**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, 2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| [  ]                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 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.**

| Delaware                                                                          | 36-2476480                                              |
|-----------------------------------------------------------------------------------|---------------------------------------------------------|
| (State                    or other jurisdiction of incorporation or organization) | (I.R.S.                    Employer Identification No.) |

**1158        Broadway, Hewlett, NY 11557**

**(516)        374-7600**

**________________________________________________**

**APPLICABLE      ONLY TO ISSUERS INVOLVED IN**

**BANKRUPTCY      PROCEEDINGS DURING THE**

**PRECEDING      FIVE YEARS**

**APPLICABLE      ONLY TO CORPORATE ISSUERS**

----

**INDEX**

**DCAP      GROUP, INC. AND SUBSIDIARIES**

| **PART                I.**  | **FINANCIAL                INFORMATION**                                                                                                                |
|-----------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
|                        |                                                                                                                                                    |
| **Item                1.**  | **Financial                Statements**                                                                                                                 |
|                        |                                                                                                                                                    |
|                        | Condensed                Consolidated Balance Sheet – June 30, 2007 (Unaudited)                                                                   |
|                        |                                                                                                                                                    |
|                        | Condensed                Consolidated Statements of Income - Six months ended June 30, 2007                and                2006 (Unaudited)          |
|                        |                                                                                                                                                    |
|                        | Condensed                Consolidated Statements of Income – Three months ended June 30, 2007 and                2006 (Unaudited)                 |
|                        |                                                                                                                                                    |
|                        | Condensed                Consolidated Statements of Cash Flows - Six months ended June 30,                2007 and                2006 (Unaudited)      |
|                        |                                                                                                                                                    |
|                        | Notes                to Condensed Consolidated Financial Statements - Six months ended                June 30,                2007 and 2006 (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.**  | **Unregistered                Sales of Equity Securities and Use of Proceeds**                                                                          |
| **Item                3.**  | **Defaults                Upon Senior Securities**                                                                                                      |
| **Item                4.**  | **Submission                of Matters to a Vote of Security Holders**                                                                                  |
| **Item                5.**  | **Other                Information**                                                                                                                    |
| **Item                6.**  | **Exhibits**                                                                                                                                            |
|                        |                                                                                                                                                    |
| **SIGNATURES**              |

