UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

(Mark One)
[ X ]    Quarterly report under Section 13 or 15(d) of the Securities Exchange
         Act of 1934

For the quarterly period ended June 30, 2004
                               -------------

[  ]     Transition report under Section 13 or 15(d) of the Exchange Act

For the transition period from                        to
                                ----------------------  ------------------------

Commission File Number:  0-1665

                                DCAP GROUP, INC.
                                ----------------
        (Exact Name of Small Business Issuer as Specified in its Charter)

         Delaware                                              36-2476480
         --------                                            -------------------
(State or Other Jurisdiction of                              (I.R.S Employer
Incorporation or Organization)                               Identification No.)

                        1158 Broadway, Hewlett, NY 11557
                        --------------------------------
                    (Address of Principal Executive Offices)

                                 (516) 374-7600
                                 --------------
                (Issuer's Telephone Number, Including Area Code)

                ------------------------------------------------
         (Former Name, Former Address and Former Fiscal Year, if Changed
                               Since Last Report)

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. Yes X  No
                                                                       --    --
                     APPLICABLE ONLY TO ISSUERS INVOLVED IN
                        BANKRUPTCY PROCEEDINGS DURING THE
                              PRECEDING FIVE YEARS

     Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court. Yes     No
                                                  --    --

                      APPLICABLE ONLY TO CORPORATE ISSUERS

     State the number of shares  outstanding of each of the issuer's  classes of
common equity, as of the latest  practicable date:  12,562,487 shares as of July
31 2004.

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


<PAGE>

                                      INDEX

                        DCAP GROUP, INC. AND SUBSIDIARIES


PART I.   FINANCIAL INFORMATION
-------   ---------------------

Item 1.   Financial Statements
          --------------------

          Condensed Consolidated Balance Sheet - June 30, 2004 (Unaudited)

          Condensed  Consolidated  Statements  of Income - Six months ended June
          30, 2004 and 2003 (Unaudited)

          Condensed Consolidated  Statements of Income - Three months ended June
          30, 2004 and 2003 (Unaudited)

          Condensed  Consolidated  Statements  of Cash Flows - Six months  ended
          June 30, 2004 and 2003 (Unaudited)

          Notes to  Condensed  Consolidated  Financial  Statements  - Six months
          ended June 30, 2004 and 2003 (Unaudited)

Item 2.   Management's Discussion and Analysis or Plan of Operation

Item 3.   Controls and Procedures

PART II.  OTHER INFORMATION
--------  -----------------

Item 1.   Legal Proceedings
Item 2.   Changes in Securities and Small Business Issuer Purchases of Equity
          Securities
Item 3.   Defaults Upon Senior Securities
Item 4.   Submission of Matters to a Vote of Security Holders
Item 5.   Other Information
Item 6.   Exhibits and Reports on Form 8-K


SIGNATURES


<PAGE>


Forward-Looking Statements
--------------------------

     This Quarterly Report contains  forward-looking  statements as that term is
defined in the federal  securities laws. The events described in forward-looking
statements  contained in this Quarterly  Report may not occur.  Generally  these
statements  relate to business  plans or  strategies,  projected or  anticipated
benefits  or  other  consequences  of our  plans  or  strategies,  projected  or
anticipated  benefits  from  acquisitions  to be  made  by  us,  or  projections
involving  anticipated  revenues,  earnings  or other  aspects of our  operating
results. The words "may," "will," "expect," "believe,"  "anticipate," "project,"
"plan,"  "intend,"  "estimate,"  and "continue," and their opposites and similar
expressions are intended to identify forward-looking  statements. We caution you
that these statements are not guarantees of future performance or events and are
subject to a number of uncertainties,  risks and other influences, many of which
are beyond our control,  that may influence the accuracy of the  statements  and
the  projections  upon which the statements are based.  Factors which may affect
our  results  include,  but are not  limited  to,  the risks  and  uncertainties
discussed  in Item 6 of our  Annual  Report on Form  10-KSB  for the year  ended
December 31, 2003 under  "Factors That May Affect  Future  Results and Financial
Condition".

     Any one or more of these  uncertainties,  risks and other  influences could
materially  affect  our  results  of  operations  and  whether   forward-looking
statements  made by us  ultimately  prove to be  accurate.  Our actual  results,
performance  and  achievements  could differ  materially from those expressed or
implied in these  forward-looking  statements.  We  undertake no  obligation  to
publicly  update or revise  any  forward-looking  statements,  whether  from new
information, future events or otherwise.



