DHB CAPITAL GROUP INC /DE/, 424B1, 1997-05-22

DHB CAPITAL GROUP INC /DE/
424B1, 1997-05-22
ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES

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As filed with the Commission on May 1, 1997 Registration No. 333-26249
- --------------------------------------------------------------------------------

U.S. Securities and Exchange Commission
Washington, D.C. 20549

Form SB-2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST EFFECTIVE AMENDMENT NO. 4

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

Delaware 11-3129361
(State or jurisdiction of incor- (I.R.S. Employer
poration or organization) Identification No.)

3842
(Primary Standard Industrial
Classification Code Number)

11 Old Westbury Road
Old Westbury, New York 11568
(516) 997-1155

(Address and telephone number of principal executive offices, and address of
principal place of business or intended principal place of business)

David H. Brooks, Chief Executive Officer With copies to
DHB Capital Group Inc. Peter Landau
11 Old Westbury Road Opton Handler Gottlieb
Old Westbury, New York 11568 Feiler & Katz, LLP 52
(516) 997-1155 Vanderbilt Avenue
New York, New York 10017
(Name, address and telephone number (212) 599-1744
of agent for service)
<TABLE>
<CAPTION>

Title of each class of Proposed maximum Proposed maximum
securities to be Dollar amount to be offering price per aggregate offering Amount of
registered registered share price registration fee
---------- ---------- ----- ----- ----------------
<S> <C> <C> <C> <C>
Common Stock, $3,814,475 At Market At Market $1,315.34
$0.001 par value
</TABLE>

In Accordance with Commission Rule 457(c), the registration fee and all other
dollar amounts have been calculated based upon the average of the high and low
prices of the Common Stock on the OTC Bulletin Board on April 28, 1997, a date
within 5 business days of the date of filing this Registration Statement.
<PAGE>
The Registrant hereby amends this its registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this amendment shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the registration statement should become effective on such
date as the Commission, acting pursuant to said Section 8(a), may determine.

This Registration Statement also serves as a Post-Effective Amendment to
Registrant's Registration Statement No. 33-59764 became effected May 14, 1993
relating to shares reserved for issuance in connection with future business
acquisitions, the conversion of preferred shares into common shares and the
exercise of warrants for shares of Common Stock.
<PAGE>
Prospectus

DHB CAPITAL GROUP INC.

4,050,000 Shares of Common Stock, $0.001 par value

This prospectus (the "Prospectus") relates to 4,050,000 shares (the "Shares") of
the common stock, $0.001 par value, (the "Common Stock") of DHB Capital Group
Inc., a Delaware corporation (the "Company"). Of this amount 4,000,000 shares
represent shares reserved for issuance in connection with future business
acquisitions (the "Acquisition Shares") which the Company may hereafter issue in
connection with one or more future business acquisitions and which may then be
resold by the recipients thereof. There are no understandings or agreements, at
present, with respect to any particular acquisition. The Company will not
receive proceeds from any sale of Common Stock by the recipients thereof. As of
April 28, 1997, 1,604,700 shares were issued in connection with four
acquisitions. See "Prospectus Summary - The Company." The remaining 50,000
shares offered hereby are being sold by certain shareholders of the Company (the
"Selling Shareholders"). The Company will not receive any of the proceeds from
the sale of these shares. See "Selling Shareholders".

The recipients of the Acquisition Shares and the Selling Shareholders may sell
the Shares to or through underwriters, and also may sell the Shares directly to
purchasers or through agents from time to time in the over-the-counter market at
prevailing prices in such market. See "Plan of Distribution".

The Common Stock is traded (i) in the over-the-counter market, and quotations
are available through the OTC Bulletin Board under the symbol "DHBT," and (ii)
on the Boston Stock Exchange under the symbol "DHB." On April 28, 1997, the
closing bid quotation on the OTC Bulletin Board was $1.75. See "Certain Market
Information and Dividends."

THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS," WHICH BEGINS
ON PAGE 7.

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The date of this Prospectus is May 1, 1997

<PAGE>
DECLARATION OF 50% STOCK DIVIDEND

On July 1, 1996, the Board of Directors of the Company declared a 50% Stock
Dividend (the "Stock Dividend") payable on July 16, 1996, to shareholders of
record as of July 15, 1996. As a result thereof , the number of outstanding
shares of the Common Stock has been increased from 15,303,019 to 22,954,529.
Except where specifically noted, all information in this Prospectus about shares
outstanding, per-share financial information, share prices, option prices,
warrant prices and the like have been restated to give effect to the Stock
Dividend as if it occurred prior to the date or period for which such
information is reported or disclosed herein. The Summary Financial Information
on page 7 has been adjusted to give effect to the Stock Dividend. See ' Business
- - Recent Developments - Stock Dividend. '

SPECIAL NOTICE REGARDING REINCORPORATION IN DELAWARE

The Company was originally incorporated as a New York corporation in 1992.
Effective April 17, 1995 (the "Reincorporation Date), pursuant to the
authorization of the security holders of the Company, the Company was
reincorporated (the "Reincorporation") in Delaware. Any reference in this
Prospectus to the Company as of or for any period ending prior to the
Reincorporation Date includes the New York corporation. Under the terms of the
Reincorporation, the Delaware corporation is the successor in interest to all
the rights, interests, assets and liabilities of the New York corporation.
Holders of certificates which, prior to the Reincorporation Date, evidenced
securities of the New York corporation, automatically become holders of a like
number of securities of the Delaware corporation and are entitled (subject to
compliance with customary procedures) to exchange their certificates for
certificates evidencing the Delaware corporation.

OTHER PROSPECTUSES

The Company filed post-effective amendments with respect to the registration
statement of which this prospectus is a part of, as permitted under Rule 429
promulgated by the Securities and Exchange Commission (the "SEC"), and the most
recent post-effective amendment thereof was declared effective as of the date
hereof. As of such date, an aggregate of 2,770,000 shares remained to be issued
in connection with future business acquisitions.

The Company has also filed a Registration Statement on Form S-8, pursuant to
which selected persons may offer for sale shares of Common Stock which they
acquire under the Company's 1995 Stock Option Plan. As of the date hereof, the
Company has not awarded any such options. See "Risk Factors," and "Management -
Executive Compensation."

The Shares covered by this Prospectus are the unissued portion of shares
reserved for one or more business acquisitions.
<PAGE>
AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith is required to file periodic
reports, proxy statements and other information with the SEC relating to its
business, financial statements and other matters. Additionally, the Company has
filed a Post-Effective Amendment No. 4 to its Registration Statement on Form
SB-2, of which this Prospectus is a part (SEC Registration No. 33-59674)
relating to this offering. As permitted by the rules and regulations of the SEC,
this Prospectus omits certain information, exhibits and undertakings contained
in the Registration Statement. Copies of the Registration Statement and exhibits
thereto may be inspected and copied at the public reference facilities of the
SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. Such periodic reports, proxy statements and other information may be
inspected and copied at the public reference facilities maintained by the SEC at
the SEC's regional offices located at: Suite 788, 1376 Peachtree St. N.E.,
Atlanta, Georgia 30367; Northwestern Atrium Center, 500 W. Madison Street, Suite
1400, Chicago, Illinois 60621-2511 and 7 World Trade Center, 13th Floor, New
York, New York 10048. Also, copies of such material can be obtained at
prescribed rates from the Public Reference Section of the SEC at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and are also available on
the Commission's web site at http:\\www.secgov..

The Company's Common Stock is listed on the Boston Stock Exchange and reports,
proxy statements and other information concerning the Company can be inspected
and copied at the library of the Exchange at One Boston Place, Boston,
Massachusetts 02108.
<PAGE>
TABLE OF CONTENTS

DECLARATION OF 50% STOCK DIVIDEND...............................................

SPECIAL NOTICE REGARDING REINCORPORATION IN DELAWARE...........................

OTHER PROSPECTUSES..............................................................

AVAILABLE INFORMATION...........................................................

PROSPECTUS SUMMARY..............................................................

RISK FACTORS....................................................................

USE OF PROCEEDS.................................................................

CERTAIN MARKET INFORMATION AND DIVIDENDS........................................

MANAGEMENT'S DISCUSSION AND ANALYSIS OF.........................................

FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............................

BUSINESS........................................................................

MANAGEMENT......................................................................

PRINCIPAL SHAREHOLDERS..........................................................

CERTAIN TRANSACTIONS............................................................

DESCRIPTION OF SECURITIES.......................................................

SELLING SHAREHOLDERS............................................................

PLAN OF DISTRIBUTION............................................................

LEGAL MATTERS...................................................................

EXPERTS.........................................................................

ADDITIONAL INFORMATION..........................................................

INDEX TO FINANCIAL STATEMENTS ..................................................
<PAGE>
PROSPECTUS SUMMARY

The following is a summary of certain information contained in this
Prospectus and is qualified in its entirety by the more detailed information,
including the financial statements, appearing elsewhere in this Prospectus.

The Company

The Company was originally incorporated as a New York corporation in
1992. Effective April 17, 1995 (the "Reincorporation Date"), pursuant to the
authorization of the security holders of the Company, the Company was
reincorporated (the "Reincorporation") in Delaware. Any reference in this
Prospectus to the Company as of or for any period ending prior to the
Reincorporation Date includes the New York corporation. Under the terms of the
Reincorporation, the Delaware corporation is the successor in interest to all
the rights, interests, assets and liabilities of the New York corporation.
Holders of certificates which, prior to the Reincorporation Date, evidenced
securities of the New York corporation, automatically become holders of a like
number of securities of the Delaware corporation and are entitled (subject to
compliance with customary procedures) to exchange their certificates for
certificates evidencing the Delaware corporation.

Declaration of 50% Stock Dividend

On July 1, 1996, the Board of Directors of the Company declared a 50%
Stock Dividend (the "Stock Dividend") payable on July 16, 1996, to shareholders
of record as of July 15, 1996. As a result thereof , the number of outstanding
shares of the Common Stock has been increased from 15,303,019 to 22,954,529.
Except where specifically noted, all information in this Prospectus about shares
outstanding, per-share financial information, share prices, option prices,
warrant prices and the like have been restated to give effect to the Stock
Dividend as if it occurred prior to the date or period for which such
information is reported or disclosed herein. The Summary Financial Information
on page 7 has been adjusted to give effect to the Stock Dividend. See 'Business
- - Recent Developments - Stock Dividend.'

Ballistic-resistant Equipment

In November 1992, the Company acquired Protective Apparel Corporation
of America ("PACA"), which manufactures and distributes ballistic-resistant
equipment and apparel and related products used by police and other
law-enforcement and security personnel. In August 1995, the Company, through a
wholly owned subsidiary now known as Point Blank Body Armor, Inc., a Delaware
corporation (hereinafter, "Point Blank"), acquired from a trustee in bankruptcy
certain assets (the "Point Blank Assets"), free of all liabilities, of Point
Blank Body Armor, L.P., and an affiliated company (collectively, "Old Point
Blank"), for a cash payment of $2,000,000 at an auction held pursuant to Chapter
7 of the United States Bankruptcy Code (the "Bankruptcy Code"). Prior to the
filing of the petition in bankruptcy, Old Point Blank had been the leading
<PAGE>
manufacturer of bullet resistant garments and related accessories. In February
1997, the Company acquired Zunblindage S.A., a privately held Belgian
Corporation in exchange for a total of 666,000 shares of the Company's
registered common stock. Zunblindage is engaged in the manufacture and
distribution of bullet resistant equipment, apparel and related products and
specializes in sales distribution and marketing in the European theater and the
Middle East regions. PACA, Point Blank, and Zunblindage are now wholly owned by
DHB Armor Group, Inc., a Delaware corporation (the "Armor Group"), which is a
wholly owned subsidiary of the Company.

PACA was founded in 1975 and has been engaged in the development,
manufacture and distribution of bullet- and projectile-resistant garments,
including bullet-resistant vests, fragmentation vests, bomb-protection blankets
and tactical load-bearing vests. Old Point Blank was founded in 1975 and was,
prior to its bankruptcy, the leading United States manufacturer of bullet- and
projectile-resistant garments. In addition to these products, both companies
distribute other ballistic-protection devices including helmets and shields, and
the Armor Group will continue to do so. Zunblindage is a forty year old company
with ties throughout Europe and has been engaged in the development, manufacture
and distribution of bullet resistant equipment, apparel and related products. In
1993, PACA began manufacturing and distributing a line of reversible utility
jackets which is marketed under the trade name "DHB USA", and a line of nylon
tactical equipment (holsters, gun cases and specialty utility bags) which is
marketed under the trade name "DHB Systems". The Armor Group's products are sold
through a nationwide independent sales representative and distributor network
primarily to domestic law enforcement agencies, the U.S. military, various
federal government agencies, federal and state correctional facilities, highway
patrols and sheriffs' departments. In 1990, in connection with certain
transactions, PACA entered into a domestic and international non-competition
agreement with American Body Armor & Equipment, restricting the Company's right
to sell products outside the United States and to certain domestic distributors
prior to 2000. In August 1995, the Armor Group purchased the agreement from
American Body Armor & Equipment, Inc., for a cash payment of $250,000, thereby
terminating this agreement and the restriction on the Armor Group against
international sales.

Protective Athletic Equipment

On December 20, 1994, the Company started up a business of
manufacturing and distributing protective athletic equipment and apparel by
purchasing (the "NDL Transaction"), through a wholly-owned subsidiary now known
as NDL Products, Inc., a Florida corporation (hereinafter, "NDL"), the assets
(the "NDL Assets") of N.D.L. Products, Inc., a Delaware corporation, and of its
wholly owned subsidiaries, for a cash payment of $3,080,000, net of cash
acquired, at an auction held pursuant to Chapter 7 the U.S. Bankruptcy Code.
Prior to the transaction and a conversion, the Seller was a
debtor-in-possession, under Chapter 11 of the Bankruptcy Code. The transaction
was consummated pursuant to an order of the U.S. Bankruptcy Court, Southern
District of Florida dated 12-20-94. NDL distributes protective athletic apparel
and equipment, such as elbow, breast, hip, groin, knee, shin and ankle supports,
and wrist, elbow, groin and knee braces.
<PAGE>
Orthopedic Products

The Company has entered the orthopedic products business by acquiring
the outstanding capital stock of Orthopedic Products, Inc., a Florida
corporation ("OPI"). The Company issued 270,000 shares (after giving effect to
he Stock Dividend) of its registered Common Stock in March 1996, in two
transactions, in exchange for all the outstanding capital stock of OPI. In
August, 1996 Mr. Jeff Schepp and Mr. Leon Wagner, the former shareholders from
whom the Company acquired the stock of OPI, resigned as officers of OPI. The
Company initiated legal actions against the former shareholders for
misrepresentation. This matter was settled in mediation on April 23, 1997 which
resulted in the return of 38,625 shares of the Company's common stock. In each
of the years ended September 30, 1995 and 1994, OPI had sales in excess of
$3,000,000 and losses of approximately $200,000 in 1995 and $41,000 in 1994. See
"Business" and "Management". OPI is engaged in the manufacture and sale of
medical and or orthopedic products.

Other Business

The Company also actively seeks to acquire and finance, as appropriate,
additional operating companies or interests therein. The Company has made the
following transactions:

A 98% interest in the common stock of Intelligent Data Corporation, a
Nevada corporation ("ID"), which is a development-stage company engaged
in applying sophisticated telecommunications systems, known as "virtual
writing," for remote document signature and authentication, remote
issuance of bank or brokerage cashier's checks and the facilitation of
COD payment transactions. This interest was acquired in April 1994 for
425,000 shares of the Company's Registered Common Stock. The net assets
were written down in 1996. See "Other Business - Write-down of Net
Assets of Subsidiaries."

A 100% interest in the capital stock of Royal Acquisition Corp. ("DHB
Media Group, Inc.") whose principal asset is a film library. This
interest was acquired in April 1994 for 100,000 shares of the Company's
Registered Common Stock. The net assets were written down in 1996 See
"Other Business - Write-down of Net Assets of Subsidiaries."

Minority interests in the common stock or securities convertible into
common stock, of the following companies:

Zydacron, Inc., which designs and manufactures video teleconferencing
codecs that are fully compliant with ITU H.320 standards. Zydacron
codecs provide full-featured multimedia capabilities that integrate
into micro-computers running Windows 3.1 operating system software.
Zydacron's family of codec products offers a low-cost full-function
"codec engine" that meets existing video teleconferencing environments.

Darwin Molecular Corporation ("DMC"), which hopes to use DNA sequencing
to create novel drugs for the treatment of cancer, AIDS and auto-immune
disease. On December 18, 1996 Chiroscience Group plc, a publicly traded
company located in England, acquired Darwin Molecular. The Company
received approximately 394,000 shares of Chiroscience in exchange for
its Darwin shares. These shares are restricted until June 1997.
<PAGE>
Positron Corporation, a publicly held Texas corporation, designs,
manufactures, markets and services advanced medical imaging devices
which utilize positron emission tomography ("PET") technology. Unlike
other available imaging technologies, PET technology permits the
measurement of the biological processes of organs and tissues as well
as producing anatomical and structural images.

