pawnbrokers Exchange, Inc. (see
Note 7)) and its wholly owned subsidiaries, Export Erez, USA, Inc., Export Erez,
Ltd.,  Mayotex,  Ltd. and Dragonwear  Trading Ltd. and its 76% owned  subsidiary
Achidatex Nazareth Elite  (collectively,  the "Company").  The minority interest
represents the minority shareholders' proportionate share of Achidatex.

The  consolidated  financial  statements for 2001 include the accounts of Export
Erez, USA, Inc. and its wholly owned  subsidiaries,  Export Erez, Ltd., Mayotex,
Ltd. and Dragonwear Trading Ltd. and its 76% owned subsidiary Achidatex Nazareth
Elite from June 18, 2001, the date of acquisition (See Note 5).

All   intercompany   accounts  and   transactions   have  been   eliminated   in
consolidation.

     USE OF ESTIMATES

The preparation of financial statements in conformity with Accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  effect  the  reported  amounts  of assets and
liabilities and disclose the nature of contingent  assets and liabilities at the
date of the  financial  statements  and the  reported  amounts of  revenues  and
expenses  during the reporting  periods.  Actual results could differ from those
estimates.

     PER SHARE DATA

Basic net income per common  share is  computed  based on the  weighted  average
common shares  outstanding  during the year. Diluted net income per common share
is  computed  based on the  weighted  average  common  shares and  common  stock
equivalents  outstanding  during the year. The  computation of weighted  average
common  shares  outstanding  gives  retroactive  effect to the  recapitalization
discussed in Note 4. There were no common stock equivalents  outstanding because
the exercise price of the common stock  equivalents  exceeded the average market
price of the stock.  Accordingly,  a  reconciliation  between  basic and diluted
earnings per share is not presented.

     INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The condensed  consolidated financial statements as of June 30, 2002 and for the
three and six months ended June 30, 2002 and 2001 are unaudited.  In the opinion
of management,  such condensed  consolidated  financial  statements  include all
adjustments  (consisting  only of normal recurring  accruals)  necessary for the
fair  presentation of the consolidated  financial  position and the consolidated
results of operations.  The consolidated results of operations for the three and
six months ended June 30, 2002 and 2001 are not  necessarily  indicative  of the
results to be expected for the full year.  The  condensed  consolidated  balance
sheet  information  as of  December  31,  2001  was  derived  from  the  audited
consolidated  financial  statements included in the Company's annual report Form
10-KSB. The interim condensed  consolidated  financial statements should be read
in conjunction with that report.

                                      -18-
<PAGE>

     PRIOR PERIOD ADJUSTMENT

The accompanying  condensed  consolidated  balance sheet as of December 31, 2001
has been  restated to correct an error for the  understatement  of  depreciation
expense  during 2001. The effect of the  restatement  was to decrease net income
for 2001 by $72,053. Retained earnings and property, plant and equipment, net in
the December 31, 2001  consolidated  balance sheet and retained  earnings in the
consolidated statement of changes in shareholders' equity have been restated for
the effects of the prior period adjustment.




                                      -19-
<PAGE>




                           PART II. OTHER INFORMATION

Item 1.     Legal Proceedings

      None.

Item 2.     Changes in Securities and Use of Proceeds.

     On April 8,  2002 the  Company  entered  into a one year  agreement  with a
     consultant whereby the Company issued 100,000 shares of unregistered common
     stock in return for future consulting services.

     On April 30,  2002 the Company  entered  into a one year  agreement  with a
     consultant whereby the Company issued 300,000 shares of unregistered common
     stock in return for future consulting services. The contract is in dispute.
     Counsel  for the Company is  confident  that the  Company  will  prevail in
     receive its 300,000  shares back.  (See Note 4 -  Shareholders'  Equity {B}
     Issuances of Common Stock).

Item 3.     Defaults Upon Senior Securities

      None.

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

     In June 2002, a majority of the shareholders representing 21,000,000 shares
     of the  25,000,000  shares  outstanding  of the common  stock as of May 30,
     2002,  consented in writing to: (1)a change of domicile  merger to effect a
     transfer of the  Company's  domicile from the State of Utah to the State of
     Nevada;  and (2) adoption of a Stock Option Plan.  Reference is made to the
     information contained in our Definitive Information Statement made pursuant
     to Section  14(C) of the  Securities  Exchange Act of 1934,  filed with the
     Securities & Exchange Commission on June 14, 2002.

Item 5.     Other Information

      None.

Item 6.     Exhibits and Reports on Form 8-K

      (a)   Exhibits:

         99.1 Sarbanes-Oxley Certification

      (b)   Reports on Form 8-K:

         None.

                                   SIGNATURES

      In accordance  with the  requirements  of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned,  thereunto
duly authorized.


Dated:  August 14, 2002

                                          DEFENSE INDUSTRIES INTERNATIONAL, INC.



                                          By:  /s/ Joseph Fostbinder
                                              --------------------------------
                                          Name:    Joseph Fostbinder
                                          Title:   President


                                      -20-