<PAGE>


PART I.  FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

                        DCAP GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheet (Unaudited)
--------------------------------------------------------------------------------
June 30, 2004
--------------------------------------------------------------------------------
Assets

Current Assets:
  Cash and cash equivalents                                       $  2,461,012
  Accounts receivable, net of allowance for
     doubtful accounts of $62,000                                    1,464,512
  Finance contracts receivable                   $27,684,745
    Less: Deferred Interest                       (2,187,938)
    Less: Allowance for doubtful accounts           (141,976)       25,354,831
                                                 -----------
  Prepaid expenses and other current assets                            259,662
                                                                  ------------
Total Current Assets                                                29,540,017

Property and Equipment, net                                            398,659
Goodwill                                                             1,171,551
Other Intangibles, net                                                 304,952
Deposits and Other Assets                                              263,392
                                                                  ------------
Total Assets                                                       $31,678,571
                                                                  ============

Liabilities and Stockholders' Equity

Current Liabilities:
  Revolving credit line                                            $14,379,076
  Accounts payable and accrued expenses                              1,082,518
  Premiums payable                                                   7,037,301
  Current portion of long-term debt                                    125,000
  Income taxes payable                                                 474,393
  Other current liabilities                                            199,909
                                                                  ------------
Total Current Liabilities                                           23,298,197
                                                                  ------------

Long-Term Debt                                                       3,771,800
                                                                  ------------
Other Liabilities                                                       43,388
                                                                  ------------
Mandatorily Redeemable Preferred Stock                                 904,000
                                                                  ------------

Commitments

Stockholders' Equity:
  Common Stock, $.01 par value; 40,000,000 shares authorized;
     16,277,103 shares issued                                          162,771
  Preferred Stock, $.01 par value; 1,000,000 shares authorized;
     0 shares issued and outstanding                                         -
  Capital in excess of par                                          10,582,315
  Deficit                                                           (6,155,245)
                                                                  ------------
                                                                     4,589,841
Treasury Stock, at cost, 3,714,616 shares                             (928,655)
                                                                  ------------
Total Stockholders' Equity                                           3,661,186
                                                                  ------------
Total Liabilities and Stockholders' Equity                         $31,678,571
                                                                  ============

--------------------------------------------------------------------------------
See notes to condensed consolidated financial statements.

                                       4
<PAGE>


                        DCAP GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements Of Income (Unaudited)
--------------------------------------------------------------------------------
Six months ended June 30,                               2004              2003
--------------------------------------------------------------------------------

Revenues:
    Commissions and fees                         $  3,472,839      $  3,015,662
    Premium finance revenue                         3,955,086           697,272
                                                 ------------------------------
                                                    7,427,925         3,712,934
Operating Expenses:
    General and administrative expenses             5,390,022         2,943,162
    Depreciation and amortization                     210,465            74,918
    Premium finance interest expense                  594,713                 -
                                                 ------------------------------
Total Operating Expenses                            6,195,200         3,018,080
                                                 ------------------------------

Operating Income:                                   1,232,725           694,854
                                                 ------------------------------

Other (Expense) Income:
    Interest income                                     5,441             4,803
    Interest expense                                  (18,119)          (33,794)
    Interest expense - mandatorily redeemable
       preferred stock                                (22,600)           (7,792)
    Gain on sale of stores                                  -            89,700
                                                 ------------------------------
                                                      (35,278)           52,917
                                                 ------------------------------

Income Before Provision for Income Taxes            1,197,447           747,771

Provision for Income Taxes                            476,386             5,664
                                                 ------------------------------

Income from Continuing Operations                     721,061           742,107

Discontinued Operations:
    (Loss) from discontinued operations                     -           (46,096)
                                                 ------------------------------

Net Income                                       $    721,061      $    696,011
                                                 ==============================

Net Income Per Common Share:
  Basic:
    Income from continuing operations            $       0.06      $       0.06
    (Loss) from discontinued operations                     -             (0.00)
                                                 ------------------------------
    Net income                                   $       0.06      $       0.06
                                                 ==============================

  Diluted:
    Income from continuing operations            $       0.05      $       0.05
    (Loss) from discontinued operations                     -             (0.00)
                                                 ------------------------------
    Net income                                   $       0.05      $       0.05
                                                 ==============================

Weighted Average Number of Shares Outstanding:
    Basic                                          12,368,087        12,353,402
                                                 ==============================

    Diluted                                        16,186,742        13,079,072
                                                 ==============================

--------------------------------------------------------------------------------

See notes to condensed consolidated financial statements.


                                       5
<PAGE>


                        DCAP GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements Of Income (Unaudited)
--------------------------------------------------------------------------------
Three months ended June 30,                           2004             2003
--------------------------------------------------------------------------------

Revenues:
    Commissions and fees                         $  1,801,022      $  1,554,247
    Premium finance revenue                         2,126,886           349,795
                                                 ------------------------------
                                                    3,927,908         1,904,042

Operating Expenses:
    General and administrative expenses             2,905,987         1,535,865
    Depreciation and amortization                     107,982            38,599
    Premium finance interest expense                  318,872                 -
                                                 ------------------------------
Total Operating Expenses                            3,332,841         1,574,464
                                                 ------------------------------

Operating Income:                                     595,067           329,578
                                                 ------------------------------