FED Corporation, a development-stage company, intends to manufacture
liquid crystal display devices using proprietary field emission display
technologies, which can be used in smart notebook computers and other
smart devices.

The Company intends to continue to evaluate and consider the acquisition of
additional businesses, which may or may not be related to its current
businesses. Except as set forth above, the Company is not currently involved in
any substantive negotiations for purchasing any business or group of assets.

The Company maintains its executive offices at 11 Old Westbury Road,
Old Westbury, New York 11568, telephone number (516) 997-1155. PACA is located
in Norris, Tennessee. NDL, Point Blank, and OPI are located in Oakland Park,
Florida. Zunblindage is located in Liege, Belgium.

See "Risk Factors", "Management" and "Certain Transactions" for a
discussion of certain factors that should be considered in evaluating the
Company and its business.

The Offering

This Prospectus covers an aggregate of 4,050,000 shares (the "Shares") of common
stock, $0.001 par value. (the "Common Stock") of the Company up to 4,000,000 of
which may be offered by the Company from time to time in connection with future
business acquisitions (the "Acquisition Shares") and which may then be resold by
the recipients thereof. See "Plan of Distribution". There are no understandings
or agreements, at present, with respect to any particular acquisition. The
remaining 50,000 shares offered hereby are being sold by certain shareholders of
the Company (the "Selling Shareholders"). The Company will not receive any of
the proceeds from the sale of these shares. See "Selling Shareholders". There
are, as of April 28, 1997, 24,045,583 shares of Common Stock outstanding, and
warrants to purchase an additional 5,437,500 shares.

The Shares offered hereby constitute approximately 17% of all shares of the
Company's outstanding Common Stock (without giving effect to the exercise of
outstanding warrants). The resale of Acquisition Shares by the recipients
thereof and the resale of the shares by the Selling Shareholders in connection
with any particular acquisition, if and when made, may be made through customary
brokerage channels either through broker-dealers acting as agents or brokers for
or through broker-dealers acting as principals who may then resell the Shares in
the over-the-counter market or otherwise, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
recipients of Acquistion Shares or Selling Shareholders and/or the purchasers of
Shares for whom such broker-dealers may act as agent or to whom they sell as
principal, or both (which compensation as to any particular broker-dealer may be
in excess of customary commissions); sales may be at fixed prices which may be
changed, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices, or at negotiated prices, or by a combination of
such methods. The period of distribution of the Shares may occur over an
extended period of time. The Company has no interest in, and will receive no
proceeds from any sales of the Shares. The Company will not pay or assume
brokerage commissions or discounts incurred in the sale of any of the Shares.
See "Plan of distribution."
<PAGE>
Previous Offerings, Redemption of Warrants, Conversion of Class A Shares

The Company has filed two other registration statements (Nos. 33-70678
and 33-96846) pursuant to which 305,625 shares (the "Warrant Shares") were
issued by the Company pursuant to the exercise of certain warrants (the
"Redeemable Warrants") at a price of $2.66 per share prior to November 30, 1995,
and 173,436 shares (the "Conversion Shares") were issued upon conversion of the
Company's outstanding Class A convertible preferred stock, $0.01 par value (the
"Class A Stock"), at the rate of $2.66 per share of Common Stock. The Class A
Shares were called for redemption, and all were tendered for conversion. The
Company realized $815,000 from the exercise of Redeemable Warrants.

SEC Consent Decree

David H. Brooks, Chairman and principal shareholder of the Company, and
his brother, Mr. Jeffrey Brooks, and Jeffrey Brooks Securities, Inc. ("JBSI"), a
company wholly owned by Mr. Jeffrey Brooks, entered into a consent decree with
the SEC in December 1992. Without admitting or denying any allegations, they
were assessed a fine and agreed to be enjoined from future violations of Section
15(b) and 15(f) of the Exchange Act. Mr. David Brooks is barred from having any
direct or indirect interest in, or acting as a director, officer or employee of,
any broker, dealer, municipal securities dealer, investment advisor, or
investment company. Mr. David Brooks may apply to become so associated after a
five-year period. Mr. David Brooks is not barred from being an officer or
director of any public company other than a registered broker-dealer or
investment company. Mr. Jeffrey Brooks was prohibited (for a period of one year
which ended December 1993) from acting in a supervisory capacity with respect to
any employee or any broker, dealer, municipal securities dealer, investment
company or investment adviser, and JBSI (his company) was required to institute
and maintain procedures pursuant to Section 15(f) of the Exchange Act. Mr.
Jeffrey Brooks is a Selling Shareholder. See "Risk Factors," "Management,"
"Principal Shareholders," "Selling Shareholders," and "Certain Transactions."
<PAGE>
Summary Financial Information

The following summary financial information concerning the Company has
been derived from the financial statements included elsewhere in this Prospectus
and should be read in conjunction with such financial statements and the notes
thereto. See "Financial Statements". All per share information has been adjusted
for the Stock Dividend.
<TABLE>
<CAPTION>
Statement of Income
Data: Year Ended December 31,
- ----- -----------------------
1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue .......... $ 23,378,698 14,494,094 $ 9,102,373 7,107,090

Net Income (loss) (4,865,872) $ 244,475 $ (75,273) $ 230,772

Primary income per
common share ..... $ (0.20) $ 0.01 $ (0.005) $ 0.02

Weighted average
number of primary
common shares
outstanding ...... 24,879,521 21,167,754 16,701,220 14,072,352
<CAPTION>

Balance Sheet Data December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Working Capital .................... $ 8,900,398 $ 6,526,004

Total Assets ....................... 19,160,419 19,465,208

Total Liabilities .................. 4,736,242 7,663,240

Stockholders' Equity ............... $12,980,086 $11,801,968
</TABLE>
<PAGE>
RISK FACTORS

The securities offered are speculative and involve a high degree of
risk. They should be purchased only by persons who can afford the loss of their
entire investment. Prospective investors, prior to making an investment
decision, should carefully read this Prospectus and consider, along with other
matters referred to herein, the following Risk Factors:

RELATING TO THE SECURITIES:

Depressive Effect on Market of Untimely Sales by Selling Shareholders;
Shares Eligible for Future Sale. The Company has engaged in private placements
of unregistered securities, including the Shares covered by this Prospectus, at
prices below prevailing market prices for registered shares at the times the
private placements were effected. In February 1997, the Company issued 666,000
registered shares to acquire Zunblindage. In March 1996, the Company issued
270,000 registered shares (after giving effect to the 50% stock dividend) to
acquire OPI. The Company initiated a lawsuit alleging misrepresentation which
was settled in mediation and resulted in the return and retirement of 38,625
shares of the Company's Common Stock. See Pending Litigation. In October 1995,
the Company adopted a plan (the "1995 Stock Option Plan" or the "Plan") pursuant
to which the Board of Directors of the Company is authorized to award up to
3,500,000 options to purchase Common Stock (the "Plan Options") to officers,
employees and independent contractors of the Company. The Company has also filed
a registration statement covering the shares (the "Plan Shares") acquirable
under the Plan Options. At the present time, no Plan Options have been awarded.

Exercise of Outstanding Warrants May Have Dilutive Effect on Market.
There are presently outstanding warrants or options (collectively, the
"Miscellaneous Warrants") to purchase approximately 5,437,500 shares of the
Company's Common Stock, after giving effect to the 50% Stock Dividend, with
exercise prices ranging from $1.33 to $2.66 per share, for various terms of up
to 5 years, which are held by certain of the Company's officers or directors or
their affiliates. The Miscellaneous Warrants provide, during their respective
terms, an opportunity for the holder to profit from a rise in the market price
of the Common Stock, with resulting dilution in the ownership interest in the
Company held by the then present shareholders. Holders of the Miscellaneous
Warrants would most likely exercise them and purchase the underlying Common
Stock at a time when the Company may be able to obtain capital by a new offering
of securities on terms more favorable than those provided by such Miscellaneous
Warrants, in which event the terms on which the Company may be able to obtain
additional capital would be adversely affected. At the present time, neither the
Miscellaneous Warrants nor the shares underlying the Miscellaneous Warrants are
registered under the Act, but the Company reserves the right to do so at any
time.

Rights of Common Shareholders May be Affected by Issuance of Preferred
Shares. The Company's Delaware charter authorizes the Board of Directors to
issue up to 5,000,000 shares of preferred stock, $0.001 par value of the
Company, in such amounts and with such rights to dividends, voting, conversion,
redemption and other terms as the Board may determine. No preferred shares are
presently issued or outstanding. If the Board were to authorize and issue
preferred shares, the holders of preferred shares may be entitled to dividends
in preference to the holders of the common stock, may be entitled to preferences
in liquidation, and may be entitled to voting rights, which may affect the
composition of the Board of Directors. See "Dividends" and "Description of
Securities".
<PAGE>
Increase in Authorized Shares of Common Stock. On December 30, 1996 at
a Special Meeting of the Stockholders, an amendment to the Company's Certificate
of Incorporation was approved, increasing the number of authorized shares of
Common Stock from 25,000,000 shares to 100,000,000 shares. This amendment became
effective on December 31, 1996.

Dividends. The Company has paid no cash dividends on its Common Stock
and does not anticipate paying cash dividends on its Common Stock in the
foreseeable future. The Company's ability to pay dividends is dependent upon,
among other things, future earnings, the operating results and financial
condition of the Company, its capital requirements, general business conditions
and other pertinent factors, and is subject to the discretion of the Board of
Directors. The Board is authorized to issue, at any time hereafter, up to
5,000,000 shares of preferred stock on such terms and conditions as it may
determine, which may include preferences as to dividends. Accordingly, there is
no assurance that any dividends will ever be paid on the Company's Common Stock.
See "Certain Market Information and Dividends" and Description of Securities".

RELATING TO THE BUSINESS OF THE ARMOR GROUP:

Concentration of Business Activities; Dependence on Major Customer. The
market for products of the Armor Group is, in large part, composed of domestic
and international, military, and civil authorities. Accordingly, the Armor
Group's operations are subject to the risk of fluctuations in the demand for
such products by such authorities. Point Blank had a significant international
customer, Egypt, which accounted for 12% of Point Blank's sales for the year
ended December 31, 1996.

Reliance Upon Governmental Spending. The Armor Group's products are
sold nationally and internationally, primarily to law enforcement agencies and
military services. Sales to domestic law enforcement agencies, including
government, security and intelligence agencies, police departments, federal and
state correctional facilities, highway patrol and sheriffs' departments,
comprise the largest portion of the Armor Group's business. Accordingly, any
substantial reduction in governmental spending or change in emphasis in defense
and law enforcement programs could have a material adverse effect on the Armor
Group's business. See "Business - DHB Armor Group - Customers."

Products Liability. The products manufactured by the Armor Group are
used in applications where the failure of such products could result in serious
personal injuries and death. The Armor Group maintains product liability
insurance for both PACA and Point Blank in the amount of $11,000,000 per
occurrence and $12,000,000 in the aggregate, excluding legal fees which are
borne by the insurance carriers, less a $12,500 deductible. There is no
assurance that these amounts would be sufficient to cover the payment of any
potential claim. In addition, there is no assurance that this or any other
insurance coverage will continue to be available or, if available, that PACA
and/or Point Blank will be able to obtain it at a reasonable cost. Any
substantial uninsured loss would have to be paid out of the assets of the Armor
<PAGE>
Group, as applicable, and may have a material adverse effect on the Company's
financial condition and operations on a consolidated basis. In addition, the
inability to obtain product liability coverage would prohibit PACA or Point
Blank, as applicable, from bidding for orders from certain municipal customers
since, at present, many municipal bids require such coverage, and any such
inability would have a material adverse effect on the Company's financial
condition and results of operations, on a consolidated basis.

Limited Sources of Raw Material. The primary raw material used by the
Armor Group in 60% of its manufacturing ballistic-resistant garments is
Kevlar(TM), a patented product of E. I. Du Pont de Nemours Co., Inc. ("Du
Pont"). Du Pont and its European licensee are currently the only producers of
Kevlar. The Armor Group purchases Kevlar in the form of woven cloth from three
independent weaving companies. In the event Du Pont or its licensee in Europe
cease, for any reason, to produce and sell Kevlar, the Company would be required
to utilize other fabrics as a substitute. The Armor Group also uses
Spectrashield(TM) and SpectraFibre(TM), patented products of Allied Signal,
Inc., as a ballistic-resistant fabric and has tested a new woven
ballistic-resistant fabric, to reduce dependence on Kevlar. SpectrashieldTM and
SpectraFibreTM have been used in combination with Kevlar in approximately 20% of
all vests sold by the Armor Group. Neither SpectrashieldTM nor SpectraFibreTM,
due to their respective physical characteristics, is expected to become a
complete substitute for Kevlar in the near future. In the opinion of management,
the Armor Group enjoys a good relationship with its suppliers of Kevlar,
SpectrashieldTM and Spec traFibreTM. Until the Armor Group secured an adequate
supply of an alternative fabric and appropriate ballistic tests were performed,
its operations would be severely curtailed and the Armor Group's financial
condition and operations would be adversely affected. See "Business - Raw
Materials, Sources and Availability".

Competition. The ballistic-resistant garment industry is highly
competitive. Some competitors may have substantially greater financial
resources, brand recognition, market share, marketing power and other
competitive advantages over the competitors in the business, including the
Company. The Company believes that the principal elements of competition in the
sale of ballistic-resistant garments are price and quality. The Company must
therefore maintain profitable prices and control costs and quality. As
manufacturing technology changes, there can be no assurance that the Company
will continue to be able to manufacture its products at competitive prices.

Bankruptcies of Prior Owners of Certain Assets. The Company acquired
the assets of NDL from a debtor-in-possession under the Bankruptcy Code, and
certain assets of Old Point Blank from a trustee in bankruptcy. The prior owners
became unable to utilize the assets in a profitable business, and there can be
no assurance that the Company will be able to utilize the assets on a profitable
basis.

New Venture in Zunblindage S.A. In late February 1997, the Company
expanded its bullet resistant business into the European market by acquiring
Zunblindage S.A. a company located in Liege, Belgium. Zunblindage had sales for
the years ended December 31, 1996 and 1995 of over $1,000,000 with breakeven net
income for the year ended December 31, 1996 and a $30,000 net income for the
year ended December 31, 1995. There can be no assurance that Zunblindage will
become profitable or that its losses will not grow.
<PAGE>
RELATING TO THE BUSINESS OF NDL:

Limited Operating History. NDL is a new business with only two year's
operating history. NDL has very limited business experience and is subject to
all the risks in the establishment of any new business venture. Therefore, in
addition to other risk factors, the likelihood of NDL's success must be
considered in light of the problems, expenses, difficulties, complications and
delays frequently encountered in the development of a new business. The Company
entered the protective athletic equipment and apparel business by purchasing the
inventory, trademarks, trade names, equipment, and certain other assets of a
failed enterprise from a trustee in bankruptcy. Senior management of NDL, have
all been hired since January 1, 1995. See "Management"; see, also, "Bankruptcies
of Prior Owners of Certain Assets," above.

Significant Competition. The protective athletic equipment and apparel
business is highly competitive. NDL believes that the principal elements of
competition are price and quality. The major manufacturers of protective
athletic equipment include well-known brands like Everlast, Roller Blade and Ace
Bandage, and lesser known manufacturers such as Tru-fit Manufacturing, of
Boston, Massachusetts, Stromgren Co., of Kansas City, Missouri, and Mueller Co.,
of Wisconsin. Some competitors have substantially greater financial resources,
brand recognition, market share, marketing power and other competitive
advantages over the smaller competitors in the business, including the Company.
There can be no assurance that the Company will be able to compete successfully
in this business.

RELATING TO THE BUSINESS OF OPI:

Limited Operating History. In late March 1996, the Company entered the
orthopedic products business by acquiring OPI, which had sales in its last two
fiscal years of over $3,000,000, and losses or approximately $200,000 and
$41,000, respectively, in the years ended September 30, 1995 and 1994. In August
1996, Mr. Schepp and Mr. Wagner, the former shareholders from whom the Company
acquired the stock of OPI, resigned as officers of OPI. There can be no
assurance that OPI will become profitable or that its losses will not grow.

RELATING TO OTHER BUSINESS ACTIVITIES:

Possible Acquisition of Unidentified Businesses. The Company intends to
continue to diversify its business operations through the possible acquisition
of one or more operating companies. The Company has not presently identified any
specific business or industry in which it intends to expand through the purchase
or development of a business. Up to 4,000,000 Acquisition Shares being offered
hereby are reserved for issuance in one or more future business acquisitions and
may be resold by the recipients thereof. Purchasers of the Shares offered hereby
will have no opportunity to evaluate or to have a voice in the determination of
the business or businesses that the Company may purchase. In addition, the
Company is presently a passive investor in several other public or private
companies and has little or no control over the business and affairs of such
entities. See "Business" and "Management".
<PAGE>
Need for Additional Financing. The Company has, throughout its
existence, obtained funds for acquisitions and operations from term bank loans
for periods of up to a year, which have been secured, in part, by the
controlling shareholder's hypothecation of marketable securities. In the past,
the Company has always been able to roll over such loans with new loans at
prevailing interest rates. At the present time, it has a loan of $1,400,000 from
The Bank of New York ("BNY,") coming due in May 1997. There is no assurance that
the Company will be able to roll over such term loans as they become due. See,
also, "Financial Accommodations by Related Persons."