----

----

**PART      I.  FINANCIAL INFORMATION**

**Item      1.    FINANCIAL      STATEMENTS**

| **DCAP                GROUP, INC. AND****SUBSIDIARIES**                                                                    |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|
| **Condensed                Consolidated Balance Sheet (Unaudited)**                                                        |   |
| *June                30, 2007*                                                                                             |   |
|                                                                                                                       |   |
| **Assets**                                                                                                                 |   |   |   |   |   |   |
| Current                Assets                                                                                              |   |   |   |   |   |   |
| Cash                and cash equivalents                                                                                   |   |   |   |   | $ | 950,142 |   |
| Accounts                receivable, net of allowance for   doubtful                accounts of $20,000      |   |   |   |   |   | 1,014,244 |   |
| Finance                contracts receivable                                                                                |   | $ | 15,322,568 |   |   |   |   |   |
|    Less:  Deferred                interest                                                        |   |   | (1,183,535 | ) |   |   |   |   |
|    Less:                Allowance for finance receivable losses                                             |   |   | (193,705 | ) |   |   | 13,945,328 |   |
| Prepaid                expenses and other current assets                                                                   |   |   |   |   |   |   | 162,248 |   |
| Deferred                income taxes                                                                                       |   |   |   |   |   |   | 76,000 |   |
| Total                Current Assets                                                                                        |   |   |   |   |   |   | 16,147,962 |   |
|                                                                                                                       |   |   |   |   |   |   |   |   |
| Property                and Equipment, net                                                                                 |   |   |   |   |   |   | 505,389 |   |
| Goodwill                                                                                                                   |   |   |   |   |   |   | 2,601,257 |   |
| Other                Intangibles, net                                                                                      |   |   |   |   |   |   | 290,260 |   |
| Notes                Receivable, net                                                                                       |   |   |   |   |   |   | 4,531,582 |   |
| Deposits                and Other Assets                                                                                   |   |   |   |   |   |   | 219,704 |   |
| Total                Assets                                                                                                |   |   |   |   |   | $ | 24,296,154 |   |
| **Liabilities                and Stockholders’ Equity**                                                              |   |   |   |   |   |   |   |   |
| Current                Liabilities:                                                                                        |   |   |   |   |   |   |   |   |
| Revolving                credit line                                                                                       |   |   |   |   |   | $ | 9,858,960 |   |
| Accounts                payable and accrued expenses                                                                       |   |   |   |   |   |   | 726,146 |   |
| Premiums                payable                                                                                            |   |   |   |   |   |   | 3,072,612 |   |
| Current                portion of long-term debt and lease obligations                                                     |   |   |   |   |   |   | 743,320 |   |
| Mandatorily                redeemable preferred stock                                                                      |   |   |   |   |   |   | 780,000 |   |
| Other                current liabilities                                                                                   |   |   |   |   |   |   | 155,507 |   |
| Total                Current Liabilities                                                                                   |   |   |   |   |   |   | 15,336,545 |   |
|                                                                                                                       |   |   |   |   |   |   |   |   |
| Long-Term                Debt and Capital Lease Obligations                                                                |   |   |   |   |   |   | 2,148,695 |   |
| Deferred                Income Tax                                                                                         |   |   |   |   |   |   | 477,623 |   |
|                                                                                                                       |   |   |   |   |   |   |   |   |
| Commitments                                                                                                                |   |   |   |   |   |   |   |   |
|                                                                                                                       |   |   |   |   |   |   |   |   |
| Stockholders’                Equity:                                                                                 |   |   |   |   |   |   |   |   |
| Common                stock, $.01 par value; authorized 10,000,000 sharesissued                3,747,447                   |   |   |   | 37,475 |   |
| Preferred                stock; $.01 par value; authorized1,000,000                shares; 0 shares issued and outstanding |   |   |   | - |   |
| Capital                in excess of par                                                                                    |   |   |   | 11,755,339 |   |
| Deficit                                                                                                                    |   |   |   | (4,273,743 | ) |
|                                                                                                                       |   |   |   | 7,518,071 |   |
| Treasury                stock, at cost, 781,423 shares                                                                     |   |   |   | (1,185,780 | ) |
| Total                Stockholders’ Equity                                                                            |   |   |   | 6,333,291 |   |
| Total                Liabilities and Stockholders’ Equity                                                            |   |   | $ | 24,296,154 |   |

*See      notes to condensed consolidated financial statements*

----

| **DCAP                GROUP, INC. AND****SUBSIDIARIES**                        |   |
|--------------------------------------------------------------------------------|--------|
| **Condensed                Consolidated Statements of Income (Unaudited)**     |   |
| *Six  Months                Ended June 30,*                          |   | *2007* |   |   | *2006* |   |
|                                                                           |   |   |   |   |   |   |
| Revenues:                                                                      |   |   |   |   |   |   |
| Commissions                and fees                                            |   | $ | 3,126,859 |   |   | $ | 3,753,230 |   |
| Premium                finance revenue                                         |   |   | 1,641,868 |   |   |   | 2,146,701 |   |
| Total                Revenues                                                  |   |   | 4,768,727 |   |   |   | 5,899,931 |   |
|                                                                           |   |   |   |   |   |   |   |   |
| Operating                Expenses:                                             |   |   |   |   |   |   |   |   |
| General                and administrative expenses                             |   |   | 4,013,228 |   |   |   | 4,603,965 |   |
| Provision                for finance receivable losses                         |   |   | 275,610 |   |   |   | 327,942 |   |
| Depreciation                and amortization                                   |   |   | 188,619 |   |   |   | 224,621 |   |
| Premium                finance interest expense                                |   |   | 332,980 |   |   |   | 407,550 |   |
| Total                Operating Expenses                                        |   |   | 4,810,437 |   |   |   | 5,564,078 |   |
|                                                                           |   |   |   |   |   |   |   |   |
| Operating                (Loss) Income                                         |   |   | (41,710 | ) |   |   | 335,853 |   |
|                                                                           |   |   |   |   |   |   |   |   |
| Other                Income (Expense):                                         |   |   |   |   |   |   |   |   |
| Interest                income                                                 |   |   | 3,908 |   |   |   | 2,282 |   |
| Interest                income – notes receivable                        |   |   | 648,597 |   |   |   | 534,247 |   |
| Interest                expense                                                |   |   | (249,691 | ) |   |   | (254,664 | ) |
| Interest                expense – mandatorily redeemable preferred stock |   |   | (19,500 | ) |   |   | (19,500 | ) |
| Gain                on sale of stores                                          |   |   | 65,767 |   |   |   | 81,105 |   |
| Total                Other Income (Expense)                                    |   |   | 449,081 |   |   |   | 343,470 |   |
|                                                                           |   |   |   |   |   |   |   |   |
| Income                Before Provision for Income Taxes                        |   |   | 407,371 |   |   |   | 679,323 |   |
|                                                                           |   |   |   |   |   |   |   |   |
| Provision                for Income Taxes                                      |   |   | 183,317 |   |   |   | 271,729 |   |
|                                                                           |   |   |   |   |   |   |   |   |
| Net                Income                                                      |   | $ | 224,054 |   |   | $ | 407,594 |   |
|                                                                           |   |   |   |   |   |   |   |   |
| Net                Income Per Common Share:                                    |   |   |   |   |   |   |   |   |
| Basic                                                                          |   | $ | 0.08 |   |   | $ | 0.14 |   |
| Diluted                                                                        |   | $ | 0.07 |   |   | $ | 0.13 |   |
|                                                                           |   |   |   |   |   |   |   |   |
| Weighted                Average Number of Shares Outstanding                   |   |   |   |   |   |   |   |   |
| Basic                                                                          |   |   | 2,954,538 |   |   |   | 2,881,466 |   |
| Diluted                                                                        |   |   | 3,284,096 |   |   |   | 3,243,846 |   |