Other (Expense) Income:
    Interest income                                     3,751             3,455
    Interest expense                                   (8,090)          (16,534)
    Interest expense - mandatorily redeemable
       preferred stock                                (11,300)           (7,792)
                                                 ------------------------------
                                                      (15,639)          (20,871)

Income Before Provision for Income Taxes              579,428           308,707

Provision for Income Taxes                            228,678               809
                                                 ------------------------------
Net income                                       $    350,750     $     307,898
                                                 ==============================

Net Income Per Common Share:
  Basic:                                         $       0.03     $        0.02
                                                 ==============================

  Diluted                                        $       0.02     $        0.02
                                                 ==============================

Weighted Average Number of Shares Outstanding:
    Basic                                          12,452,949        12,353,402
                                                 ==============================

    Diluted                                        16,237,865        13,234,215
                                                 ==============================

--------------------------------------------------------------------------------
See notes to condensed consolidated financial statements.

                                       6
<PAGE>


                        DCAP GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)
--------------------------------------------------------------------------------
Six months ended June 30,                                2004           2003
--------------------------------------------------------------------------------


Cash Flows from Operating Activities:
  Net income                                          $   721,061   $   696,011
  Adjustments to reconcile net income to net
    cash provided by operating activities:
       Depreciation and amortization                      210,465        74,918
       Bad debt expense                                         -        27,029
       Amortization of warrants                            29,400             -
       Gain on sale of stores                                   -       (89,700)
       Changes in operating assets and liabilities:
         Decrease (increase) in assets:
           Accounts receivable                            331,848      (375,923)
           Prepaid expenses and other current assets     (144,494)      (44,945)
           Deposits and other assets                      (18,174)       (1,954)
         Increase (decrease) in liabilities:
           Premium payable                                507,082             -
           Accounts payable and accrued expenses         (245,011)      (60,091)
           Income taxes payable                           474,393             -
           Other current liabilities                      (12,281)      (10,942)
                                                      -------------------------
Net Cash Provided by Operating Activities               1,854,289       214,403
                                                      -------------------------

Cash Flows from Investing Activities:
  Increase in finance contracts receivable - net       (6,270,670)            -
  Decrease in notes and other receivables - net             8,234        38,752
  Purchase of property and equipment                      (64,258)      (71,868)
  Business acquisitions                                         -       (39,039)
  Proceeds from disposition of discontinued subsidiary          -       500,000
  Proceeds from sale of stores                                  -       141,383
                                                      -------------------------
Net Cash (Used in) Provided by Investing Activities    (6,326,694)      569,228
                                                      -------------------------

Cash Flows from Financing Activities:
  Principal payments on long-term debt                    (21,878)     (309,214)
  Proceeds from revolving credit line                  35,130,245             -
  Payments on revolving credit line                   (29,719,251)            -
  Proceeds from exercise of warrants                      194,997             -
                                                      -------------------------
Net Cash Provided by (Used in) Financing Activities     5,584,113      (309,214)
                                                      -------------------------

Net Increase in Cash and Cash Equivalents               1,111,708       474,417
Cash and Cash Equivalents, beginning of period          1,349,304       607,403
                                                      -------------------------
Cash and Cash Equivalents, end of period              $ 2,461,012    $1,081,820
                                                      =========================


--------------------------------------------------------------------------------
See notes to condensed consolidated financial statements.

                                       7
<PAGE>


                        DCAP GROUP, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
               SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (UNAUDITED)

1.   The Condensed Consolidated Balance Sheet as of June 30, 2004, the Condensed
     Consolidated  Statements  of Income for the three and six months ended June
     30, 2004 and 2003 and the Condensed  Consolidated  Statements of Cash Flows
     for the six months  ended June 30,  2004 and 2003 have been  prepared by us
     without  audit.  In  our  opinion,  the  accompanying  unaudited  condensed
     consolidated  financial  statements  contain all  adjustments  necessary to
     present fairly in all material  respects our financial  position as of June
     30, 2004, results of operations for the three and six months ended June 30,
     2004 and 2003 and cash  flows for the six months  ended  June 30,  2004 and
     2003.  This report should be read in conjunction  with our Annual Report on
     Form 10-KSB for the year ended December 31, 2003.

     The results of operations  and cash flows for the six months ended June 30,
     2004 are not  necessarily  indicative of the results to be expected for the
     full year.

2.   Summary of Significant Accounting Policies:
     -------------------------------------------

     a.   Principles of consolidation
          ---------------------------

     The accompanying  consolidated financial statements include the accounts of
     all  subsidiaries  and joint  ventures  in which we have a majority  voting
     interest or voting  control.  All  significant  intercompany  accounts  and
     transactions have been eliminated.

     b.   Revenue recognition
          -------------------

     We recognize commission revenue from insurance policies at the beginning of
     the  contract  period  (except for those  commissions  that are  receivable
     annually,  which we recognize on a ratable  basis) and on  automobile  club
     dues equally over the contract period.  Franchise fee revenue is recognized
     when substantially all of our contractual  requirements under the franchise
     agreement are  completed.  Refunds of commissions  on the  cancellation  of
     insurance policies are reflected at the time of cancellation.