Financial Accommodations by Related Persons. David H. Brooks, the
Company's Chairman and principal shareholder, previously loaned the Company the
funds necessary to complete the acquisition of PACA. The Company repaid Mr.
Brooks' loan from the proceeds of private placements completed in 1993. Mr.
Brooks and his wife, Mrs. Terry Brooks, made loans totaling $1,140,000 in
connection with the start-up of NDL, and they have pledged certain of their
personal assets to guaranty term loans made by the Banks. The outstanding
balance on this loan is presently $550,000. In connection with the purchase of
the Point Blank Assets, Mr. David H. Brooks made a loan in the amount of
$2,000,000, of which $750,000 is still outstanding. The Company is currently
indebted to Mr. and Mrs. Brooks in the principal sum of $1,300,000 expiring
April 1997 and has been renewed until November 1998 bearing interest at 12% per
year. All term loans from banks which the Company has obtained since inception
have been secured, in part, by the hypothecation of marketable securities owned
by Mr. and Mrs. Brooks. There can be no assurance that the Company will not
require similar accommodations in the future or that Mr. and Mrs. David Brooks
will be able or willing to do so on terms acceptable to the Company. An entity
controlled by Mrs. Terry Brooks and beneficially owned by the Brooks' minor
children leased (as lessor) the facility occupied by NDL and Point Blank in
Oakland Park, Florida. While the Company believes that no future transactions
will be entered into between the Company and its officers, directors or 5%
shareholders unless such transactions are on terms no less favorable to the
Company than could be obtained from unaffiliated third parties, any current or
future transactions between the Company and such affiliates may involve possible
conflicts of interest. See "Management's Discussion and Analysis of Results of
Financial Condition and Results of Operations," "Business - Properties" and
"Certain Transactions".

RELATING TO MANAGEMENT:

Control by Management. David H. Brooks currently beneficially owns
approximately 59% of the outstanding Common Stock. His brother owns 2,353,500
shares (8%), and each disclaims beneficial ownership of shares owned by the
other. Shareholders do not have cumulative voting rights, and each shareholder
is entitled to cast one vote per share on all matters submitted to a vote of
shareholders, including the election of directors, and so shareholders holding a
majority of the outstanding shares will be able to elect all of the directors.
Accordingly, Mr. David Brooks is able to elect all of the directors of the
Company and generally direct the management of the Company, and other
shareholders will be unable to elect any members of the Board of Directors. See
"Principal Shareholders" and "Description of Securities - Common Stock".
<PAGE>
SEC Consent Decree Affecting the Chairman. Mr. David Brooks entered
into a consent decree in December 1992 with the SEC, together with Jeffrey
Brooks, his brother and owner of Jeffrey Brooks Securities, Inc. ("JBSI"). The
SEC had filed a civil complaint in the United States District Court for the
Southern District of New York (Docket No. 922846) alleging that an employee of
JBSI was involved in an unlawful insider-trading scheme allegedly conducted
through JBSI and the filing of false information by JBSI, which was then a
registered broker-dealer. The SEC alleged that JBSI did not establish, maintain
or enforce policies and procedures that are required under Section 15(f) of the
Exchange Act, designed to detect and prevent insider trading by an employee of
JBSI, and that JBSI did not make required disclosures under Section 15(b) of the
Exchange Act. The SEC further alleged that David Brooks exercised "de facto
control" of certain aspects of JBSI's operations and that David Brooks and
Jeffrey Brooks aided and abetted the reporting violations of JBSI. Pursuant to
the settlement of these charges, without admitting or denying such allegations,
David Brooks, Jeffrey Brooks and JBSI were assessed an aggregate civil fine of
$405,000 and were enjoined from future violations of Section 15(b) and 15(f) of
the Exchange Act; David Brooks was barred from having any direct or indirect
interest in, or acting as a director, officer or employee of, any broker,
dealer, municipal securities dealer, investment advisor, or investment company,
provided that David Brooks is able to apply to become so associated after a
five-year period; Jeffrey Brooks was prohibited from acting in a supervisory
capacity with respect to any employee or any broker, dealer, municipal
securities dealer, investment company or investment advisor for a period of one
year, which ended in December 1993; and JBSI was required to institute and
maintain procedures pursuant to Section 15(f) of the Exchange Act. Mr. David
Brooks is not under any prohibition from serving as an officer or director of
any public company other than a registered broker-dealer or an investment
company. Mr. Jeffrey Brooks is one of the Selling Shareholders. See
"Management," "Principal Shareholders," "Certain Transactions" and "Selling
Shareholders."

Reliance Upon Key Personnel. The Company is substantially dependent
upon the personal efforts and abilities of Mr. David H. Brooks, Chairman of the
Board and Chief Executive Officer, and to a lesser extent, Ms. Mary Kreidell,
Secretary and Treasurer, and, at present, Leonard Rosen the President of PACA
and Sandra Hatfield the President of Point Blank. Should any of the members of
the Company's senior management be unable or unwilling to continue in their
present roles, or should such person determine to enter into competition with
the Company, the Company's business could be adversely affected. Because of the
relatively small size of the Company, the loss of a senior executive may have a
materially adverse effect upon the Company until a suitable replacement can be
found. See "Business" and "Management".

USE OF PROCEEDS

Since 4,000,000 of the Shares offered hereby are to be issued in
connection with one or more future business acquisitions or are to be resold for
the account of the recipients thereof,and 50,000 shares are being offered by
Selling Shareholders. The Company will not receive any cash proceeds pursuant to
this offering.
<PAGE>
Certain Market Information and Dividends

The Common Stock of the Company has been traded on the over-the-counter
market ("OTC Bulletin Board") since September 22, 1993. Prior thereto, there was
no public market for the Company's securities. The bid prices set forth below
represent quotations by brokers making a market in the Company's Common Stock,
have been adjusted to reflect the 50% Stock Dividend and do not include retail
mark-ups, mark-downs or commissions, and may not necessarily reflect actual
transactions. Commencing on June 8, 1994, the Company was listed on the Boston
Stock Exchange and traded under the symbol "DHB."
<TABLE>
<CAPTION>

Low High
--- ----
<S> <C> <C>
1994: 1st Quarter 1.67 3.50
2nd Quarter 1.50 3.00
3rd Quarter 1.50 2.33
4th Quarter 1.33 3.25

1995: 1st Quarter 1.92 2.50
2nd Quarter 1.92 3.75
3rd Quarter 2.92 4.00
4th Quarter 2.17 3.17

1996: 1st Quarter 2.00 2.75
2nd Quarter 2.67 6.67
3rd Quarter 5.00 10.00
4th Quarter 3.00

1997: 1st Quarter 1.75 2.75
2nd Quarter(through 1.75 2.13
April 28)
</TABLE>
On July 1, 1996, the Board of Directors declared a 50% Stock
Dividend payable on July 16, 1996, to holders of record as of July 15, 1996. See
'Business - Recent Developments - 50% Stock Dividend.' With respect to the
Company's current policy on cash dividends, if the Company generates earnings,
the Company will retain such earnings for further development of its business.
The payment of cash dividends in the future will depend upon the earnings and
financial requirements of the Company and all other relevant factors, including
approval of such dividends by the Board of Directors.

The number of holders of record of the Company's Common Stock on April
28, 1997, was 147; however, the number of holders of record includes several
brokers and depositories for the accounts of their customers. The Company
estimates that shares of Common Stock are held by approximately 1,000 beneficial
owners.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

General

The Company is a holding company which is principally engaged through
its wholly-owned subsidiaries in the development, manufacture and distribution
of bullet- and projectile-resistant garments, and the manufacture and
distribution of protective athletic equipment and apparel. In August 1995, the
Company acquired certain assets, free of all liabilities (the "Point Blank
Assets") of Point Blank Body Armor, L.P., and an affiliated company
(collectively, "Old Point Blank") at an auction held pursuant to Chapter 7 of
the United States Bankruptcy Code. In late December 1994, the Company started up
its protective athletic equipment business by acquiring the trade inventory,
work in process, raw materials, trade names and trademarks (the "NDL Assets") of
N.D.L. Products, Inc., a Delaware corporation, at an auction held pursuant to
Chapter 7 of the Bankruptcy Code. In March 1996, the Company acquired Orthopedic
Products, Inc. ("OPI"), which is a manufacturer of orthopedic products and a
distributor of general medical supplies. The Company also owns a minority
interest in several other companies, some privately held and some publicly held,
in the pharmaceutical business, health care, telecommunications, electronics and
snowboard manufacturing. The management of the Company is engaged in the review
of potential acquisitions and in providing management assistance to the
Company's operating subsidiaries.

The Company commenced operations in November 1992 by acquiring the
outstanding common stock of PACA, a manufacturer and distributor of bullet-proof
garments and accessories. From the acquisition of PACA through December 20,
1994, i.e., the date of the start-up of NDL, PACA was the Company's only source
of revenue from operations. Thereafter, and to date, NDL, Point Blank, and OPI
are also a source of revenue from operations.

The Armor Group's products are sold nationally and internationally,
primarily to law enforcement agencies and military services. Sales to domestic
law enforcement agencies, including government, security and intelligence
agencies, police departments, federal and state correctional facilities, highway
patrol and Sheriffs' departments, comprise the largest portion of the Armor
Group's business. Accordingly, any substantial reduction in governmental
spending or change in emphasis in defense and law enforcement programs could
have a material adverse effect on the Armor Group's business.

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

<PAGE>
Results of Operations

Year Ended December 31, 1996, compared to year ended December 31, 1995.
Consolidated net sales of the Company for the year ended December 31, 1996
increased by $8,884,604, or 61% to approximately $23,378,698. The increase was
primarily due to the inclusion of Point Blank for a full year. Gross profit in
1996 decreased $1,054,520. The Company's gross profit percentage decreased from
27% in 1995 to 19% in 1996. This decrease was the result of lower selling prices
to induce new customers and a weakness in production management and production
controls which allowed for above normal usage of raw materials. The Company has
a consolidated net loss of approximately $4,866,000 for 1996 as compared to a
consolidated net income of approximately $244,000 for 1995.

During the last quarter of 1996, the Company instituted major changes
at their Florida facility which houses Point Blank, NDL and OPI. New management
was put in place in October 1996 including a new production manager. Pricing was
reviewed and controls put in place to yield better profit margins and better
material usages. The new management instituted a policy regarding the
capitalization of salesmen samples after finding that the returned samples were
normally reissued to other salesmen and seldomly sold for their recorded value.
Therefore, the decision was made to write these salesmen samples off in 1996
resulting in a $292,000 charge to income. Additionally, the Company changed it
policies regarding the percentage of inventory to reserve for future slow moving
inventory, which resulted in a charge of approximately $700,000 against income
in 1996.

The Company's selling, general and administrative expenses ("S,G&A
expenses") for 1996 increased to $8,668,963 from $5,140,399 in 1995. As a
percentage of net sales the S,G & A expenses were 37% in 1996 compared to 35% in
1995. In 1996 the Company wrote off a loan-receivable of approximately $52,000
which was made to an individual relating to the acquistion of Media. All
attempts to collect the debt were unsuccessful, and therefore, the loan was
written off. In connection with the major changes instituted above, the Company
incurred some non-recurring consulting and management fees during the year ended
1996 for approximately $250,000. Included in rent expense for 1996 was a one
time buy-out of OPI's lease for its former location of $80,000. Management
believed that by moving OPI into the facility with the other Florida Companies
would enable them to reduce costs in the future due to the synergy of
businesses. Additionally, the Company increased its percentage of accounts
receivable to record an allowance for, which resulted in a $233,320 increase in
S,G,&A expenses.

In 1996 the Company aggressively sought to regain its market share by
increasing its marketing efforts. This amounted to 8% of the S,G&A expenses for
1996 as compared 4 % of the S,G&A expenses for 1995. The Company also incurred
additional research and development to launch a new product line which increased
S,G&A expenses over 1995 levels by over $150,000.

The Company incurred additional legal and professional fees for the
year ended 1996 regarding the purchase of OPI, a proposed merger which was
terminated, the Company commencing a lawsuit against the former shareholders of
OPI. Legal fees increased over $50,000 in 1996 compared to 1995.

Interest expense, net of interest income, for 1996 increased to
$327,347 from $303,615 due to a decline of interest income on the Company's cash
balances.
<PAGE>
At the end of Fiscal 1996, Management of the Company analyzed its
current operations to examine the most effective/profitable ways to direct its
future efforts. This resulted in the decision to put on hold, for an indefinite
period, the pursuit of ID's patents and technology and the film library of DHB
Media. These write-downs resulted in a loss on the "Net write-down of Investment
in Subsidiaries" for the year ended December 31, 1996 of approximately $530,000.
Also included in other income (expense) is a $1,000,000 write-off of two of the
Company's long term investments. The Company's entire $500,000 investment in
Solid Manufacturing was written off as a result of them filing for bankruptcy.
The Company recorded a valuation allowance for the full value of the $500,000
investment in Pinnacle Diagnostic as result of Pinnacles' insolvency. The
Company had a net realized gain of $381,337 and an unrealized gain of $69,168
for the year ended December 31, 1996 as compared to a $675,743 realized gain and
a $347,481 unrealized gain for the year ended December 31, 1995.

Year Ended December 31, 1995, compared to year ended December 31, 1994.
Consolidated net sales of the Company for the year ended December 31, 1995,
increased by $5,391,721, or 59% to approximately $14,494,000. The increase was
primarily due to the inclusion of Point Blank and NDL. The start-up of NDL on
December 20, 1994, contributed less than $100,000 to sales in 1994 as compared
to $4,276,603 in 1995. The Company had consolidated net income of approximately
$244,000 for 1995, as compared to a consolidated net loss of $75,243 for 1994.
The improved results are attributable to the ability to utilize volume discounts
and eliminating duplication of expenses, as well as income derived from the sale
and appreciation of the Company's marketable securities.

Gross profit in 1995 increased to $5,405,477 an increase of 119% over
1994. The Company's gross profit ratio increased from 27% in 1994 to 37% in
1995, primarily because of the products sold by Point Blank yielded greater
margins.

The Company's selling, general and administrative expenses for 1995
increased to $5,140,399 from $2,250,550 in 1994. These expenses as a percentage
of net sales were 35% in 1995, compared to 25% in 1994. The increase was
attributable to costs associated with the move of Point Blank and NDL into the
present location and other nonrecurring expenses.

Interest expense, net of interest income, for 1995 increased to
$303,615 from $65,072 for 1994, principally due to a decline in interest income
because of the use of the Company's funds in its operating business, and
increases in the borrowings of the Company.

The Company had a net realized gain of $675,743 and an unrealized gain
on its investments in marketable securities of $347,481 for the year ended
December 31, 1995, as compared to a net realized loss of $360,817 and an
unrealized loss of $293,854 for the year ended December 31, 1994.

Liquidity and Capital Resources.

The Company's primary capital requirements over the next twelve months
are to assist PACA, Point Blank, NDL, and OPI in financing their working capital
requirements, and to make possible acquisitions. PACA, Point Blank, and NDL sell
most of their products on 60 - 90 day terms, and OPI sells most of its products
on 30-60 day terms, and working capital is needed to finance the receivables,
manufacturing process and inventory. Working capital at December 31, 1996 was
$8,900,398 compared to $8,416,004 at December 31, 1995, and its ratio of current
assets to current liabilities was 2.88:1 and 2.46:1, respectively, on such
dates.
<PAGE>
Cash, cash equivalents and marketable securities totaled $2,591,682 at
December 31, 1996 compared to $2,304,964. The increase in cash, cash equivalents
and marketable securities was primarily through the proceeds from private
offerings of the Company's securities. This increase was partially offset by
cash used to pay off a line of credit of $1,150,000 and to repay a shareholder
loan of $590,000. The Company has, throughout its existence, obtained funds for
acquisitions and operations from term bank loans for periods of up to a year,
which have been secured, in part, by the controlling shareholder's hypothecation
of marketable securities. In the past, the Company has always been able to roll
over such loans with new loans at prevailing interest rates. At the present
time, it has a loan of $1,400,000 from the Bank of New York coming due in April
1997, bearing interest at 6.3125% per year. There is no assurance that the
Company will be able to roll over such loans as they become due. The Company
expects to renew this loan, at prevailing interest rates, when it becomes due.

The Company's principal commitments at December 31, 1996 consisted of
obligations under their operating leases for its facilities.

The Company's capital expenditures for 1996 was $1,123,739 as compared
to $4,222,257. The purchase of Point Blank accounted for over $2.3 million of
the capital expenditures for 1995. The Company purchased OPI in March 1996 and
Zunblindage in February 1997 by issuing stock in lieu of a cash payment.

The Company invested approximately $3,316,750 (as of December 31,1996,
on a historical cost basis) in the securities of certain privately held
companies and restricted securities of certain public companies, which are
included in "Investments in Non-marketable Securities" on the Company's Balance
Sheet. As of December 31, 1996, the Company has recorded a valuation allowance
of $1,000,000 against two specific investments to bring the net realizable value
to $2,316,750 at December 31, 1996.