*See      notes to condensed consolidated financial statements.*

----

| **DCAP                GROUP, INC. AND****SUBSIDIARIES**                        |   |
|--------------------------------------------------------------------------------|--------|
| **Condensed                Consolidated Statements of Income (Unaudited)**     |   |
| *Three                Months Ended June 30,*                                   |   | *2007* |   |   | *2006* |   |
|                                                                           |   |   |   |   |   |   |
| Revenues:                                                                      |   |   |   |   |   |   |
| Commissions                and fees                                            |   | $ | 1,513,620 |   |   | $ | 1,860,052 |   |
| Premium                finance revenue                                         |   |   | 851,173 |   |   |   | 1,172,188 |   |
| Total                Revenues                                                  |   |   | 2,364,793 |   |   |   | 3,032,240 |   |
|                                                                           |   |   |   |   |   |   |   |   |
| Operating                Expenses:                                             |   |   |   |   |   |   |   |   |
| General                and administrative expenses                             |   |   | 1,950,407 |   |   |   | 2,314,456 |   |
| Provision                for finance receivable losses                         |   |   | 112,554 |   |   |   | 158,317 |   |
| Depreciation                and amortization                                   |   |   | 92,161 |   |   |   | 113,317 |   |
| Premium                finance interest expense                                |   |   | 167,162 |   |   |   | 218,452 |   |
| Total                Operating Expenses                                        |   |   | 2,322,284 |   |   |   | 2,804,542 |   |
|                                                                           |   |   |   |   |   |   |   |   |
| Operating                Income                                                |   |   | 42,509 |   |   |   | 227,698 |   |
|                                                                           |   |   |   |   |   |   |   |   |
| Other                Income (Expense):                                         |   |   |   |   |   |   |   |   |
| Interest                income                                                 |   |   | 2,555 |   |   |   | 923 |   |
| Interest                income – notes receivable                        |   |   | 324,299 |   |   |   | 321,955 |   |
| Interest                expense                                                |   |   | (116,986 | ) |   |   | (153,792 | ) |
| Interest                expense – mandatorily redeemable preferred stock |   |   | (9,750 | ) |   |   | (9,750 | ) |
| Gain                on sale of store                                           |   |   | 3,300 |   |   |   | 81,105 |   |
| Total                Other Income (Expense)                                    |   |   | 203,418 |   |   |   | 240,441 |   |
|                                                                           |   |   |   |   |   |   |   |   |
| Income                Before Provision for Income Taxes                        |   |   | 245,927 |   |   |   | 468,139 |   |
|                                                                           |   |   |   |   |   |   |   |   |
| Provision                for Income Taxes                                      |   |   | 110,667 |   |   |   | 187,325 |   |
|                                                                           |   |   |   |   |   |   |   |   |
| Net                Income                                                      |   | $ | 135,260 |   |   | $ | 280,814 |   |
|                                                                           |   |   |   |   |   |   |   |   |
| Net                Income Per Common Share:                                    |   |   |   |   |   |   |   |   |
| Basic                                                                          |   | $ | 0.05 |   |   | $ | 0.10 |   |
| Diluted                                                                        |   | $ | 0.04 |   |   | $ | 0.09 |   |
|                                                                           |   |   |   |   |   |   |   |   |
| Weighted                Average Number of Shares Outstanding                   |   |   |   |   |   |   |   |   |
| Basic                                                                          |   |   | 2,967,442 |   |   |   | 2,896,024 |   |
| Diluted                                                                        |   |   | 3,284,523 |   |   |   | 3,248,668 |   |