     Prior to July 14, 2003, premium financing fee revenue was earned based upon
     the  origination  of premium  finance  contracts sold by agreement to third
     parties.  The  contract  fee gave  consideration  to an  estimate as to the
     collectability  of the  loan  amount.  Periodically,  actual  results  were
     compared to estimates previously recorded, and adjusted accordingly.

     On July 14, 2003, we changed our business model with respect to our premium
     finance  operations  from selling  finance  contracts  to third  parties to
     internally  financing those  contracts.  To accomplish  this, we obtained a
     credit facility and commenced recording interest and fee-based revenue over
     the life of each loan  (generally 9 to 10 months) and expenses of operating
     a finance company, such as servicing, bad debts and interest expense.

     Thus, rather than recording a one-time fee per contract (as we did prior to
     July 14, 2003),  we are now  recording  income and expense over the life of
     each  contract,  as  well  as  receivables  and  payables  relating  to the
     operations of a premium finance  company.  We are using the interest method
     to recognize  interest income over the life of each loan in accordance with
     Statement  of  Financial   Accounting  Standard  No.  91,  "Accounting  for
     Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans
     and Initial Direct Costs of Leases."

                                       8
<PAGE>


     Delinquency  fees are earned when collected.  Upon completion of collection
     efforts,  after  cancellation  of the underlying  insurance  policies,  any
     uncollected earned interest or fees are charged off.

     c.   Website Development Costs
          -------------------------

     Technology and content costs are generally expensed as incurred, except for
     certain  costs  relating  to  the  development  of  internal-use  software,
     including those relating to operating our website, that are capitalized and
     depreciated  over two years.  A total of $12,945  and $23,549 in such costs
     was  incurred  during  the  six  months  ended  June  30,  2004  and  2003,
     respectively.

     d.   Stock Options
          -------------

     We have elected the  disclosure  only  provisions of Statement of Financial
     Accounting  Standard No. 123,  "Accounting  for  Stock-Based  Compensation"
     ("FASB 123") in accounting for our employee stock options.  Accordingly, no
     compensation  expense has been  recognized.  Had we  recorded  compensation
     expense for the stock options based on the fair value at the grant date for
     awards in the six and three months ended June 30, 2004 and 2003  consistent
     with the  provisions  of SFAS 123,  our net income and net income per share
     would have been adjusted as follows:

<TABLE>
<CAPTION>
                                                   Six Months Ended                 Three Months Ended
                                                        June 30,                       June 30, 2004
                                                 ----------------------          -----------------------
                                                    2004        2003                 2004         2003
                                                 --------      --------              ----         ----

<S>                                              <C>           <C>                 <C>          <C>
     Net income, as reported                     $721,061      $696,011            $350,750     $307,898

     Deduct:  Total stock-based employee
     compensation expense determined
     under fair value based method, net
     of related tax effects                       (33,000)     (30,000)             (17,000)     (15,000)
                                                 ---------     --------            ---------    --------

     Pro forma net income                        $688,061      $666,011            $333,750     $292,898
                                                 ========      ========            ========     ========

     Net income per share:
              Basic - as reported                $   0.06      $   0.06            $   0.03     $   0.02
                                                 --------      --------            --------     --------
              Basic - pro forma                  $   0.06      $   0.05            $   0.03     $   0.02
                                                 --------      --------            --------     --------


              Diluted - as reported              $   0.05      $   0.05            $   0.02     $   0.02
                                                 --------      --------            --------     --------
              Diluted - pro forma                $   0.04      $   0.05            $   0.02     $   0.02
                                                 --------      --------            --------     --------
</TABLE>

     e.   Reclassifications
          -----------------

     Certain  reclassifications  have  been made to the  consolidated  financial
     statements  for the six  months  ended June 30,  2003 to  conform  with the
     classifications used for the six months ended June 30, 2004.

3.   Business Segments:
     ------------------

     We currently have two reportable  business segments:  Insurance and Premium
     Finance. The Insurance segment sells retail auto,  motorcycle,  boat, life,
     business,  and  homeowner's  insurance and  franchises.  In addition,  this
     segment offers tax  preparation  services and automobile  club services for
     roadside emergencies. Insurance revenues are derived from

                                       9
<PAGE>

     activities within the United States,  and all long-lived assets are located
     within the United States.  The Premium  Finance segment offers property and
     casualty policyholders loans to finance the policy premiums.

     In December  2002, we disposed of our Hotel segment as part of a settlement
     agreement.  Accordingly,  the segment  information  shown in the  following
     table  excludes  the activity of this segment for the six months ended June
     30, 2004 and 2003.