Although the Company had a net loss of $4,869,122 for the year ended
December 31, 1996, there was a net increase of cash of $774,547 as compared to a
net income of $244,475 for the year ended December 31, 1995 with a net increase
in cash of $67,683. The Company's quick ratio increased to 1.34% in 1996 as
compared to 1.09% in 1995. The Company believes it has sufficient resources to
meet its working capital requirements for the next twelve months.

BUSINESS

History

DHB Capital Group, Inc. and Subsidiaries, (the "Company") was
originally incorporated as a New York corporation on October 22, 1992 by Mr.
David H. Brooks. (Mr. Brooks may be deemed a "founder" as defined under the
Act.) Effective April 17, 1995 (the "Reincorporation Date"), pursuant to the
authorization of the security holders of the Company, the Company was
reincorporated (the "Reincorporation") in Delaware. Under the terms of the
Reincorporation, the Delaware corporation is the successor in interest to all
the rights, interests, assets and liabilities of the New York corporation.
Holders of certificates which, prior to the Reincorporation Date, evidenced
securities of the New York corporation, automatically become holders of a like
number of securities of the Delaware corporation and are entitled (subject to
compliance with customary procedures) to exchange their certificates for
certificates evidencing the Delaware corporation.
<PAGE>
Ballistic - resistant Equipment

The Company entered the body-armor business by acquiring Protective
Apparel Corporation of America ("PACA") at the end of 1992. PACA is engaged in
the development, manufacture and distribution of bullet-, bomb- and
projectile-resistant garments, including bullet-resistant vests,
fragmentation-protective vests, bullet-resistant blankets and tactical
load-bearing vests. In addition, PACA distributes other ballistic protection
devices, including helmets, face masks and trauma shields, manufactured by other
companies. In August 1995, the Company, through a wholly owned subsidiary now
known as Point Blank Body Armor, Inc., a Delaware corporation ("Point Blank"),
acquired from a trustee in bankruptcy certain assets (the "Point Blank Assets")
of Point Blank Body Armor, L.P., and an affiliated company (collectively, "Old
Point Blank"), for a cash payment of $2,000,000, which was provided by a loan
from Mr. David Brooks. Prior to the filing of the petition in bankruptcy, Old
Point Blank had been a leading U.S. manufacturer of bullet-resistant garments
and related accessories. On February 28, 1997 the Company exchanged a total of
666,000 shares of its registered common stock to acquire 100% of the common
stock of a privately held Belgian corporation, Zunblindage S.A.. Zunblindage is
engaged in the manufacture and distribution of bullet resistant equipment,
apparel and related products and specializes in sales distribution and marketing
in the European theater and the Middle East regions. PACA, Point Blank and
Zunblindage are now wholly owned by DHB Armor Group, Inc., a Delaware
corporation (the "Armor Group"), which is a wholly owned subsidiary of the
Company.

Protective Athletic Equipment

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

The Seller was engaged in the manufacture and distribution of
protective athletic apparel and equipment, such as elbow, breast, hip, groin,
knee, shin and ankle supports, and wrist, elbow, groin and knee braces. The
Company changed the name of DHB Acquisition, Inc., to "NDL Products, Inc."
(hereinafter, "NDL"), in order to use the NDL Assets to start up a business as a
manufacturer and distributor of specialized protective athletic apparel and
equipment.
<PAGE>
Orthopedic Products, Inc.

The Company has entered the orthopedic products business by acquiring
the outstanding capital stock of Orthopedic Products Inc., ("OPI"), a Florida
corporation. The Company issued 270,000 shares (after giving effect to the Stock
Dividend) of its registered Common Stock in March 1996, in two transactions, in
exchange for all the outstanding capital stock of OPI. In April 1997, 38,625 of
the shares issued were returned to the Company and retired as a result of the
adjustment of the purchase price of OPI. OPI is engaged in the manufacture and
sale of medical and orthopedic products. OPI's products are sold directly to the
medical industry, including hospitals, sports medicine centers and medical
practices.

Other Business

Intelligent Data Corporation. In April 1994, the Company acquired a 98%
interest in the common stock of Intelligent Data Corporation, ("ID"), a Nevada
corporation. ID is a development-stage company engaged in applying sophisticated
telecommunications systems, known as "virtual writing" for remote document
signature and authentication, remote issuance of bank or brokerage cashier's
checks and the facilitation of COD payment transactions. The net assets were
written down in 1996 see below "Write-down of net assets of subsidiaries"

DHB Media Group Inc. In April 1994, the Company acquired a 100%
interest of the capital stock of DHB Media Group Inc. ("Media"), a New York
corporation, whose principal asset is a film library. The net assets were
written down in 1996 see below "Write- down of Net Assets of Subsidiaries."

Write-down of Net assets of Subsidiaries. At the end of Fiscal 1996,
Management of the Company analyzed its current operations to examine the most
effective/profitable ways to direct its future efforts. This resulted in the
decision to reappraise, for an indefinite period, the pursuit of ID's patents
and technology and the film library of DHB Media. These write-downs resulted in
a loss on the "Net write-down of Net Assets in Subsidiaries" for the year ended
December 31, 1996 of approximately $530,000.

Recent Developments

Increase in Authorized Shares of Common Stock. On December 30, 1996 at
a Special Meeting of the Stockholders, an amendment to the Company's Certificate
of Incorporation was approved, increasing the number of authorized shares of
Common Stock from 25,000,000 shares to 100,000,000 shares. This amendment became
effective on December 31, 1996.

50% Stock Dividend Declared July 1, 1996. On July 1, 1996, the Board of
Directors of the Company declared a 50% Stock Dividend (the "Stock Dividend")
payable on July 16, 1996, to shareholders of record as of July 15, 1996. As a
result thereof, the number of outstanding shares of the Common Stock has been
increased from 15,303,019 to 22,954,529. Except where specifically noted, all
information in this Prospectus about shares outstanding, per-share financial
information, share prices, option prices, warrant prices and the like have been
restated to give effect to the Stock Dividend as if it occurred prior to the
date or period for which such information is reported or disclosed herein. The
Summary Financial Information on page 7 has been adjusted to give effect to the
Stock Dividend. The Company will pay cash in lieu of fractional shares issuable
on account of the Stock Dividend; the aggregate amount of such payments is not
expected to be material.
<PAGE>
Buyback of Common Stock. On October 22, 1996 the Board of Directors of
the Company announced a directive authorizing the Company to purchase up to one
million shares of its common stock on the open market, from time to time, at its
discretion. The Company has not purchased any of its common stock on the open
market to date.

Equity Investments.

The Company also actively seeks to acquire and finance, as appropriate,
additional operating companies or interests therein. Since January 1, 1994, the
Company made acquired minority interests in the common stock or securities
convertible into common stock, of the following companies:

Darwin Molecular Corporation ("DMC"), which hopes to use DNA sequencing
to create novel drugs for the treatment of cancer, AIDS and auto-immune
disease. The Company owns 3.9% of the equity. On December 18th 1996
Chiroscience Group plc, a publicly traded company located in England,
acquired Darwin Molecular. The Company received 394,000 shares of
Chiroscience in exchange for its Darwin shares. These shares are
restricted until June 1997.

Positron Corporation, a publicly held Texas corporation, designs,
manufactures, markets and services advanced medical imaging devices
which utilize positron emission tomography ("PET") technology. Unlike
other available imaging technologies, PET technologies permits the
measurement of the biological processes of organs and tissues as well
as producing anatomical and structural images. The Company owns less
than 2% of the equity securities of Positron.

The Company intends to continue to evaluate and consider the
acquisition of additional businesses, which may or may not be related to its
current businesses. The Company has no specific plans, arrangements,
understandings or commitments with respect to any such acquisition at the
present time, and it is uncertain as to when or if any acquisition will be made.
The Company is not currently involved in any substantive negotiations for
purchasing any business or group of assets.
<PAGE>
BUSINESS

DHB Armor Group

Products. The Armor Group manufactures two basic types of body armor:
concealable armor, which is generally intended to be worn beneath the user's
clothing, and tactical armor, which is worn externally and is designed to
protect against more serious ballistic threats. Both types of armor are
manufactured using multiple layers of KevlarTM and/or a combination of KevlarTM,
SpectrashieldTM and SpectraFibreTM ballistic fabric, then covered and fully
enclosed in an outer carrier. Although some products of Point Blank and PACA are
competitive with each other, brand recognition, brand loyalty and distribution
channels are expected to minimize the extent to which products of the two
companies may impact each other's sales. PACA specializes in concealable and
correctional vests. Point Blank specializes in tactical vests and patented
concealable GenesisTM series vests.

Concealable vests are contoured to closely fit the user's body shape.
The Armor Group sells a line of vests designed specifically for the body shapes
of women users. Male vests are manufactured in standard sizes and may also be
custom-made. Vests are fastened using Velcro-brand elastic strapping.
Concealable vests may be supplied with a shock plate or SpectrashieldTM trauma
plate, which is a light insert designed to enhance protection of vital areas.
Vests may be supplemented with additional armor plate made of either metal or
ceramic to withstand greater threat levels than the vest is otherwise designed
to protect against. PACA's wholesale prices for its concealable vests range from
approximately $150 to approximately $475. Point Blank's wholesale prices for its
concealable vests ranged from approximately $215 to $440, and the Armor Group
expects to continue these price levels.

Tactical vests are designed to give all-around protection and more
coverage around the neck, shoulders and kidneys than concealable vests. A groin
protector is a popular accessory. These vests contain pockets to incorporate
small panels constructed from high-alumina ceramic tiles which provide
additional protection against rifle fire. Tactical vests come in a variety of
styles, including tactical assault vests, high-coverage armor, and flak jackets,
each of which is manufactured to protect against varying degrees of ballistic
threat. PACA's wholesale prices of these products range from approximately $370
to approximately $1200. Point Blank's wholesale prices for its tactical garments
ranged from approximately $295 to $1150, and the Armor Group expects to continue
these price levels.

The Armor Group's other body-armor products include a tactical police
jacket, military field jacket, executive vests, NATO-style vests, fragmentation
vests and attack vests. Bomb and fragmentation vests and pants are designed to
specifications in U.S. government contracts to offer protection against
materials and velocities associated with the fragmentation of explosive devices
such as grenades and artillery shells. In general, concealable vests sold to law
enforcement agencies and distributors are designed to resist bullets from
handguns. Bomb gear utilizes a variety of designs and materials and patterns
slightly different from bullet-resistant vests. The Armor Group also
manufactures a variety of accessories for use with its body-armor products.
<PAGE>
Potential Product Liability. The products manufactured or distributed
by the Armor Group, e.g., bullet-resistant vests, are used in situations which
could result in serious personal injuries and death, whether on account of the
failure of such products, or otherwise. The Armor Group maintains product
liability insurance for both PACA and Point Blank in the amount of $11,000,000
each per occurrence, and $12,000,000 in the aggregate less a deductible of
$12,500 for each company. There is no assurance that these amounts would be
sufficient to cover the payment of any potential claim. In addition, there is no
assurance that this or any other insurance coverage will continue to be
available or, if available, that PACA and Point Blank would be able to obtain it
at a reasonable cost. Any substantial uninsured loss would have to be paid out
of the Armor Group's assets, as applicable, and may have a material adverse
effect on the Company's financial condition and results of operations on a
consolidated basis. In addition, the inability to obtain product liability
coverage would prohibit PACA or Point Blank as applicable, from bidding for
orders from certain governmental customers, because many governmental agencies
require such coverage, and any such inability to bid would have a material
adverse effect on the Company's financial condition and results of operations on
a consolidated basis.

Raw Materials and Manufacturing. The Armor Group manufactures
substantially all of their respective bullet-, bomb- and projectile-resistant
garments and other ballistic-protection devices. The primary raw material used
by the Armor Group in 60% of its manufacturing of ballistic-resistant garments
is Kevlar(TM), a patented product of E.I. Du Pont de Nemours & Co.
Spectrashield(TM) and SpectraFibre(TM), which are patented products of Allied
Signal are used in approximately 20% of all vests. The Armor Group uses Twaron
for their balance of vest, a fabric manufactured by Akxo, an Israeli company.
The Armor Group purchases cloth woven from these materials from three
independent weaving companies. See "Raw Materials, Sources and Availability".
The woven fabric is placed on tables, layered over patterns for a particular
component of a garment (for example, the front or back of a vest), cut using
electric knives and computerized cutting machines, and then they are stitched
together. The Armor Group utilizes several hundred patterns based upon size,
shape and style (depending upon whether the garment is a bullet-, bomb- or
fragmentation-resistant garment). The various components of the garment are then
sewn together to create the finished product. KevlarTM, SpectrashieldTM,
SpectraFibreTM and Twaron differ in their pliability, strength and cost, such
that the materials are combined to suit a particular application. In the opinion
of management, the Armor Group enjoys a good relationship with its suppliers of
KevlarTM, SpectrashieldTM, SpectraFibreTM and Twaron. If, however, Du Pont or
its European licensee were to cease, for any reason, to manufacture and
distribute the bullet-resistant fabrics, the Armor Group would be required to
utilize other fabrics, and the specifications of some of the Armor Group's
products would have to be modified. Until the Armor Group selected an
alternative fabric and appropriate ballistic tests were performed, its
operations would be severely curtailed and the Armor Group's financial condition
and results of operations would be adversely affected.

The Armor Group purchases other raw materials used in the manufacture
of their products from a variety of sources and believes additional sources of
supply for these materials are readily available.
<PAGE>
Customers. The Armor Group's products are sold to United States law
enforcement agencies and the military and internationally to governments and
distributors. Sales to domestic law enforcement agencies, security and
intelligence agencies, police departments, federal and state correctional
facilities, highway patrols and sheriffs' departments accounted for 44% and 29%,
respectively, of the Armor Group's revenues in each of the years ended December
31, 1996 and 1995. One customer, the New York City Police Department, accounted
for approximately 4% and 5% of PACA's sales for the years ended December 31,
1996 and 1995, respectively. PACA was the successful bidder for a significant
portion of this customers new 1996 - 1997 contract. Besides domestic customers,
Point Blank also has international customers which account for 20% of Point
Blank's 1996 sales. One major international customer, Egypt, accounted for 12%
of Point Blank's sales for the year ended December 31, 1996. The loss of any one
customer would not be expected to have a significant impact on the Armor Group's
continuing financial results, due to the Armor Group's constant submission of
bids for new contracts.

Sales to the United States armed forces directly or as a subcontractor
accounted for 5% of revenues in 1996 and 1995.

Substantially all sales by the Armor Group to the armed services and
other federal agencies are made pursuant to standard purchasing contracts
between PACA or Point Blank and the General Services Administration of the
Federal Government, commonly referred to as a "GSA Contract". The Armor Group
also responds to invitations by military branches and government agencies to bid
for particular orders. GSA contracts accounted for 28% of the Armor Group's
sales for the year ended December 31, 1996. Zunblindage has government contracts
with the Belgium and Netherlands governments.

PACA and Point Blank, as GSA Contract vendors, are obligated to make
all sales pursuant to such contract at its lowest unit price. PACA's current GSA
Contract expires July 31, 2001, while Point Blank's GSA Contract is from August
1, 1996 through August 1997.

During the years ended December 31, 1996 and 1995, commercial sales
(i.e., sales to non-governmental entities) accounted for 49% and 52%,
respectively, of Armor Group's revenues.

Marketing and Distribution. The Armor Group employs 10 customer support
representatives, 2 regional sales managers and 25 independent sales
representatives who are paid solely on a commission basis. These personnel are
responsible for marketing the Armor Group's products to law enforcement agencies
in the United States. These individuals often call upon personnel within these
agencies who are responsible for making purchasing decisions in order to provide
information concerning the Armor Group's products. Sales are made primarily
through independent local distributors. However, in areas in which there are no
suitable distributors, the Armor Group will fill orders directly.

Substantially all of the Armor Group's advertising is directed toward
law enforcement agencies in the form of catalogs and trade shows. The Armor
Group advertises its products primarily in law enforcement trade magazines and
at trade shows. During the years ended December 31, 1996 and 1995, advertising
expenditures were $363,000 and $79,000, respectively.
<PAGE>
Government and Industry Regulations and Standards. Bullet- and
bomb-resistant garments and accessories manufactured and sold by the Armor Group
are not currently the subject of government regulations. However, law
enforcement agencies and the military publish invitations for bidding which
specify certain standards of performance which the bidders' products must meet.
The National Institute of Justice, under the auspices of the United States
Department of Justice, has issued a revised voluntary ballistic standard
(NIJ0101.03) for bullet-resistant vests of several categories. The Armor Group
regularly submits its vests to independent laboratories for ballistic testing
under this voluntary ballistic standard and all of its products have, at the
time of manufacture, met or exceeded such standards in their respective
categories.

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

Competition. The ballistic-resistant garment business is highly
competitive and the number of United States manufacturers is estimated to be
less than 20. Management is not aware of published reports concerning the
market, and most companies are privately held. Nevertheless, the Armor Group
believes, based upon its experience in the industry and that the largest
manufacturer was Old Point Blank prior to its filing for Liquidation under
Chapter 7 of the United States Bankruptcy Code and that as a result of its
purchase of the Point Blank Assets, it is positioned to become the largest
manufacturer of ballistic-resistant garments in the United States. In the
future, the Company may face other and unknown competitors, some of whom may
have substantially greater financial, marketing and other resources than the
Company.