*See      notes to condensed consolidated financial statements.*

----

| **DCAP                GROUP, INC. AND****SUBSIDIARIES**                                                                    |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|
| **Condensed                Consolidated Statements of Cash Flows (Unaudited)**                                             |   |
| *Six                months ended June 30,*                                                                                 |   | *2007* |   |   | *2006* |   |
| Cash                Flows from Operating Activities:                                                                       |   |   |   |   |   |   |
| Net                income                                                                                                  |   | $ | 224,054 |   |   | $ | 407,594 |   |
| Adjustments                to reconcile net income to net cash  provided                by operating activities: |   |   |   |   |   |   |   |   |
| Depreciation                and amortization                                                                               |   |   | 188,618 |   |   |   | 224,621 |   |
| Bad                debt expense                                                                                            |   |   | - |   |   |   | 1,200 |   |
| Deferred                income taxes                                                                                       |   |   | 183,317 |   |   |   | - |   |
| Accretion                of discount on notes receivable                                                                   |   |   | (493,902 | ) |   |   | (411,592 | ) |
| Amortization                of warrants                                                                                    |   |   | 26,757 |   |   |   | 38,916 |   |
| Stock-based                payments                                                                                        |   |   | 10,000 |   |   |   | 10,000 |   |
| Gain                on sale of store                                                                                       |   |   | (65,767 | ) |   |   | (81,105 | ) |
| Changes                in operating assets and liabilities:                                                                |   |   |   |   |   |   |   |   |
| Decrease                (increase) in assets:                                                                              |   |   |   |   |   |   |   |   |
| Accounts                receivable                                                                                         |   |   | 432,737 |   |   |   | 380,320 |   |
| Prepaid                expenses and other current assets                                                                   |   |   | (65,293 | ) |   |   | 13,444 |   |
| Deposits                and other assets                                                                                   |   |   | (150,536 | ) |   |   | (67,689 | ) |
| Increase                (decrease) in liabilities:                                                                         |   |   |   |   |   |   |   |   |
| Premiums                payable                                                                                            |   |   | 10,363 |   |   |   | (592,694 | ) |
| Accounts                payable and accrued expenses                                                                       |   |   | (287,036 | ) |   |   | 261,280 |   |
| Taxes                payable                                                                                               |   |   | 159,709 |   |   |   | (18,174 | ) |
| Other                current liabilities                                                                                   |   |   | (10,638 | ) |   |   | (24,429 | ) |
| Net                Cash Provided by Operating Activities                                                                   |   |   | 162,383 |   |   |   | 131,692 |   |
|                                                                                                                       |   |   |   |   |   |   |   |   |
| Cash                Flows from Investing Activities:                                                                       |   |   |   |   |   |   |   |   |
| Decrease                (increase) in finance contracts receivable – net                                             |   |   | 832,527 |   |   |   | (1,071,130 | ) |
| Decrease                in notes and other receivables – net                                                         |   |   | 93,394 |   |   |   | 9,852 |   |
| Purchase                of notes                                                                                           |   |   | - |   |   |   | (1,771,701 | ) |
| Proceeds                from sale of stores                                                                                |   |   | 66,300 |   |   |   | - |   |
| Purchase                of agencies                                                                                        |   |   | - |   |   |   | (832,654 | ) |
| Purchase                of property and equipment                                                                          |   |   | (136,179 | ) |   |   | (40,238 | ) |
| Net                Cash Provided by (Used in) Investing Activities                                                         |   |   | 856,042 |   |   |   | (3,705,877 | ) |
|                                                                                                                       |   |   |   |   |   |   |   |   |
| Cash                Flows from Financing Activities:                                                                       |   |   |   |   |   |   |   |   |
| Principal                payments on long-term debt                                                                        |   |   | (283,509 | ) |   |   | - |   |
| Proceeds                from revolving credit line                                                                         |   |   | 20,447,842 |   |   |   | 28,307,721 |   |
| Payments                on revolving credit line                                                                           |   |   | (21,541,228 | ) |   |   | (25,887,220 | ) |
| Proceeds                from exercise of stock options                                                                     |   |   | 112,200 |   |   |   | 191,250 |   |
| Net                Cash (Used in) Provided by Financing Activities                                                         |   |   | (1,264,695 | ) |   |   | 2,611,751 |   |
|                                                                                                                       |   |   |   |   |   |   |   |   |
| Net                Decrease in Cash and Cash Equivalents                                                                   |   |   | (246,270 | ) |   |   | (962,434 | ) |
| Cash                and Cash Equivalents, beginning of period                                                              |   |   | 1,196,412 |   |   |   | 1,961,489 |   |
| Cash                and Cash Equivalents, end of period                                                                    |   | $ | 950,142 |   |   | $ | 999,055 |   |
|                                                                                                                       |   |   |   |   |   |   |   |   |
| Supplemental                Schedule of Non-Cash Investing  and                Financing Activities:             |   |   |   |   |   |   |   |   |
| Note                payable issued for purchase                of notes receivable                                         |   |   |   |   |   | $ | 1,303,434 |   |
| Note                payable issued for purchase                of agencies                                                 |   |   |   |   |   | $ | 522,949 |   |
| Capital                lease                obligations                                                                    |   | $ | 89,818 |   |   |   |   |   |