     Summarized  financial  information  concerning our  reportable  segments is
     shown in the following tables:

     Six Months Ended                      Premium
     June 30, 2004            Insurance     Finance       Other(1)        Total
     --------------------     ---------    ---------      --------        -----

     Revenues from external
       customers              $3,472,839   $3,955,086  $         -    $7,427,925
     Interest income               5,441            -            -         5,441
     Interest expense             39,536      594,713        1,183       635,432
     Depreciation and
       amortization               84,648      111,528       14,289       210,465
     Segment profit (loss)
       before income taxes       817,976      965,963     (586,492)    1,197,447
     Segment profit (loss)       490,786      579,577     (349,302)      721,061
     Segment assets            3,565,414   26,754,589    1,358,568    31,678,571

    ------------
     (1)  Column  represents  corporate-related  items  and,  as it  relates  to
          segment  profit  (loss),  income,  expense and assets not allocated to
          reportable segments.

     Six Months Ended                       Premium
     June 30, 2003             Insurance    Finance      Other(1)      Total
     --------------------     ----------    --------   ----------   ----------

     Revenues from external
       customers              $3,015,662    $697,272    $       -   $3,712,934
     Interest income               1,223           -        3,580        4,803
     Interest expense             41,586           -            -       41,586
     Depreciation and
       amortization               74,138         780            -       74,918
     Segment profit (loss)
       before income taxes       626,487     525,266     (403,982)     747,771
     Segment profit (loss)       626,487     525,266     (409,646)     742,107
     Segment assets            3,236,120     209,038      924,000    4,369,158

     ----------
     (1)  Column  represents  corporate-related  items  and,  as it  relates  to
          segment  profit  (loss),  income,  expense and assets not allocated to
          reportable segments.

4.   Sale of Stores
     --------------

     During  the six  months  ended  June 30,  2003,  we sold two of our  retail
     offices (part of our Insurance segment) for cash consideration  aggregating
     $141,383 and a note receivable of  approximately  $97,000.  The sale of the
     two  offices  resulted  in a gain of  $89,700.  The assets of these  stores
     included  accounts  receivable of  approximately  $85,000,  goodwill with a

                                       10
<PAGE>

     carrying  amount of $50,000,  and fixed  assets  with a carrying  amount of
     approximately  $10,000.  In  addition,  concurrently  with  the  sale,  the
     purchasers entered into franchise agreements with us.

5.   Net Income Per Share
     --------------------

     Basic net income per share is  computed  by dividing  income  available  to
     common  shareholders  by  the  weighted-average  number  of  common  shares
     outstanding.  Diluted earnings per share reflect,  in periods in which they
     have a dilutive effect,  the impact of common shares issuable upon exercise
     of stock  options and warrants and  conversion  of  mandatorily  redeemable
     preferred stock.

     The reconciliation is as follows:

<TABLE>
<CAPTION>
                                           Three Months Ended                 Six Months Ended
                                                 June 30,                          June 30,
                                        ---------------------------      -----------------------------
                                           2004           2003               2004             2003
     -------------------------------------------------------------------------------------------------

<S>                                     <C>              <C>              <C>               <C>
     Weighted Average Number
       of Shares Outstanding            12,452,949       12,353,402       12,368,087        12,353,402
     Effect of Dilutive Securities,
       common stock equivalents          3,784,916          880,813        3,818,655           725,670
                                        ---------------------------       ----------------------------
     Weighted Average Number of
       Shares Outstanding, used for
       computing diluted earnings
       per share                        16,237,865       13,234,215       16,186,742        13,079,072
                                        ===========================       ============================
</TABLE>

     Net income available to common  shareholders for the computation of diluted
     earnings per share is computed as follows:

<TABLE>
<CAPTION>
                                                     Three Months Ended                  Six Months Ended
                                                           June 30,                            June 30,
                                                 --------------------------           -------------------------
                                                   2004               2003               2004             2003
     -----------------------------------------------------------------------------------------------------------

<S>                                              <C>               <C>                 <C>              <C>
     Net Income                                  $350,750          $307,898            $721,061         $696,011
     Interest Expense on Dilutive
       Convertible Preferred Stock                 11,300                 -              22,600                -
                                                 ---------------------------------------------------------------
     Net Income Available to Common
       Shareholders for Diluted Earnings
       Per Share                                 $362,050          $307,898            $743,661         $696,011
                                                 ===============================================================
</TABLE>


6.   Exercise of Warrants
     --------------------

     During the six months ended June 30, 2004,  warrants were exercised for the
     purchase of 113,633  common shares at an exercise  price of $1.10 per share
     and 95,452 common shares at an exercise price of $.73 per share.

                                       11
<PAGE>


Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
         ---------------------------------------------------------

     Overview

     We operate 25  storefronts,  including  19 Barry Scott  locations  acquired
through our August 2002  acquisition  of Barry Scott  Companies,  Inc., and five
Atlantic  Insurance  locations  acquired  through  our May 2003  acquisition  of
substantially all the assets of AIA Acquisition Corp. We also have 42 franchised
DCAP locations.