The Armor Group believes that the principal elements of competition in
the sale of ballistic-resistant garments are its innovative design, price and
quality. In dealings with law enforcement agencies and the military, PACA and
Point Blank bid for orders in response to invitations for bidding which set
forth specifications for product performance. The Armor Group believes its
products are competitive as to both price and quality with the products of its
competitors having similar ballistic capabilities and that its ability to remain
competitive in pricing is due to its relatively lower labor and production
costs. In addition, the Company believes that the Armor Group enjoys a favorable
reputation in the industry with over 20 years of supplying federal, state and
municipal governments and agencies. These factors, combined with the financial
resources made available to the Armor Group by the Company, have permitted it,
and are expected to continue to permit it, to reduce interest expenses, improve
production efficiency and capacity, control purchasing costs and permit the
Armor Group to compete favorably.
<PAGE>
In March 1990, before PACA was controlled by the Company, PACA entered
into an agreement with American Body Armor and Equipment, Inc., which prohibited
PACA, for a period of ten years ending March 2000, from soliciting business from
American Body Armor's twelve largest domestic distributors, nor may PACA solicit
business outside the United States relating to the manufacturing, distribution
or sale of projectile-resistant garments and materials and other
ballistic-protection devices, including without limitation personal body armor.
In August 1995, PACA entered into an agreement which terminated all such
restrictions, for a payment of $250,000, which was expensed in the quarter ended
September 30, 1995.

The Armor Group's Backlog. As of December 31, 1996, the Armor Group had
a backlog of approximately $2,500,000, as compared to $3,096,000 as of December
31, 1995. Backlog at any one date is not a reliable indicator of future sales or
sales trends.

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

Employees. As of December 31, 1996, there were two officers of the
Armor Group, 13 persons employed in supervisory capacities, 245 employed for
manufacturing, shipping and warehousing, and 18 are office personnel. All of
Armor Group's employees are employed full time. In the opinion of management,
the Armor Group enjoys good relationships with its employees.

NDL PRODUCTS, INC.

On December 20, 1994, the Company, through a wholly-owned subsidiary,
acquired the NDL Assets for a cash payment of $3,080,000, and renamed the
acquiring subsidiary "NDL Products, Inc." NDL is engaged in business as a
manufacturer and distributor of specialized protective athletic equipment and
apparel.

NDL's protective sports apparel and fitness products and related items
are sold under the brand names NDL(TM), Grid(TM), Dr. Bone Savers(TM),
Hitman(TM) and Flex Aid(TM). NDL has hired new executives for sales and
marketing, production, and new product research and development. NDL has moved
its corporate, manufacturing and warehouse operations into a single building in
Oakland Park, Florida. See "Properties - NDL Facility."

NDL's Marketing and Distribution. NDL employs 5 sales executives who
are responsible for sales throughout the United States, Western Europe, Asia,
the Middle East and Latin America and who supervise 30 independent sales
representatives who are paid solely on a commission basis. These representatives
call on customers, who are generally major retailers and distributors. NDL also
sells to local distributors and has a telemarketing staff of 5. NDL added a
marketing director who is currently evaluating and developing marketing and
sales strategies.
<PAGE>
NDL's Potential Products Liability. Some of the products manufactured
or distributed by NDL are used in situations where serious personal injuries
could occur, whether on account of the failure of NDL's products or otherwise.
NDL maintains product liability insurance in the amount of $1,000,000 per
occurrence and $2,000,000 in the aggregate, including legal fees, subject to a
$10,000 deductible. There can be no assurance that these amounts would be
sufficient to cover payment of potential claims, and there can be no assurance
that this or any other insurance coverage would continue to be available, or if
available, that NDL would be able to obtain it at reasonable cost. Any
substantial uninsured loss would have to be paid out of NDL's assets and could
have a material adverse effect on the Company's financial condition and results
of operations.

Employees. As of December 31, 1996, there was one officer of the NDL
Products, Inc., 6 persons employed in supervisory capacities, 14 employed for
shipping and warehousing, and 10 are office personnel. All of NDL's
manufacturing employees are subcontracted from Point Blank. Every NDL employee
is employed full time. In the opinion of management, NDL enjoys good
relationships with its employees.

ORTHOPEDIC PRODUCTS, INC.

In March 1996, the Company exchanged a total of 270,000 shares of its
common stock with a value of approximately $579,000 to acquire 100% of the
common stock of Orthopedic Products, Inc, a Florida corporation. This
transaction was accounted for as a purchase, and resulted in an excess purchase
price over the fair value of identifiable assets acquired and liabilities
assumed of approximately $57,000 which was allocated to goodwill. In April 1997,
there was a reduction of the purchase price of OPI as a result of a lawsuit
initiated by the Company alleging misrepresentation of the net worth of OPI.
This matter was settled in mediation and resulted in the return of 38,625 shares
of the Company's common stock and a reduction of the purchase price of
approximately $72,000. OPI is engaged in the manufacture and sale of orthopedic
products, and the distribution and sale of general medical supplies to
orthopedists, orthopedic clinics, hospitals, sports medicine centers and
orthopedic medical practices.

OPI's Marketing and Distribution. OPI employs 2 sales executives who
supervise 3 independent sales representatives who are paid solely on a
commission basis. OPI's products are sold directly to the medical industry,
including hospitals, sports medicine centers and medical practices. OPI's
objective is to broaden their sales to a national level over the next year.

OPI's Potential Products Liability. Some of the products manufactured
or distributed by OPI are used in situations where serious personal injuries
could occur, whether on account of the failure of OPI's products or otherwise,
OPI maintains product liability insurance in the amount of $1,000,000 per
occurrence, and $2,000,000 in the aggregate, including legal fees, subject to a
$10,000 deductible. There can be no assurance that these amounts would be
sufficient to cover payment of potential claims and there can be no assurance
that this or any other insurance coverage would continue to be available, or if
available, that OPI would be able to obtain it at a reasonable cost. Any
substantial uninsured loss would have to be paid out of OPI's assets and could
have a material adverse effect on the Company's financial condition and results
of operations.
<PAGE>
Employees. As of December 31, 1996, OPI has one officer, three people
employed in supervisor capacities, 9 employed for shipping and warehousing, and
3 office personnel. All of OPI's manufacturing employees are subcontracted from
Point Blank. OPI's employees are employed full time. In the opinion of
management, OPI enjoys good relationships with its employees.

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

Financial information on the Company's business segments was as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net Sales:
Ballistic-resistant equipment ......... $ 18,358,614 $ 10,370,602
Protective athletic & medical equipment 5,909,238 4,276,603
------------ ------------
24,267,852 14,647,205
Less inter-segment sales ........... (889,154) (153,111)
------------ ------------
Consolidated Net Sales ....... 23,378,698 14,494,094
============ ============

Income from Operations
Ballistic-resistant equipment ......... $ (728,388) $ 618,934
Protective athletic & medical equipment (2,449,120) (118,733)
------------ ------------
(3,177,508) 500,201
Corporate and Other (1) ............... (1,140,497) (235,123)
------------ ------------
Consolidated Operating Income $ (4,318,005) $ 265,078
============ ============

Identifiable Assets (2)
Ballistic-resistant equipment ......... $ 10,648,863 $ 9,818,189
Protective athletic & medical equipment 4,204,341 3,827,460
------------ ------------
14,853,204 13,645,649
Corporate and Other ................... 3,549,941 5,819,559
------------ ------------
Consolidated Net Assets ...... $ 18,403,145 $ 19,465,208
============ ============

(1) Corporate and other includes corporate general and
administrative expenses, net interest expense, other
non-operating income and expense, and income taxes.

(2) Identifiable assets by industry segment exclude intercompany
loans, advances, and investments. Intercompany trade
receivables between companies have also been excluded form
identifiable assets. Corporate assets are principally cash,
marketable securities, deferred charges and assets held for
disposition.
</TABLE>
<PAGE>
PROPERTIES

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

PACA. PACA leases 23,400 square feet of office, manufacturing and
warehouse space at 148 Cedar Place, Norris, Tennessee from Leonard Rosen,
President of PACA, at a present annual rental of $43,200, plus real estate taxes
of approximately $4,800 annually. The space is occupied pursuant to a five-year
lease which expires October 31, 1997, with an option to acquire the property for
$500,000. In the opinion of management, PACA's facilities are adequate for its
current needs and for its needs in the foreseeable future. Management believes
that the terms of the lease are no less favorable to the Company than could be
obtained from an unrelated party.

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

Zunblindage Facility. Zunblindage leases a 5,700 square foot warehouse
facility located at Rue Leon Frederig, 14 4020 Liege, Belgium and a 1,800 square
foot store located at passage Lemonnier, 8 4000 Liege, Belgium. These spaces are
occupied pursuant to a nine year lease with annual rentals of $42,000.

PENDING LITIGATION

On August 1996, the Company commenced a lawsuit against the former
shareholders of OPI, Mr. Jeffrey Schepp and Mr. Leon Wagner for breach of their
employment contracts, negligent misrepresentation and injunctive relief seeking
to enforce a covenant not to compete. On April 23, 1997, this lawsuit was
settled in mediation and resulted in the former shareholders returning 38,625
shares of the Company's common stock which were subsequently retired.

In June 1996, the Company commenced a lawsuit against the former
president of NDL, Mr. Barry Finn, for breach of his employment agreement. On
December 13, 1996 Mr. Finn filed a counterclaim against the Company asserting
Breach of Contract. The legal counsel handling the case for the Company have
advised that it is too early to reliably predict the outcome of the case.

The Company is party to other litigation matters and claims which are
normal in the course of its operations, and while the results of the litigation
and claims cannot be predicted with certainty, management believes, based on
advice of counsel, the final outcome of such matters will not have a materially
adverse effect on the consolidated financial position.
<PAGE>
MANAGEMENT

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

Directors and Executive Officers

The executive officers, directors and key employees of the Company and
their respective positions and ages as of April 21, 1997, are as follows:

David H. Brooks, age 42, has served as Chairman of the Board and Chief
Executive Officer of the Company since its inception. Mr. Brooks has been the
Chairman of the Board, President and a Director of Brooks Industries of L.I.,
Inc. ("Brooks Industries"), since October 1988, a New York corporation of which
he is the sole shareholder and through which he makes investments. Brooks
Industries engages in the venture capital business and in securities trading.
Mr. Brooks served as a consultant to U.S. Alcohol Testing of America Inc. during
the period from February 1991 to November 1992 and has, through Brooks
Industries, served as a consultant to Good Ideas Enterprises, Inc., a
majority-owned indirect subsidiary of U.S. Alcohol pursuant to an agreement
having a five-year term expiring in May 1997. Mr. Brooks served as a consultant
to The Thunder Group, Inc. from October 25, 1991, until the filing of an
involuntary Chapter 11 bankruptcy petition against The Thunder Group in February
1993. In each case, Mr. Brooks provided advice on matters relating to the
business, financial management and marketing activities. Mr. Brooks does not
serve as a consultant to any other company at the present time and, other than
as previously described, he has not served in such capacity for more than the
past five years. Mr. Brooks received a bachelor of science degree in accounting
from New York University in 1976. Since that time he has been engaged
principally as an investor for his own account.

David H. Brooks, his brother Jeffrey Brooks, and Jeffrey Brooks
Securities, Inc. ("JBSI"), which was wholly owned by Jeffrey Brooks, entered
into a consent decree in December 1992 with the SEC. The SEC had filed a civil
complaint in the United States District Court for the Southern District of New
York (Docket No. 922846) alleging that an employee of JBSI was involved in an
unlawful insider-trading scheme allegedly conducted through JBSI and the filing
of false information by JBSI, a registered broker-dealer. The SEC alleged that
JBSI did not establish, maintain or enforce policies and procedures that are
required under Section 15(f) of the Exchange Act, designed to detect and prevent
insider trading by an employee of JBSI, and that JBSI did not make required
disclosures under Section 15(b) of the Exchange Act. The SEC further alleged
that David Brooks exercised "de facto control" of certain aspects of JBSI's
operations and that David Brooks and Jeffrey Brooks aided and abetted the
reporting violations of JBSI. Pursuant to the settlement of these charges,
without admitting or denying such allegations, David Brooks, Jeffrey Brooks and
JBSI were assessed an aggregate civil fine of $405,000 and were enjoined from
future violations of Section 15(b) and 15(f) of the Exchange Act; David Brooks
was barred from having any direct or indirect interest in, or acting as a
director, officer or employee of, any broker, dealer, municipal securities
dealer, investment advisor, or investment company (provided that David Brooks is
able to apply to become so associated after a five-year period); Jeffrey Brooks
is prohibited from acting in a supervisory capacity with respect to any employee
<PAGE>
or any broker, dealer, municipal securities dealer, investment company or
investment advisor for a period of one year; and JBSI was required to institute
and maintain procedures pursuant to Section 15(f) of the Exchange Act. Mr. David
Brooks is not under any prohibition from serving as an officer or director of
any public company other than a registered broker-dealer or an investment
company.

Mary Kreidell, age 43, has served as Treasurer, Secretary, and a
Director of the Company since its inception. Mrs. Kreidell became a Certified
Public Accountant in 1991. She worked for Israeloff, Trattner & Co. CPA'S, P.C.,
a certified public accounting firm, for four years prior thereto.

Leonard Rosen, age 58, is a founder of PACA and has served as its
President since its inception in 1975. He is actively involved in all facets of
PACA's operations, from production to sales. Mr. Rosen has experience in the
apparel industry for over 35 years. He worked closely in the research and
development of ballistic-resistant soft body armor and helmets with the Federal
Government, including serving as a charter member of the committee that
conceived the National Institute of Justice "0l" Standard for ballistic body
armor.

Sandra Hatfield, age 43, has been President of Point Blank since
October 1996. For more than 5 years prior thereto, she was the Vice President of
Production at PACA.

Michael Bell, age 43, became the President of NDL in March 1997. For
more than five years prior thereto, he was the President and Chief Executive
Officer of Converse, Inc.

Joseph Giaquinto, age 32, has been President of NDL's Flex Aid division
since March, 1995. For more than 7 years prior thereto, he was a Vice President
of Sales for Tru-Fit Marketing, of Boston, Massachusetts.

Patrick J. Garvey, age 61, is the Director of Canal Enterprises for the
N.Y. State Thruway Authority and its wholly owned subsidiary, the N.Y. State
Canal Corp (development for commercial shipping and economic development
initiatives). Prior to joining the Thruway Authority in 1993, he served for more
than seven years as the Commander of Camp Smith in Peekskill, N.Y. and as
Legislative Assistant to the Adjunct General of N.Y. Mr. Garvey is also a
retired Colonel in the United States Marine Corps Reserve.

Gary Nadelman, age 44, has been the president of Synari, Inc., of New
York, NY, a privately held manufacturer and distributor of women's sportswear
and other apparel, for more than 5 years.

Morton A. Cohen, age 61, has over ten years experience in venture
capital and over twenty-five years experience in the public securities industry,
both as a securities analyst and a investment banker. Also, he has successfully
managed several emerging growth companies. Mr. Cohen has been Chairman,
President and Chief Executive Officer of Clarion Capital Corp. since 1982. Mr.
Cohen served as Governor of the Montreal Stock Exchange, is a Chartered
Financial Analyst and holder of a M. B.A. from the Wharton School of Business of
the University of Pennsylvania. Mr. Cohen was a member of the Small Business
Investment Advisory of Small Business Investment Companies and is a member of
the Small Business Investment Advisory Council. He is the Chairman of Monitek
Technologies, Inc. (NASDAQ), Chairman of Cohesant Technologies (NASDAQ) and
Director of Gothic Energy (NASDAQ) and a director of Zemex Corp (NYSE).
<PAGE>
Robert Trevisani, age 62, is a senior partner in the Boston and
Washington D.C. law firm of Gadsby & Hannah. He was a former Special Trial
counsel for the General Counsel of the U.S. Treasury Department in New York
City. He holds degrees from Boston College (BA), Boston College of Law (JD) and
New York University Graduate School of Law (LLD).

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

Executive Compensation.

Summary Compensation Table. The following table sets forth certain
summary information regarding the compensation of the Company's Chief Executive
Officer and each of its other executive officers whose total salary and bonus
for the year ended December 31, 1996 and 1995, exceeded $100,000:
<TABLE>
<CAPTION>

Long-Term
Compensation
Annual Compensation Awards
------------------- ------
Securities
underlying
Name and Principal Options/
Position Year Salary(1) Bonus Other SAR's(4)
- -------- ---- --------- ----- ----- --------
<S> <C> <C> <C> <C> <C>
David Brooks,(2) 1996 191,667
Chairman, CEO 1995 39,583

Joseph Giaquinto 1996 100,000
President of Flex Aid 1995 50,962 0 0 0

Leonard Rosen,(3) 1996 135,000 0 0 0
President of PACA 1995 125,000

(1) Although certain officers receive certain perquisites such as auto
allowances and expense allowances, the value of such perquisites did
not exceed the lesser of $50,000 or 10% of the respective officers'
salary and bonus.