*See      notes to condensed consolidated financial statements.*

----

**DCAP      GROUP, INC. AND SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**SIX      MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED)**

| 1.   | The                Condensed Consolidated Balance Sheet as of June 30, 2007, the Condensed                Consolidated Statements of Income for the three and six months ended                June                30, 2007 and 2006 and the Condensed Consolidated Statements of Cash                Flows                for the six months ended June 30, 2007 and 2006 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, 2007, results of operations for the three                and six                months ended June 30, 2007 and 2006 and cash flows for the six months                ended June 30, 2007 and 2006. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

** **

----

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

----

| Six                Months EndedJune                30, 2007                                    |   | Insurance |      |   | PremiumFinance |   |       | Other                (1) |   |   | Total     |   |
|------------------------------------------------------------------------------------------------|--------|-----------|-----------|--------|----------------|--------|------------|--------------------------|--------|--------|-----------|--------|
|                                                                                           |   |      |      |   |           |   |       |                     |   |   |      |   |
| Revenues                from external    customers                         |   | $         | 3,126,859 |   |           | $      | 1,641,868  |                     |   | $      | -         |   |   | $ | 4,768,727 |   |
| Interest                income                                                                 |   |      | 2,933     |   |           |   | -          |                     |   |   | 975       |   |   |   | 3,908 |   |
| Interest                income –notes receivable                                    |   |      | -         |   |           |   | -          |                     |   |   | 648,597   |   |   |   | 648,597 |   |
| Interest                expense                                                                |   |      | 40,553    |   |           |   | 332,980    |                     |   |   | 228,638   |   |   |   | 602,171 |   |
| Depreciation                and    amortization                            |   |      | 116,274   |   |           |   | 50,938     |                     |   |   | 21,407    |   |   |   | 188,619 |   |
| Segment                profit (loss)    before                income taxes |   |      | 402,999   |   |           |   | 241,886    |                     |   |   | (237,514  | )      |   |   | 407,371 |   |
| Segment                profit (loss)                                                           |   |      | 221,649   |   |           |   | 133,037    |                     |   |   | (130,632  | )      |   |   | 224,054 |   |
| Segment                assets                                                                  |   |      | 4,789,307 |   |           |   | 14,597,126 |                     |   |   | 4,909,721 |   |   |   | 24,296,154 |   |