     Our insurance  storefronts  serve as insurance  agents or brokers and place
various  types of  insurance  on behalf of  customers.  We focus on  automobile,
motorcycle  and  homeowner's  insurance  and  our  customer  base  is  primarily
individuals rather than businesses.

     The stores receive commissions from insurance companies for their services.
We receive fees from the  franchised  locations in connection  with their use of
the DCAP name. Neither we nor the stores currently serve as an insurance company
and therefore do not assume underwriting risks. The stores also offer automobile
club services for roadside assistance and income tax preparation services.

     Payments Inc., our wholly-owned subsidiary, is an insurance premium finance
agency  that  offers  premium  financing  to  clients of DCAP,  Barry  Scott and
Atlantic Insurance offices,  as well as non-affiliated  insurance  agencies.  We
currently operate within the states of New York, Pennsylvania and New Jersey.

     Critical Accounting Policies

     Our consolidated  financial statements include accounts of DCAP Group, Inc.
and all majority-owned and controlled subsidiaries. The preparation of financial
statements in conformity with accounting  principles  generally  accepted in the
United States  requires our  management to make  estimates  and  assumptions  in
certain circumstances that affect amounts reported in our consolidated financial
statements and related  notes.  In preparing  these  financial  statements,  our
management  has  utilized  information  available  including  our past  history,
industry standards and the current economic environment, among other factors, in
forming  its  estimates  and  judgments  of  certain  amounts  included  in  the
consolidated financial statements,  giving due consideration to materiality.  It
is possible  that the ultimate  outcome,  as  anticipated  by our  management in
formulating  its estimates  inherent in these  financial  statements,  might not
materialize.  However,  application  of the critical  accounting  policies below
involves  the  exercise  of  judgment  and  use  of  assumptions  as  to  future
uncertainties  and,  as  a  result,  actual  results  could  differ  from  these
estimates. In addition,  other companies may utilize different estimates,  which
may impact  comparability  of our results of operations to those of companies in
similar businesses.

     Commission and fee income

     We recognize commission revenue from insurance policies at the beginning of
the contract period,  except for commissions that are receivable  annually,  for
which we recognize the commission revenue ratably. Refunds of commissions on the
cancellation of insurance policies are reflected at the time of cancellation.


                                       12
<PAGE>

     Franchise  fee  revenue  is  recognized  when   substantially  all  of  our
contractual requirements under the franchise agreement are completed.

     Automobile club dues are recognized equally over the contract period.

     Finance income, fees and receivables

     Finance income  consists of interest,  service fees and  delinquency  fees.
Finance income,  other than  delinquency  fees, is recognized using the interest
method or similar  methods that produce a level yield over the life of each loan
(generally nine to ten months). Delinquency fees are earned when collected.

     Allowance for finance receivable losses

     Losses on finance  receivables  include an estimate of future credit losses
on premium finance  accounts.  Credit losses on premium  finance  accounts occur
when the unearned  premiums  received  from the insurer upon  cancellation  of a
financed  policy are  inadequate to pay the balance of the premium  finance loan
amount, which includes accrued interest. The majority of these shortfalls result
in the write-off of such interest.  We review  historical  trends of such losses
relative to finance  receivable  balances to develop estimates of future losses.
However,  actual write-offs may differ  materially from the write-off  estimates
that we used.

     Goodwill and intangible assets

     The carrying value of goodwill was initially  reviewed for impairment as of
January 1, 2002,  and is  reviewed  annually  or  whenever  events or changes in
circumstances indicate that the carrying amount might not be recoverable. If the
fair value of the operations to which goodwill relates is less than the carrying
amount of those operations,  including unamortized goodwill, the carrying amount
of goodwill is reduced  accordingly with a charge to expense.  Based on our most
recent  analysis,  we believe that no impairment of goodwill  exists at June 30,
2004.

     Stock-based compensation

     We apply the  intrinsic  value-based  method of  accounting  prescribed  by
Accounting  Principles  Board  Opinion No. 25,  Accounting  for Stock  Issued to
Employees,  and related  interpretations,  to account for  stock-based  employee
compensation  plans and report pro forma  disclosures in our Form 10-QSB filings
by  estimating  the fair value of  options  issued  and the  related  expense in
accordance with SFAS No. 123. Under this method, compensation cost is recognized
for awards of common  shares or stock  options to our  directors,  officers  and
employees  only if the  quoted  market  price of the stock at the grant date (or
other  measurement  date,  if later) is greater than the amount the grantee must
pay to acquire the stock.

     Results of Operations

     Our operating income for the six months ended June 30, 2004 was $1,232,725,
an increase of 77% over the results for the comparable 2003 perid of $694,854.