(2) Certain warrants were awarded to Mrs. Terry Brooks in 1994 and Mr.
David Brooks in 1996 and 1997; see "Employment Agreements" and
"Certain Transactions."

(3) Mr. Rosen is the lessor of PACA's premises in Norris, Tennessee. See
"Properties" and "Certain Transactions." The Company does not consider
the lease payments to be compensation, because they are not in excess
of the fair market value of the lease.
<PAGE>
(4) In October 1995, the Company adopted a plan (the "1995 Stock Option
Plan" or the "Plan") pursuant to which the Board of Directors or a
committee (the "committee") of the Board is authorized to award up to
3,500,000 shares of Common Stock, after giving effect to the 50% stock
dividend paid on July 16, 1996, to selected officers, employees,
agents, consultants and other persons who render services to the
Company. The options may be issued on such terms and conditions as
determined by the Board or Committee, and may be issued so as to
qualify as incentive stock options under Internal Revenue Code Section
422A. The directors who are authorized to award options are not
eligible to receive options under the Plan. The Company has filed a
registration statement with respect to the Plan, and shares ("Option
Shares") of Common Stock acquired under the Plan are eligible for
resale by non-affiliates without further registration under the Act;
Option Shares acquired by affiliates of the Company are subject to the
registration requirements of the Act. No shares have been issued under
this plan.
</TABLE>

Employment Agreements. Mr. Brooks, the CEO and Chairman of the Board of
DHB Capital Group Inc. is employed pursuant to a five year employment agreement
which was entered into April 1, 1996. Pursuant to the agreement Mr. Brooks
receives an annual salary of $250,000 through April 1997 with annual increases
of $25,000. The terms of Mr. Brooks's contract provide for 750,000 warrants per
year exercisable at $2.33 for five years. In addition, Mr. Brooks receives an
annual bonus of ten percent of the net profit. As the Company has businesses in
Florida and requires Mr. Brooks to spend considerable time there, this contract
include provisions for certain of his Florida living expenses. Subsequent to the
execution of the employment contract, Mr. Brooks voluntarily relinquished his
right to the provision in his employment contract for the annual bonus of ten
percent of net profit.

Mr. Rosen is employed pursuant to a five-year employment agreement with
PACA which was entered into at the time the Company acquired PACA, i.e.,
November 6, 1992. Pursuant to the agreement, Mr. Rosen receives annual salaries
ranging from $115,000 in 1993 to 155,000 in 1997 plus certain fringe benefits.

NDL's executive, Mr. Giaquinto, has a three year employment contract
providing for an annual base salary of $100,000 and options to purchase 49,500
shares of common stock at a price of $1.33 per share exercisable at the rate of
not more than 16,500 shares per year. In March 1997, NDL's and OPI's President,
Mr. Bell, entered into a three year employment contract providing for an annual
base salary of $100,000 plus certain fringe benefits.

Stock Options. In April 1997 and April 1996, the Company granted
750,000 stock warrants per year exercisable at $2.33 for five years to the CEO,
David Brooks, in connection with his employment contract. No additional stock
options, warrants or similar securities, rights or interests to any of the
executive officers of the Company listed in the Summary Compensation Table
above, and no options, warrants or similar securities, rights or interests were
exercised by any such executive officers. In 1994, a warrant was issued to Mrs.
Terry Brooks in exchange for loans by Mrs. Brooks and her pledging of certain
assets to secure the Company's indebtedness to the Bank. See "Certain
Transactions."
<PAGE>
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes of ownership of Common Stock and other equity securities of the
Company.

To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended December 31, 1996, all
Section 16(a) filing requirements applicable to its officers, directors and
greater-than-ten-percent beneficial owners were complied with.

Personal Liability and Indemnification of Directors

The Company's Certificate of Incorporation and By-Laws contain
provisions which reduce the potential personal liability of directors for
certain monetary damages and provide for indemnity of directors and other
persons. The Company is unaware of any pending or threatened litigation against
the Company or its directors that would result in any liability for which such
director would seek indemnification or similar protection.

Such indemnification provisions are intended to increase the protection
provided directors and, thus, increase the Company's ability to attract and
retain qualified persons to serve as directors. Because directors' liability
insurance is available only at considerable cost and with low dollar amounts of
coverage and broad policy exclusions, the Company does not currently maintain a
liability insurance policy for the benefit of its directors, although the
Company may attempt to acquire such insurance in the future. The Company
believes that the substantial increase in the number of lawsuits being
threatened or filed against corporations and their directors and the general
unavailability of directors' liability insurance to provide protection against
the increased risk of personal liability resulting from such lawsuits have
combined to result in a growing reluctance on the part of capable persons to
serve as members of boards of directors of public companies. The Company also
believes that the increased risk of personal liability without adequate
insurance or other indemnity protection for its directors could result in
overcautious and less effective direction and management of the Company.
Although no directors have resigned or have threatened to resign as a result of
the absence of such insurance or other indemnity protection from liability, it
is uncertain whether the Company's directors would continue to serve in such
capacities if improved protection from liability were not provided.

The provisions regarding personal liability do not abrogate a
director's fiduciary duty to the Company and its shareholders, the personal
liability for monetary damages for breach of that duty. The provisions do not,
however, eliminate or limit the liability of a director for failing to act in
good faith, for engaging in intentional misconduct or knowingly violating a law,
for authorizing the illegal payment of a dividend or repurchase of stock, for
obtaining an improper personal benefit, for breaching a director's duty of
loyalty (which is generally described as the duty not to engage in any
transaction which involves a conflict between the interest of the Company and
those of the director) or for violations of the federal securities laws. The
provisions also limit or indemnify against liability resulting from grossly
negligent decisions including grossly negligent business decisions relating to
attempts to change control of the Company.
<PAGE>
The provisions regarding indemnification provide, in essence, that the
Company will indemnify its directors against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with any action, suit or proceeding arising out of the
director's status as a director of the Company, including actions brought by or
on behalf of the Company (shareholder derivative actions). The provisions do not
require a showing of good faith. Moreover, they do not provide indemnification
for liability arising out of willful misconduct, fraud, or dishonesty, for
"short-swing"profits violations under the federal securities laws, or for the
receipt of illegal remuneration. The provisions also do not provide
indemnification for any liability to the extent such liability is covered by
insurance. One purpose of the provisions is to supplement the coverage provided
by such insurance. However, as mentioned above, the Company does not currently
provide such insurance to its directors, and there is no guarantee that the
Company will provide such insurance to its directors in the near future,
although the Company may attempt to obtain such insurance.

The provision regarding personal liability of officers and directors
diminish the potential rights of action which might otherwise be available to
shareholders by limiting the liability of officers and directors to the maximum
extent allowable under applicable state law and by affording indemnification
against most damages and settlement amounts paid by a director of the Company in
connection with any shareholder derivative action. However, the provisions do
not have the effect of limiting the right of a shareholder to enjoin a director
from taking actions in breach of his fiduciary duty, or to cause the Company to
rescind actions already taken, although as a piratical matter courts may be
unwilling to grant such equitable remedies in circumstances in which such
actions have already been taken. Also, because the Company does not presently
have director's liability insurance and because there is no assurance that the
Company does not presently have directors' liability insurance and because there
is no assurance that the Company will procure such insurance or that, if such
insurance is procured, it will provide coverage to the extent directors would be
indemnified under such provisions, the Company may be forced to bear a portion
or all of the cots of a director's claims for indemnification under such
provisions. If the Company if forced to bear the costs for indemnification, the
value of the Company's stock may be adversely affected. In the opinion of the
SEC, indemnification for liabilities arising under the Securities Act of 1933 is
against public policy and therefore, is unenforceable.
<PAGE>
PRINCIPAL SHAREHOLDERS

The following table sets forth the beneficial ownership of the
Company's Common Stock as of April 28, 1997, after giving effect to the Stock
Dividend, for (i) each person known by the Company to beneficially own more than
five percent of the shares of outstanding Common Stock, (ii) each of the
executive officers listed in the Summary Compensation Table in "Management -
Executive Compensation" and (iii) all of the Company's executive officers and
directors as a group except as otherwise indicated, all shares are beneficially
owned, and investments and voting power is held by the persons named as the
owners.
<TABLE>
<CAPTION>
Number of Shares Percent
Name and Address Beneficially Owned Owned (1)
---------------- ------------------ ---------
<S> <C> <C>
David H. Brooks 17,250,600 (2) 59%
11 Old Westbury Road
Old Westbury, New York 11568

Jeffrey Brooks (3) 2,353,500 8%
44 Coconut Row
Palm Beach, Florida 33480

Leonard Rosen 120,142 (4) *
148 Cedar Place
Norris, Tennessee

All officers and Directors 17,709,370 (5) 60% (6)
as a group (11 persons)

1. Based upon 29,445,583 shares outstanding as of April 28, 1997, after giving
effect to the Stock Dividend, increased by, with respect to Mr. Brooks,
3,750,000 shares acquirable by his wife pursuant to a warrant to purchase
3,750,000 shares at a price per share of $1.33 and the 1,500,000 warrants
acquirable by Mr. Brooks at $2.33 as well as 75,000 warrants exercisable at
$1.33 for each, Ms. Kreidell and Mr. Rosen.

2. Consists of 7,500,600 shares owned by Mr. Brooks and 4,500,000 owned by his
wife as custodian for his minor children, 3,750,000 shares which may be
acquired by Mrs. Brooks upon exercise of a warrant to purchase such shares
at a price per share of $1.33 and 1,500,000 shares which may be acquired by
Mr. Brooks at $2.33 per share upon exercise of a warrant. Msrs. David H.
Brooks and Jeffrey Brooks are brothers. Each disclaims beneficial ownership
of shares owned by the other.

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

4. Consists of 45,142 shares outstanding and 75,000 shares acquirable under
warrants awarded to Mr. Rosen; does not include 4,350 shares owned by Mr.
Rosen's wife, as to which Mr. Rosen disclaims beneficial ownership.

- --------
* - Less than one (1%) percent
<PAGE>
5. Includes 5,250,000 shares acquirable by an officer and his wife pursuant to
a presently exercisable warrant.

6. Based upon all shares outstanding as set forth in Footnote 1 above,
including 3,750,000 acquirable by Mrs. Terry Brooks and 1,500,000
acquirable by Mr. David Brooks.
</TABLE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company obtained funds for the cash payment required to carry out
the acquisition of the assets used to start up NDL, and for working capital for
NDL, from (i) the Company's working capital, (ii) the Loan, and (iii) term loans
of $1,140,000 from Mr. Brooks and term loans from Mrs. Brooks, bearing interest
at 9% per year. Presently the outstanding balance of this loan is $550,000
expiring April 1997 and has been renewed until November 1998 bearing interest at
12% per year. The interest paid on this loan to date is $218,877. Under a
collateral agreement [third party] (the "Collateral Agreement") covering
securities owned by Mr. David H. Brooks, Chairman of the Board of the Company,
and Mrs. Terry Brooks, his wife, Mr. Brooks and Mrs. Brooks have pledged certain
marketable securities to the Bank to partially secure the Bank Loans and other
obligations of the Company to the Bank. In exchange for this, the Company has
agreed to grant to Mrs. Brooks 5-year warrants to purchase 3,750,000 shares of
Common Stock, at a price of $1.33 per share. The warrants contain provisions for
a one-time demand registration, and piggyback registration rights. Mr. David
Brooks also lent $2,000,000 to the Company to provide the funds needed to
purchase the Point Blank Assets; the outstanding balance on that loan is now
$750,000 at 12% interest payable November 1998; the Company obtained funds to
pay down the loan by liquidating certain investments at a profit. The Company
has paid for the account of Mr. and Mrs. Brooks a total of $133,274 in interest
on their loans to the Company. Mr. and Mrs. Brooks have also pledged personal
assets to BNY to secure the Company's debt to that bank. The Company entered
into an employment agreement in April 1996 with Mr. Brooks, See "Employment
Agreements".

From January 1, 1996 through April 28, 1997, the Company sold 1,395,000
unregistered shares of Common Stock to approximately sixteen people including
57,143 shares to Anna Brooks. Anna Brooks is the mother of Mr. David Brooks.

NDL, Point Blank and OPI operate at a 67,000 square foot office and
warehouse facility (the "Facility") located at 4031 N.E. 12th Terrace, Fort
Lauderdale, Florida 33334, which it leases from V.A.E. Enterprises ("V.A.E."), a
partnership controlled by Mrs. Brooks and beneficially owned by Mr. and Mrs.
Brooks' minor children, which purchased the Facility on or about January 1,
1995. The lease is a 5-year net-net lease; annual base rental is $480,000 and is
scheduled to increase by 4% per year. The Company, as lessee, is responsible for
all real estate taxes and other operating and capital expenses.

PACA leases 23,400 square feet of office, manufacturing and warehouse
space at 148 Cedar Place, Norris, Tennessee from Leonard Rosen, President of
PACA, at a present annual rental of $43,200, plus real estate taxes of
approximately $4,800 annually. The space is occupied pursuant to a five-year
lease which expires October 31, 1997, with an option to acquire the property for
$500,000. In the opinion of management, the rental is fair and reasonable and is
approximately at the same rate that could be obtained from an unaffiliated
lessor for property of similar type and location. In the opinion of management,
PACA's facilities are adequate for its current needs and for its needs in the
foreseeable future.
<PAGE>
DESCRIPTION OF SECURITIES

The following is a summary of certain provisions of the Certificate of
Incorporation, as amended, and rights accorded to holders of Common Stock
generally and as a matter of law, and does not purport to be complete. It is
qualified in its entirety by reference to the Company's Restated Certificate of
Incorporation, the Company's By-Laws, and the Delaware General Corporation Law.
See "Special Notice Regarding Reincorporation in Delaware" and "Business -
History."

Common Stock

General. Under the Company's Delaware charter and applicable law, the
Board of Directors has broad authority and discretion to issue convertible
preferred stock, options and warrants, which, if issued in the future, may
impact the rights of the holders of the Common Stock.

Cash Dividends. Holders of Common Stock may receive dividends if, as
and when dividends are declared on Common Stock by the Company's Board of
Directors. If the Board of Directors hereafter authorizes the issuance of
preferred shares, and such preferred shares carry any dividend preferences,
holders of Common Stock may have no right to receive dividends unless and until
dividends have been declared and paid. At the present time, there is no
preferred stock authorized or outstanding. The ability of the Company to
lawfully declare and pay dividends on Common Stock is also limited by certain
provisions of applicable state corporation law. It is not expected that
dividends will be declared on the Common Stock in the foreseeable future.

Distributions in Liquidation. If the Company is liquidated, dissolved
and wound up for any reason, distribution of the Company's assets upon
liquidation would be made first to the holders of preferred shares, if any, and
then to the holders of the Common Stock. If the Company's net assets upon
liquidation were insufficient to permit full payment to the holders of shares of
preferred stock, if any, then all of the assets of the Company would be
distributed pro rata to the holders of shares of preferred stock and no
distribution will be made to the holders of the Common Stock. There are no
shares of preferred stock authorized, issued or outstanding at this time. A
consolidation or merger of the Company with or into any other company, or the
sale of all or substantially all of the Company's assets, is not deemed a
liquidation, distribution or winding up for this purpose.

Voting Rights. Each share of Common Stock is entitled to one vote on
all matters to be voted on at meetings of the shareholders of the Company,
including the election of directors. The holders of Common Stock will be
entitled to elect all of the Company's directors. Holders of Common Stock do not
have any cumulative voting rights or preemptive rights.

Preferred Shares

The Company's Delaware charter authorizes the Board of Directors to
issue up to 5,000,000 shares of preferred stock, $0.001 par value of the
Company, in such amounts and with such rights to dividends, voting, conversion,
redemption and other terms as the Board may determine. At this thine, no
preferred stock is authorized, issued or outstanding. The Company had previously
issued Class A convertible preferred stock, but all outstanding preferred shares
were converted prior September 30, 1995.
<PAGE>
SELLING SHAREHOLDERS

An aggregate of up to 50,000 Shares of Common Stock may be offered by Selling
Shareholders. The following table sets forth certain information with respect to
people for whom the Company is registering for resale to the public shares of
the Company's Common Stock. The table reflects such person's ownership of the
Common Stock as of April 28, 1997, without giving effect to the sales of any
shares under the other registration statements. The Company will not receive any
proceeds form the sale of the Shares. There are no material relationships
between any of the Selling Shareholders and the Company or any of its
predecessors or affiliates, nor have any such material relationships existed
within the past three years, except as noted.

In addition, an aggregate of up to 4,000,000 Acquistion Shares which the Company
may hereafter issue in connection with one or more future business acquisitions
and may then be resold by the recipients thereof. The Company will not receive
any of the proceeds of the resale by any of these shares.
<TABLE>
<CAPTION>

Beneficial Ownership as of Maximum Beneficial Ownership After
April 28, 1997 to be Sold Offering if Maximum is sold
in this
Selling Shareholder Amount Percent (1) offering Amount Percent(2)
- ------------------- ------ ----------- -------- ------ ----------
<S> <C> <C> <C> <C> <C>
Howard Berg 25,000 * 25,000 0 *
Barry Berkman 25,000 * 25,000 0 *

* - Less than one percent.

(1) Calculated by dividing the number of shares owned by each respective
Selling Shareholder by the sum of (i) all shares of Common Stock issued
and outstanding as of April 28, 1997, i.e., 24,045,583 shares, and (ii)
5,437,500 shares of Common Stock which may hereafter be issued pursuant
to warrant awarded to certain executive officers of the Company, or
their affiliates.

(2) Some of the Selling Shareholders are offering shares for sale under a
prospectus which is part of a different Registration Statement. The
amounts in this column does not give effect to the possible sale of
those shares.
</TABLE>

PLAN OF DISTRIBUTION

The resale of the Shares by the Selling Shareholders and the resale of
the Acquisition Shares by the recipients which are issued in one or more future
business acquisitions by the Company may be effected from time to time in
transactions (which may include block transactions by or for the account of the
Selling Shareholders or for the account of the recipients of the Acquisition
Shares) in the over-the-counter market or in negotiated transactions, a
combination of such methods of sale, or otherwise. Sales may be made at fixed
prices which may be changed, at market prices prevailing at the time of sale, or
at negotiated prices.
<PAGE>
Selling Shareholders and recipients of the Acquisition Shares may
effect such transactions by selling their shares of Common Stock directly to
purchasers, through broker-dealers acting as agents for the Selling
Shareholders, or to broker-dealers who may purchase shares as principals and
thereafter sell their shares from time to time in the over-the-counter market,
in negotiated transactions, or otherwise. Such broker-dealers, if any, may
receive compensation in the form of discounts, concessions, or commissions from
the Selling Shareholders, and recipients of the Acquisition Shares, and/or the
purchasers for whom such broker-dealers may act as agents or to whom they may
sell as principals, or both (which compensation as to a particular broker-dealer
may be in excess of customary commissions).

The Selling Shareholders, and recipients of the Acquisition Shares, and
broker-dealers, if any, acting in connection with such sale might be deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act and
any commission received by them and any profit on the resale of the securities
might be deemed to be underwriting discounts and commissions under the
Securities Act.

LEGAL MATTERS

The validity of the securities offered hereby has been passed upon for
the Company by Opton Handler, Gottlieb, Feiler & Katz, LLP 52 Vanderbilt Avenue
New York, New York 10017.

EXPERTS

The audited financial statements of the Company as of December 31, 1996
and 1995, and for each of the years then ended, which are included in this
Prospectus, have been so included in reliance on the reports of Capraro,
Centofranchi, Kramer & Co., P.C., as independent certified public accountants,
appearing elsewhere herein, and upon the authority of such firm as experts in
auditing and accounting.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission,
Washington, D.C., Post - Effective Amendment No. 3 of its Registration Statement
No. 33-59764 under the Securities Act of 1933, as amended, with respect to the
shares of Common Stock offered hereby. This Prospectus does not contain all of
the information set forth in such Amendment and the exhibits thereto. For
further information with respect to the Company and the Shares offered hereby,
reference is made to such Amendment and exhibits, which may be obtained from the
Commission at its principal office in Washington, D.C., upon payment of charges
prescribed by the Commission. Statements contained in this Prospectus as to the
contents of any contract or other documents referred to are not necessarily
complete, and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Amendment, each such statement being
qualified all respects by such reference.
<PAGE>

DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS

CONTENTS

INDEPENDENT AUDITORS' REPORT

Consolidated Balance Sheets as of December 31, 1996

Consolidated Statements of Operations for the years ended
December 31, 1996 and 1995

Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1996 and 1995

Consolidated Statements of Cash Flows for the years ended December 31,
1996 and 1995

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, 1996 and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 1996 and 1995. 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 years ended December 31, 1996 and 1995, in conformity with
generally accepted accounting principles.

/s/Capraro, Centofranchi, Kramer & Co., P.C.
- -------------------------------------------
Capraro, Centofranchi, Kramer & Co., P.C.
South Huntington, New York
March 21, 1997

<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996

ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,249,655
Marketable securities 1,342,027
Accounts receivable, less allowance for doubtful
accounts of $303,320 3,499,535
Inventories 7,290,205
Prepaid expenses and other current assets 255,218
---------
Total Current Assets $13,636,640

PROPERTY AND EQUIPMENT, at cost, net of accumulated
depreciation and amortization of $522,907 1,834,777

OTHER ASSETS
Intangible assets, net 214,213
Investments in non-marketable securities 2,316,750
Deferred tax assets 819,300
Deposits and other assets 338,739
-------
Total Other Assets 3,689,002
---------

TOTAL ASSETS $19,160,419
===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Note payable $1,400,000
Current maturities of long term debt 61,664
Accounts payable 3,019,804
Accrued expenses and other current liabilities 243,763
State income taxes payable 11,011
------
Total Current Liabilities $4,736,242

DHB CAPITAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996

LONG TERM LIABILITIES
Long term debt, net of current maturities 144,091
Due to shareholders 1,300,000
---------
Total Long Term Debt 1,444,091
---------

Total Liabilities 6,180,333
---------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Common stock 23,146
Additional paid-in capital 17,956,030
Common stock subscription receivable (227,500)
Retained earnings (Deficit) (4,771,590)
-----------
Total Stockholders' Equity 12,980,086
----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $19,160,419
===========

See accompanying notes to financial statements.

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

1996 1995
------------ ------------
<S> <C> <C>

Net sales ................................................ $ 23,378,698 $ 14,494,094

Cost of sales ............................................ 19,027,741 9,088,617
------------ ------------

Gross Profit ....................................... 4,350,957 5,405,477

Selling, general and administrative expenses ............ 8,668,950 5,140,399
------------ ------------

Income(Loss) before other income (expense) ......... (4,317,993) 265,078
------------ ------------

Other Income (Expense)
Interest expense, net of interest income ........... (327,347) (303,615)
Dividend income .................................... 24,350 1,710
Payment to rescind restrictive covenant ............ -- (250,000)
Write-down of net assets in Subsidiaries ........... (529,578) --
Loss on holding of non marketable securities ....... (1,000,000) --
Realized gain on marketable securities ............. 381,337 675,743
Unrealized gain on marketable securities ........... 69,168 347,481
------------ ------------

Total Other Income (Expenses) ............. (1,382,070) 471,319
------------ ------------

Income (loss) before income tax (benefit) .......... (5,700,063) 736,397

Income taxes (benefit) ............................. (834,191) 491,922
------------ ------------

Net Income (loss) .................................. $ (4,865,872) $ 244,475
============ ============

Earnings (loss) per common share

Primary ................................... ($ 0.20) $ 0.01
============ ============
Fully Diluted ............................. ($ 0.20) $ 0.01
============ ============

Weighted average number of common share outstanding:
Primary ................................... 24,879,521 21,167,754
============ ============

Fully Diluted ............................. 24,879,521 21,689,754
============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

Number of Number of Additional Common Stock
Preferred Par Common Par Paid-in Subscription
shares Value shares Value Capital Receivable
------- ----- -------- ------ ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance- December 31, 1994 ............. 64,062 $ 641 11,498,202 $ 11,498 $ 7,310,391 --
Net income for the year ended
December 31, 1995 .................... -- -- -- -- -- --
Sale of common stock ................... -- -- 1,955,000 1,955 3,863,045 (437,500)
Conversion of preferred stock into
common stock ......................... (42,187) (422) 84,374 84 338 --
Exercise of stock warrants ............. -- -- 303,750 304 949,696
Restatement - 50% Common Stock Dividend -- -- 6,920,665 6,921 -- --
-------- -------- ------------ --------- ------------ -----------
Balance- December 31, 1995 ........ 21,875 $ 219 20,761,991 $ 20,762 $ 12,123,470 ($ 437,500)

Net income for the year ended
December 31, 1996 .................... -- -- -- -- -- --
Issuance of stock to purchase subsidiary -- -- 180,000 180 578,820 --
Stock issued to buy out subsidiary lease -- -- 6,000 6 79,994 --
Sale of common stock ................... -- -- 1,345,000 1,345 4,806,154 210,000
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 -- --
Boston stock exchange fee for dividend . -- -- -- -- (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 $ (227,500)
======== ======== ============ ========= ============ ===========

<PAGE>
<CAPTION>
Retained
Earnings Total
----------- -----
<S> <C> <C>
Balance- December 31, 1994 ............. $ (142,537) 7,179,993
Net income for the year ended
December 31, 1995 .................... 244,475 244,475
Sale of common stock ................... -- 3,427,500
Conversion of preferred stock into
common stock ......................... -- --
Exercise of stock warrants ............. -- 950,000
Restatement - 50% Common Stock Dividend (6,921) --
------------ ------------
Balance- December 31, 1995 ........ $ 95,017 $ 11,801,968

Net income for the year ended
December 31, 1996 .................... ($ 4,865,872) ($ 4,865,872)
Issuance of stock to purchase subsidiary -- 579,000
Stock issued to buy out subsidiary lease -- 80,000
Sale of common stock ................... -- 5,017,499
Conversion of preferred stock into
Common stock ........................ -- --
Common stock - 50% dividend ............ (718) --
Preferred Dividend-common stock ........ (17) (9)
Boston stock exchange fee for dividend . -- (5,000)
Stock issued for services .............. -- 372,500
------------ -----------
Balance - December 31, 1996. ..... $ (4,771,590) $12,980,086
============ ===========

See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,

1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES

Net Income (loss) ....................................... $(4,865,872) $ 244,475

Adjustments to reconcile net income to net
cash provided by operating
activities:
Depreciation and amortization .................... 343,564 254,956
Reserve for accounts receivable................... 233,320 --
Reserve for inventory ............................ 700,00 --
Valuation on non marketable securities............ 1,000,000 --
Write down of net assets in subsidiaries.......... 529,578 --
Stock issued for services ........................ 452,500 --
Deferred income taxes ............................ (843,000) 440,000
Changes in assets and liabilities (Increase) Decrease in:
Accounts receivable ............................... 86,716 (1,276,870)
Marketable securities ............................. 487,829 127,431
Inventories ....................................... (134,006) (3,093,118)
Prepaid expenses and other current assets ......... (46,708) 148,538
Deposits and other assets ......................... (177,918) (76,962)
Increase (decrease) in:
Accounts payable .................................. 172,114 2,336,854
Accrued expenses and other current liabilities .... (57,304) 34,854
State income taxes payable ........................ (39,772) 22,282
----------- -----------
Total Adjustments ....................................... 2,706,913 (1,082,035)
----------- -----------

Net cash used by operating activities ...................... (2,158,959) (837,560)
----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES
Payments for purchase of assets of subsidiary,
net of cash acquired .............................. -- (2,000,000)
Payments to acquire non-marketable securities ........... -- (575,000)
Payments made for property and equipment ................ (1,123,739) (1,632,980)
Payments of capitalized acquisition cost ................ -- (14,277)
----------- -----------

Net Cash provided (used) by investing activities ........... (1,123,739) (4,222,257)
----------- -----------
<PAGE>
<CAPTION>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,

1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of note payable- bank ........................ (1,150,000) --
Proceeds from issuance of long-term debt ................ 243,573 --
Proceeds(Repayments) due to shareholder ................. (590,000) 750,000
Principal payments on long-term debt .................... (37,818) --
Dividends Paid .......................................... (7,656) --
Net proceeds from sale of common stock .................. 5,599,146 4,377,500
----------- -----------

Net cash provided (used) by financing activities ........... 4,057,245 5,127,500
----------- -----------

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS ............ 774,547 67,683

CASH AND CASH EQUIVALENTS - BEGINNING ...................... 475,108 407,425
----------- -----------

CASH AND CASH EQUIVALENTS - END ............................ $ 1,249,655 475,108
=========== ===========

See accompanying notes to financial statements
</TABLE>
<PAGE>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

ORGANIZATION/REPORTING ENTITIES

The consolidated financial statements of DHB Capital Group, Inc. and
Subsidiaries (the "Company") include the following entities:

DHB Capital Group, Inc.
DHB Capital Group Inc. ("DHB") was incorporated on October 22, 1992 under the
laws of the State of New York. DHB was organized to seek, acquire and finance,
as appropriate, one or more operating companies. On February 15, 1995, the
holders of the common stock approved a re-incorporation of DHB as a Delaware
corporation, through a merger with a newly formed Delaware corporation.

DHB Armor Group, Inc.
On August 8, 1995, the Company formed a new Delaware Corporation which is a
wholly-owned subsidiary of the Company. The subsidiary, DHB Armor Group, Inc.,
("Armor"), now wholly owns PACA and Point Blank Body Armor, Inc., ("Point
Blank").

Protective Apparel Corporation of America
Protective Apparel Corporation of America ("PACA") was organized in 1975 and
is engaged in the development, manufacture and distribution of bullet and
projectile resistant garments, including bullet resistant vests,
fragmentation vests, bomb projectile blankets and tactical load bearing
vests. In addition, PACA distributes other ballistic protection devices
including helmets and shields. PACA is dependent upon a few suppliers for the
raw materials utilized to manufacture its products.

Point Blank Body Armor, Inc.
In August 1995, the Company, through a wholly-owned subsidiary known as USA
Fitness & Protection Corp, a Delaware Corporation, acquired from a Chapter 7
bankruptcy auction certain assets of Point Blank Body Armor, L.P. and an
affiliated company ("Old Point Blank"), for a cash payment of $2,000,000,
free of all liabilities. Prior to the filing of the petition in bankruptcy,
Old Point Blank had been the leading U.S. manufacturer of bullet-resistant
garments and related accessories. After acquiring the Old Point Blank, USA
Fitness & Protection Corp., amended its articles of incorporation to change
their name to Point Blank Body Armor, Inc. ("Point Blank").

NDL Products, Inc.
On December 20, 1994, the Company through a newly organized, wholly-owned
subsidiary, DHB Acquisition, Inc., ("Acquisition") purchased certain assets from
a Chapter 7 bankruptcy auction, N.D.L. Products, Inc. for $3,080,000.
Acquisition did not assume any continuing obligations of the debtor-
in-possession, nor did the management of the debtor-in-possession continue. On
February 21, 1995, Acquisition changed its corporate name to NDL Products, Inc.
NDL manufactures and distributes specialized protective athletic apparel and
equipment.
<PAGE>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

Orthopedic Products, Inc.
On March 22 and March 26, 1996, the Company exchanged a total of 270,000 shares
(after giving effect to the 50% stock dividend) of its registered common stock
to acquire 100% of the common stock of OPI, a Florida Corporation engaged in the
manufacturing and distribution of orthopedic products to the medical industry.
This transaction was accounted for as a purchase, and resulted in an excess
purchase price over the fair value of identifiable assets acquired and
liabilities assumed which was allocated to goodwill. Fifty thousand of these
shares are restricted as follows: 25,000 shares cannot be sold until March 22,
1997 and 25, 000 shares cannot be sold until March 22, 1998.

Intelligent Data Corp.
On April 1, 1994, the Company acquired 4,530,000 common shares (60.4% interest)
and 1,100,000 preferred shares of stock in Intelligent Data Corp. ("ID"), in
exchange for 425,000 shares of the Company's common stock. ID was engaged in the
development of sophisticated telecommunication systems. At the end of 1996, the
Company wrote down the net assets of the investment.

DHB Media Group, Inc.
On April 15, 1994, DHB Media Group, Inc. ("Media"), a wholly-owned subsidiary of
the Company acquired all of the outstanding common stock of Royal Acquisition
Corp. in exchange for 100,000 shares of the Company's common stock, for a
purchase price of $300,000. Subsequent negotiations resulted in the reduction of
the acquisition cost by $36,550. Royal Acquisition Corp.'s primary assets were a
film library. At the end of 1996 the Company wrote down the net assets of the
investment.

PRINCIPLES OF CONSOLIDATION

All material intercompany transactions have been eliminated in the consolidated
financial statements.

USE OF ESTIMATES

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 revenues and expenses during the reporting period.
Actual results could differ from those estimates. Significant estimates include
those relating to the valuation of inventories and non-marketable securities,
and collectibility of receivables.

REVENUE RECOGNITION
Revenue is recognized on product sales upon shipment to the customer.
<PAGE>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company includes cash on
deposit, money market funds and amounts held by brokers in cash accounts to be
cash equivalents.

MARKETABLE/NON-MARKETABLE SECURITIES

Securities which are classified as "trading securities" are recorded in the
Company's balance sheet at fair market value, with the resulting unrealized gain
or loss recognized as income in the current period. Securities which are
classified as "available for sale" are also reported at fair market value,
however, the unrealized gain or loss on these securities is listed as a separate
component of shareholder's equity.

Non-marketable securities, such as investments in privately-held companies are
carried at historical cost, if necessary, reduced by a valuation allowance to
net realizable value.

INVENTORIES

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

PROPERTY, EQUIPMENT AND DEPRECIATION

Property and equipment is stated at cost. Major expenditures for property and
those which substantially increase useful lives are capitalized. Maintenance,
repairs, and minor renewals are expensed as incurred. When assets are retired or
otherwise disposed of, their costs and related accumulated depreciation are
removed from the accounts and resulting gains or losses are included in income.
Depreciation is provided by both straight-line and accelerated methods over the
estimated useful lives of the assets.