     During  the  six   months   ended  June  30,   2004,   revenues   from  our
insurance-related  operations  were  $3,472,839,  an  increase  of 15%  over the
revenues  for the  comparable  2003  period  of  $3,015,662.  The  increase  was
generally due to the revenues of our Atlantic Insurance stores whose assets were
acquired


                                       13
<PAGE>


effective May 1, 2003.

     Premium  finance  revenues  for the six months  ended June 30, 2004 totaled
$3,955,086, an increase of 467% over the comparable 2003 period of $697,272 (see
table):

                                                   Six Months Ended
                                                       June 30,
                                              -------------------------
                                                 2004            2003
                                              -------------------------

         Revenue from sale of receivables     $        0      $697,272
         Interest and late fee revenue         3,955,086             0
                                              -------------------------

                  Total                       $3,955,086      $697,272
                                              =========================

     During the six months ended June 30, 2003,  we recognized  premium  finance
revenue  from the sale of  premium  finance  receivables  to a third  party  and
recorded  a  one-time  fee per  contract.  On July  14,  2003,  we  obtained  an
$18,000,000  two-year line of credit from Manufacturers and Traders Trust Co. to
finance our premium finance operations.  Concurrently, we obtained $3,500,000 in
funding from a private  placement of  subordinated  debt and warrants to support
our premium finance operations.  We then began utilizing these credit facilities
and commenced  recording  interest and  fee-based  revenue over the life of each
loan and the expenses of operating a finance  company,  such as  servicing,  bad
debts and  interest  expense.  Thus,  rather than  recording a one-time  fee per
contract, we are recording income and expense over the life of each contract.

     Effective November 2003, we began providing premium finance services to our
Barry Scott  locations  (following  the  expiration  of a  requirement  that the
locations use another  provider),  and in March 2004 we began providing  premium
finance services to our Atlantic Insurance offices.

     Our selling,  general and administrative  expenses for the six months ended
June 30, 2004 were  $2,446,860 more than for the six months ended June 30, 2003.
This increase was primarily due to the expenses of our Atlantic Insurance stores
whose assets were acquired  effective May 1, 2003, and the expenses of operating
a finance company, as discussed above, which we commenced on July 14, 2003.

     Our depreciation and amortization expense for the six months ended June 30,
2004 was  $135,547  more  than for the six  months  ended  June 30,  2003.  This
increase  was  primarily  the  result  of our  recording  amortization  of costs
associated with obtaining the financing discussed above.

     As a result of the change in our premium  finance  business in July 2003 as
discussed  above, we incurred  premium finance  interest  expense during the six
months ended June 30, 2004,  while none was incurred during the six months ended
June 30, 2003.

     In May 2003, we issued  redeemable  preferred shares in connection with the
acquisition of the assets of AIA Acquisition Corp. and incurred interest expense
of $22,600  during the six months  ended  June 30,  2004 as  compared  to $7,792
during the six months ended June 30, 2003.

     During  the six  months  ended  June 30,  2003,  we sold two of our  stores
resulting  in a gain of $89,700.  No such sales  occurred  during the six months
ended June 30, 2004.

     During the six months ended June 30, 2004,  our  provision for income taxes
was $476,386 as opposed to $5,664 for the six months  ended June 30, 2003.  This
was due to the  utilization  of net  operating  loss  carryforwards  for the six
months ended June 30, 2003. No net operating loss  carryforwards  were available
for the six months ended June 30, 2004.


                                       14
<PAGE>


     Our insurance-related  operations,  on a stand-alone basis, generated a net
profit before income taxes of $817,976 during the six months ended June 30, 2004
as  compared to a net profit  before  income  taxes of  $626,487  during the six
months  ended  June 30,  2003.  This  increase  was  primarily  the result of an
increase in commission revenue. Our premium finance operations, on a stand-alone
basis,  generated a net profit  before  income taxes of $965,963  during the six
months  ended June 30, 2004 as compared to a net profit  before  income taxes of
$525,266  during the six months ended June 30, 2003.  The increase was primarily
due to increased  profits  resulting  from the change in our  business  model as
discussed  above.  Loss before  income  taxes from  corporate-related  items not
allocable to reportable  segments was $586,492  during the six months ended June
30, 2004 as compared to $403,982 during the six months ended June 30, 2003. This
increase was  primarily due to the $89,700 gain on sale of stores during the six
months  ended  June 30,  2003  while no sale of stores  occurred  during the six
months ended June 30, 2004, and increased  compensation expenses during the 2004
period.

     In January  2003,  we  discontinued  the  operations  of the  International
Airport  Hotel in San Juan,  Puerto  Rico.  During the six months ended June 30,
2003, this discontinued operation generated a net loss of $46,096. There were no
such operations during the six months ended June 30, 2004.

     Liquidity and Capital Resources

     As of June 30, 2004,  we had  $2,461,012 in cash and cash  equivalents  and
working  capital of  $6,241,820.  As of December 31, 2003, we had  $1,349,304 in
cash and cash equivalents and working capital of $5,168,694.

     During the six months  ended June 30, 2004,  our cash and cash  equivalents
increased by $1,111,708. This was due to the following:

          o    Net  cash  provided  by  operating   activities   was  $1,854,289
               primarily  due our net income for the period of $721,061,  plus a
               decrease in accounts  receivable  of $331,848  and an increase in
               premiums payable of $507,082 and taxes payable of $474,393.

          o    We used  $6,326,694 in investing  activities  primarily due to an
               increase in our net finance contracts receivable of $6,270,670

          o    Net  cash  provided  by  financing   activities   was  $5,584,113
               primarily  due to  proceeds  of  $35,130,245  from our  revolving
               credit line from  Manufacturers and Traders Trust Co. for premium
               finance  purposes,  offset  by  payments  of  $29,719,251  on the
               revolving line.

     Liquidity at June 30, 2004 was sufficient, in the opinion of management, to
meet our cash requirements for the 12 month period ending June 30, 2005.

     Off-Balance Sheet Arrangements

     We have no  off-balance  sheet  arrangements  that  have or are  reasonably
likely to have a current or future effect on our financial condition, changes in
financial  condition,  revenues or expenses,  results of operations,  liquidity,
capital expenditures or capital resources that is material to investors.



                                       15
<PAGE>


Item 3.  CONTROLS AND PROCEDURES
-------  -----------------------

     Our Chief  Executive  Officer  and Chief  Financial  Officer  conducted  an
evaluation of the effectiveness of our disclosure controls and procedures. Based
on this  evaluation,  our Chief Executive  Officer and Chief  Financial  Officer
concluded that our disclosure  controls and procedures were effective as of June
30, 2004 in alerting him in a timely manner to material  information required to
be included in our SEC reports.  In addition,  no change in our internal control
over financial  reporting occurred during the fiscal quarter ended June 30, 2004
that has materially affected,  or is reasonably likely to materially affect, our
internal control over financial reporting.


                                       16

<PAGE>


PART II.  OTHER INFORMATION
          -----------------

Item 1.   LEGAL PROCEEDINGS
          -----------------

          None

Item 2.   CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY
          -------------------------------------------------------------------
          SECURITIES
          ----------

          Between  April 26, 2004 and May 27, 2004,  holders of Class A warrants
exercised  their  warrants for the purchase of an aggregate of 113,633 shares of
common stock at an exercise price of $1.10 per share.

          Effective  June 2,  2004,  the  holder of a  placement  agent  warrant
exercised  his warrant for the  purchase of 95,452  shares of common stock at an
exercise price of $0.73 per share.

          The  above  offering  of  shares  was  exempt  from  the  registration
requirements of the Securities Act of 1933 pursuant to Section 4(2) thereof as a
transaction  not involving any public  offering.  We reached this  determination
based upon the following:  (i) representations or other information available to
us to the effect that each of the purchasers was either an "accredited investor"
or had such knowledge and  experience in financial and business  matters that it
or he was capable of  evaluating  the merits and risks of an  investment  in the
shares of common stock,  each acquired the shares for its or his own account and
each had access to information regarding us; (ii) the certificates  representing
the  shares  bear  a  restrictive  legend  permitting  transfer  only  upon  the
registration  of the shares or pursuant to an exemption  from such  registration
requirements;  and (iii) the offering and sale of the shares was not done by any
form of general solicitation or general advertising.

Item 3.   DEFAULTS UPON SENIOR SECURITIES
          -------------------------------

          None

Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
          ---------------------------------------------------

          None

Item 5.   OTHER INFORMATION
          -----------------

          None

Item 6.   EXHIBITS AND REPORTS ON FORM 8-K
          --------------------------------

     (a)  Exhibits
          --------

          3(a) Certificate of Incorporation, as amended(1)

          3(b) By-laws, as amended


-------
1 Denotes document filed as an exhibit to our Quarterly Report on Form 10-QSB
for the period ended September 30, 2002 and incorporated herein by reference.


                                       17
<PAGE>


          10   Amendment  No. 2, dated as of June 29, 2004 (but  effective as of
               January 1, 2004),  to Employment  Agreement,  dated as of May 10,
               2001, by and between DCAP Group, Inc. and Barry Goldstein

          31   Rule  13a-14(a)/15d-14(a)  Certification  as adopted  pursuant to
               Section 302 of the Sarbanes-Oxley Act of 2002

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

     (b)  Reports on Form 8-K
          -------------------

          No Current Report on Form 8-K was filed by us during the quarter ended
June 30, 2004.


                                       18
<PAGE>


                                   SIGNATURES
                                   ----------

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


                                      DCAP GROUP, INC.



Dated: August 12, 2004                By: /s/ Barry Goldstein
                                         ---------------------------------------
                                         Barry Goldstein
                                         President, Chairman of the Board,
                                         Chief Executive Officer, Chief
                                         Financial Officer and Treasurer
                                         (Principal Executive, Financial and
                                         Accounting Officer)




                                       19