INTANGIBLE ASSETS

Goodwill is being amortized on a straight-line basis over ten years. The amount
allocated to on-going government contracts is being amortized over the life of
the individual contracts, which are typically 1-5 years. Patents are being
amortized on a straight-line basis over 17 years. Other intangible assets are
being amortized on a straight-line basis over their estimated lives, typically
5-15 years. When the assets are retired or otherwise disposed of, their cost and
related accumulated amortization are removed from the accounts and the resulting
gains or losses are included in income. Accumulated amortization was $440,424
and $429,297 as of December 31, 1996 and 1995, respectively.

EARNINGS PER SHARE

The computation of earnings per common share is based on the weighted average
number of outstanding common shares outstanding during the period. Primary
earnings per share and fully diluted earnings per share amounts assume the
conversion of the Cumulative Convertible Preferred Stock, and the exercise of
the stock warrants.
<PAGE>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

INCOME TAXES

The Company files a consolidated Federal tax return, which includes all
of the subsidiaries. Accordingly, Federal income taxes are provided on the
taxable income of the consolidated group. State income taxes are provided on a
separate company basis, if and when taxable income, after utilizing available
carryforward losses, exceeds certain levels.

DEFERRED INCOME TAXES

Deferred taxes arise principally from net operating losses and capital losses
available for carryforward against future years taxable income, and the
recognition of unrealized gains(losses) on marketable securities for financial
statement purposes, which are not taxable items for income tax purposes.
<TABLE>
<CAPTION>
2. SUPPLEMENTAL CASH FLOW INFORMATION
1996 1995
-------- --------
<S> <C> <C>
Cash paid for:
Interest $535,859 $261,829
Income taxes $ 33,301 $ 35,774
</TABLE>

Additionally, during, the year ended December 31, 1996 and 1995 the Company had
a non-cash financing activity of and $227,000 and $437,500 respectively for a
stock subscription receivable.

During the year ended December 31, 1996, the Company had a non-cash investing
activity when it issued common stock to acquire all of the outstanding common
stock of OPI.

3. MARKETABLE SECURITIES/NON-MARKETABLE SECURITIES

Following is a comparison of the cost and market value of marketable securities
included in current assets:
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
Cost $ 1,272,859 $ 1,482,375
Unrealized gain (loss) 69,168 347,481
----------- -----------
Market value $ 1,342,027 $ 1,829,856
=========== ===========
</TABLE>
The Company's portfolio value of trading securities has been pledged as
collateral for the bank loans (see Note 6). However, the bank has placed no
restrictions on the Company's ability to trade freely in their portfolio.
<PAGE>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

The Company's investments in non-marketable securities is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Darwin Molecular Corporationa
(approximately 3.9% interest) ..................... $1,000,000 $1,000,000
Zydacron, Inc. .....................................
(approximately 3.1% interest) ...................... 941,750 941,750
Pinnacle Diagnostics, Inc.(b)
(approximately 16.7% interest) ..................... -- 500,000
FED Corporation
(approximately 2.9% interest) ...................... 375,000 375,000
Solid Manufacturing Co. - 10% convertible debentures
(approximately 9.5% interest, if converted)(c) ..... -- 500,000
---------- ----------
Totals .................................... $2,316,750 $3,316,750
========== ==========

(a) On December 18th, 1996 Chiroscience Group plc, acquired Darwin
Molecular Corp. The Company received approximately 394,000
shares of Chiroscience, a publicly traded company located in
England, in exchange for its Darwin shares. These shares are
restricted until June 1997.

(b) The Company recorded a valuation allowance for the entire
investment in Pinnacle as a result of their insolvency.

(c) The Company recorded wrote off the entire investment in Solid
Mfg. as a result of Solid filing for Bankruptcy.
</TABLE>
All of these investments are included under the caption "Investment in
non-marketable securities" on the balance sheet.

4. INVENTORIES

Inventories are summarized as follows:
<TABLE>
<CAPTION>

1996 1995
----------- -----------
<S> <C> <C>
Finished products ....................... $ 3,138,256 $ 3,844,506
Work-in process ......................... 997,308 1,209,849
Raw materials and supplies .............. 3,854,641 2,801,844
----------- -----------
7,990,205 7,856,199
Valuation Allowance ..................... (700,000) --
----------- -----------
Total .......................... 7,290,205 7,856,199
=========== ===========
</TABLE>
<PAGE>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

5. PROPERTY AND EQUIPMENT

Major classes of property and equipment consist of the following:
<TABLE>
<CAPTION>
Estimated useful
life-years
----------
<S> <C> <C>
Land ......................................... -- $ 47,500
Building ..................................... 39 427,500
Machinery and equipment ...................... 5-10 1,022,985
Furniture and fixtures ....................... 5-7 273,451
Computer equipment ........................... 5-7 69,647
Transportation equipment ..................... 3-5 144,361
Leasehold improvements ....................... 5-31.5 372,240
----------
2,357,684
Less: accumulated depreciation ----------
and amortization ............................. 522,907
----------
Net property and equipment ................... $1,834,777
==========
</TABLE>
6. NOTES PAYABLE- FINANCIAL INSTITUTIONS

At December 31, 1996, The Company had a term loan of $1,400,000 from the Bank of
New York which matures in April 1997, bearing interest at 6.3125% per year.
There is no assurance that the Company will be able to roll over such loan as
they become due. The Company expects to renew this loan, at prevailing interest
rates, when it becomes due. This loan is secured by substantially all of the
Company's marketable securities portfolio value, and certain personal
investments of the majority shareholder. This loan requires monthly payments of
interest only.

7. LONG TERM DEBT

Long term debt consist of:
<TABLE>
<CAPTION>
<S> <C>
9.71% note payable, due in monthly installments of $1,876, including
interest, with a final payment due June 1999.
Equipment with an original cost of $89,943 is pledged as collateral. $49,757

9.0%, note payable, due in monthly principal only installments of $3,600 per
month, with interest accruing and final payment due September 2001. 155,998
--------
205,755
Less current maturities 61,664
--------
Long term debt $144,091
========

</TABLE>
<PAGE>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

As of December 31, 1996, the annual maturities of long-term debt outstanding for
the next five years as follows:
<TABLE>
<CAPTION>
<S> <C>

1997 60,285
1998 57,281
1999 44,989
2000 43,200
--------
Total $205,755
========

</TABLE>

8. DUE TO SHAREHOLDER

The amount due to shareholder represent notes payable which bear interest at
12%, payable November 1998.

9. RELATED PARTY TRANSACTIONS

DHB:
DHB leased its office location from a relative of the former president of DHB.
Included in DHB's statement of income (loss) for the years ended December 31,
1995 is $16,514 of rent paid or accrued under this lease, respectively (see note
10). Effective January 1996, the Company vacated the premises and purchased a
building for use as the corporate headquarters.

PACA:
PACA leases its location (see note 10) from the President of PACA. Included in
the statement of income (loss) for the years ended December 31, 1996 and 1995 is
$48,000 of rent paid under this lease for each period.

NDL and POINT BLANK and OPI:
NDL Products, Inc., Point Blank Body Armor Inc and Orthopedic Products, Inc.
lease their facilities from a partnership indirectly owned by relatives of the
majority shareholder of DHB (note 11). Included in the statement of income
(loss) for the year ended December 31, 1996 and 1995 is $480,000 and $300,000,
respectively, of rent paid or accrued under the lease.

ID:
ID leased its office location from a relative of the former President of DHB.
Included in DHB's statement of income (loss) for the year ended December 31,
1995 is $5,511 of rent paid or accrued under this lease, respectively (see note
10). The premises were vacated in April, 1995.
<PAGE>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

10. COMMITMENTS AND CONTINGENCIES

LEASES

PACA:
PACA is obligated under a lease for its manufacturing facility with a related
party (note 9). This lease expires October 31, 1997, and provides for minimum
annual rentals of $43,200, plus increases based on real estate taxes and
operating costs.

NDL Products, Inc., Point Blank Body Armor, Inc. and Orthopedic Products, Inc.
NDL Products, Inc., Point Blank Body Armor, Inc. and Orthopedic Products Inc.,
are obligated under a lease for its facilities with a related party (note 9).
The lease commenced January 1, 1995 and expires December, 1999. The lease
provides for minimum annual rentals of $300,000 for the initial year and then
$480,000 the following year with scheduled increases of 4% per year thereafter,
plus real estate taxes, operating costs and capital expenditures.

The following is a schedule by year of future minimum lease obligations under
noncancellable leases as of December 31,1996
<TABLE>
<CAPTION>
<S> <C>
1997 $ 542,400
1998 562,368
1999 583,135
-----------
Total minimum obligation $ 1,687,903
===========
</TABLE>

Total rental expense under cancelable and noncancelable operating leases was
$615,859 and $420,269 for the years ended December 31, 1996 and 1995,
respectively. OPI was located at different premise when the Company purchased
OPI. Included in the rental expense above is the value the Company's common
stock issued in lieu of a cash payment of $80,000 to buyout the remaining
portion of OPI's lease at their previous location.

EMPLOYMENT AGREEMENT

Mr. Brooks, the CEO and Chairman of the Board of DHB Capital Group Inc. is
employed pursuant to five year employment agreement which was entered into April
1, 1996. Pursuant to the agreement Mr. Brooks receives an annual salary of
$250,000 through April 1997 with annual increases of $25,000. The terms of Mr.
Brooks's contract provides for 750,000 warrants per year exercisable at $2.33
for five years. In addition, Mr. Brooks receives an annual bonus of ten percent
of the net profit. As the Company has businesses in Florida and requires Mr.
Brooks to spend considerable time there, this contract includes provisions for
certain of his Florida living expenses. Subsequent to the execution of this
employment agreement, Mr. Brooks voluntarily relinquished his right to the
provision regarding an annual bonus of 10%.
<PAGE>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

Concurrent with the purchase of PACA, the President of PACA was given a
five year employment agreement. This agreement calls for annual salaries ranging
from $115,000 in 1993 to $155,000 in 1997, plus certain fringe benefits. During
the year ended December 31, 1995, Joseph Giaquinto, an officer of NDL, was given
a three year employment contract. This agreement calls for an annual base
salaries of $100,000. In March 1997, Michael C. Bell, President of NDL and OPI,
was given a three year employment contract with an annual base salary of
$100,000, plus certain fringe benefits and incentive bonuses.

LITIGATION

In August 1996, the Company commenced a lawsuit against the former shareholders
of OPI for breach of their employment contracts, negligent misrepresentation and
injunctive relief seeking to enforce a covenant not to compete. The legal
counsel handling the case for the Company have advised that it is too early to
reliably predict the outcome of the case.

In June 1996, the Company commenced a lawsuit against the former president of
NDL for breach of his employment agreement. On December 13, 1996 the defendant
filed a counterclaim against the Company asserting Breach of Contract. The legal
counsel handling the case for the Company have advised that it is too early to
reliably predict the outcome of the case.

The Company is party to other litigation matters and claims which are normal in
the course of operations, and while the results of the litigation and claims
cannot be predicted with certainty, managment believes, based on advice of
counsel, the final outcome of such matters will not have a materially adverse
effect on the consolidated financial position.

11. CAPITAL STOCK
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Capital stock is as follows:
DHB:
ClassA Preferred stock, 10% convertible, $.01 par value,
1,500,000 shares authorized (see amendment below)
Shares issued and outstanding - 21,875
Par Value $ - $ 219

Common stock, $.001 par value,
100,000,000 shares authorized,
Shares issued and outstanding 23,146,008 20,761,995
============ ===========
Par Value $ 23,146 $ 20,762
============ ============
</TABLE>
Amendment to Certificate of Incorporation:
On December 30, 1996 at a Special Meeting of the Stockholders, an amendment to
the Company's Certificate of Incorporation was approved, increasing the number
of authorized shares of Common stock from 25,000,000 shares to 100,000,000
shares. This amendment became effective on December 31, 1996.
<PAGE>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

12. PRIVATE PLACEMENTS

Common Stock:
During April, June, July, and November 1996 the Company sold 1,345,000 shares of
common stock in private placements for proceeds of $4,807,500. Out of these
proceeds $1,150,000 was used to repay the line of credit and $590,000 was used
to repay one of the shareholder loans.

During June, July, and August, 1995 the Company sold 1,955,000 shares of common
stock in private placements for proceeds of $3,910,000. Out of these proceeds
$45,000 of direct expenses were paid.

13. STOCK WARRANTS

During 1995, various warrants which would have expired in November, 1995 from
the Company's original private placement were exercised by certain shareholders.
These shareholders were issued 303,750 shares of the Company's common stock for
net proceeds of $950,000. All remaining warrants for the original private
placement have expired.

In December, 1994, in consideration for monies loaned to the Company, the Board
of Directors granted Mrs. Terry Brooks, a related party, 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 127,500
warrants still outstanding. The term on these warrants have been extended two
years, the expire June 1998.

14. STOCK DIVIDEND

On July 1, 1996, the Board of Directors of the Company declared a 50% Stock
Dividend payable July 16, 1996, to shareholders of record as of July 15, 1996.
As a result thereof, the number of outstanding shares of the Common stock has
been increased by 7,638,498 shares. The weighted average number of shares and
earnings per share have been restated to give effect to the 50% stock dividend.

During 1996 year-end, the Board of Directors declared a preferred stock dividend
of 7,944 common shares with a market value of $3.77 per share for the years
ended December 31, 1995 and 1994. All earnings per share data has been restated
giving retroactive effect to the intended stock dividend.
<PAGE>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

15. INCOME TAXES

Components of income taxes are as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Current:
Federal .................................. $ 0 $ 5,400
State .................................... 8,809 58,922
Benefit of net operating loss carryfoward -- (12,400)
----------- -----------
Total current ....................... 8,809 51,922
----------- -----------

Deferred:
Federal .................................. (1,687,000) 451,500
State .................................... (562,000) 60,300
Less: valuation allowance ................ 1,406,000 (71,800)
----------- -----------

Total deferred ...................... (843,000) 440,000
----------- -----------

Total income taxes (benefit) ................. $ (834,191) $ 491,922
=========== ===========
</TABLE>
The composition of the federal and state deferred taxes at December 31, 1996 was
arrived at as follows:
<TABLE>
<CAPTION>
Federal State
---------- ----------
<S> <C> <C>
Operating Loss Carry Forward................... $1,056,000 $ 224,000
Allowance for Doubtful Accounts ............... 100,000 21,000
Valuation Allowance - Inventory ............... 231,000 49,000
Valuation Allowance - Non marketable securities 330,000 70,000
Net write down of investment in subsidiaries .. 175,000 37,000
Unrealized gain on Marketable Securities ...... (23,000) (4,600)
---------- ----------
Subtotal ............................. 1,869,000 396,400
Less: Valuation Allowance ..................... 1,198,300 247,800
---------- ----------
Net Deferred Taxes ................... $ 670,700 $ 148,600
========== ==========
</TABLE>
The Valuation Allowance changed from $75,900 at December 31, 1995 to $1,446,100
at December 31, 1996, for a increase of $1,370,200.

At December 31, 1996 the Company has net operating losses for carryfoward
against future years' taxable income of approximately $3.2 million for tax
purposes, which would expire in 2012. The deferred tax asset of $819,300 on the
balance sheet represents the future benefit of the operating loss carryforwards
<PAGE>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

offset by a valuation allowance. The deferred tax assets for the future benefit
of the net operating losses carryforward have been partially reduced by a
valuation allowance as the Company estimates that its' future taxable earnings
will not be sufficient to offset all of the operating losses.

15. SUBSEQUENT EVENT

As of February 28, 1997, the Company exchanged a total of 666,000 shares of its
registered common stock to acquire 100% of the common stock of a privately held
Belgian corporation, Zunblindage S.A. Zunblindage is engaged in the manufacture
and distribution of bullet resistant equipment, apparel and related products and
specializes in sales distribution and marketing in the European theater and
Middles East regions. This transaction was accounted for as a purchase.

Subsequent to the year-end and the execution of the employment aggreement with
Mr. Brooks, the CEO and Chairman of the Board of DHB Capital Group Inc. Mr.
Brooks voluntarily relinquished his right to the provision in his employment
contract for the annual bonus of 10% of net profit.

In March 1997, the Company renewed its' shareholder loan with Mr. Brooks which
was payable in April 1997. The new term loan is payable in November 1998 bearing
interest at 12% per year.
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP INC. AND SUBSIDIARIES
SCHEDULE II TO THE FINANCIAL STATEMENTS
VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1996

Balance Additions
at charged to Balance
beginning costs and at end
of year expenses of year
------- -------- -------
<S> <C> <C> <C>

1996

Allowances deducted from related
balance sheet accounts:

Accounts Receivable ........................ $ 70,000 $ 233,320 $ 303,320

Inventories ................................ $ 0 $ 700,000 $ 700,000

Investment in Non-marketable securities .... $ 0 $1,000,000 $1,000,000

Net Write down of Investment in subsidiaries $ 0 $ 529,578 $ 529,578
</TABLE>