| (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 EndedJune                30, 2006                                    |   | Insurance |      |   | PremiumFinance |   |       | Other                (1) |   |   | Total     |   |
|------------------------------------------------------------------------------------------------|--------|-----------|-----------|--------|----------------|--------|------------|--------------------------|--------|--------|-----------|--------|
|                                                                                           |   |      |      |   |           |   |       |                     |   |   |      |   |
| Revenues                from external    customers                         |   | $         | 3,753,230 |   |           | $      | 2,146,701  |                     |   | $      | -         |   |   | $ | 5,899,931 |   |
| Interest                income                                                                 |   |      | 2,172     |   |           |   | -          |                     |   |   | 110       |   |   |   | 2,282 |   |
| Interest                income –notes      receivable      |   |      | -         |   |           |   | -          |                     |   |   | 534,247   |   |   |   | 534,247 |   |
| Interest                expense                                                                |   |      | 46,619    |   |           |   | 407,550    |                     |   |   | 227,545   |   |   |   | 681,714 |   |
| Depreciation                and    amortization                            |   |      | 110,492   |   |           |   | 93,342     |                     |   |   | 20,787    |   |   |   | 224,621 |   |
| Segment                profit (loss)    before                income taxes |   |      | 750,450   |   |           |   | 410,431    |                     |   |   | (481,558  | )      |   |   | 679,323 |   |
| Segment                profit (loss)                                                           |   |      | 450,270   |   |           |   | 246,259    |                     |   |   | (288,935  | )      |   |   | 407,594 |   |
| Segment                assets                                                                  |   |      | 4,722,707 |   |           |   | 18,483,913 |                     |   |   | 3,901,497 |   |   |   | 27,083,114 |   |

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

----

| Three                Months EndedJune                30, 2007                                  |   | Insurance |      |   | PremiumFinance |   |    | Other                (1) |   |   | Total   |   |
|------------------------------------------------------------------------------------------------|--------|-----------|-----------|--------|----------------|--------|---------|--------------------------|--------|--------|---------|--------|
|                                                                                           |   |      |      |   |           |   |    |                     |   |   |    |   |
| Revenues                from external    customers                         |   | $         | 1,513,620 |   |           | $      | 851,173 |                     |   | $      | -       |   |   | $ | 2,364,793 |   |
| Interest                income                                                                 |   |      | 1,664     |   |           |   | -       |                     |   |   | 891     |   |   |   | 2,555 |   |
| Interest                income –notes     receivable            |   |      | -         |   |           |   | -       |                     |   |   | 324,299 |   |   |   | 324,299 |   |
| Interest                expense                                                                |   |      | 19,275    |   |           |   | 167,162 |                     |   |   | 107,461 |   |   |   | 293,898 |   |
| Depreciation                and    amortization                            |   |      | 56,404    |   |           |   | 25,469  |                     |   |   | 10,288  |   |   |   | 92,161 |   |
| Segment                profit (loss)    before                income taxes |   |      | 164,912   |   |           |   | 173,040 |                     |   |   | (92,025 | )      |   |   | 245,927 |   |
| Segment                profit (loss)                                                           |   |      | 90,701    |   |           |   | 95,172  |                     |   |   | (50,613 | )      |   |   | 135,260 |   |

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

| Three                Months EndedJune                30, 2006                                  |   | Insurance |      |   | PremiumFinance |   |      | Other                (1) |   |   | Total    |   |
|------------------------------------------------------------------------------------------------|--------|-----------|-----------|--------|----------------|--------|-----------|--------------------------|--------|--------|----------|--------|
|                                                                                           |   |      |      |   |           |   |      |                     |   |   |     |   |
| Revenues                from external    customers                         |   | $         | 1,860,052 |   |           | $      | 1,172,188 |                     |   | $      | -        |   |   | $ | 3,032,240 |   |
| Interest                income                                                                 |   |      | 898       |   |           |   | -         |                     |   |   | 25       |   |   |   | 923 |   |
| Interest                income –notes    receivable                  |   |      | -         |   |           |   | -         |                     |   |   | 321,955  |   |   |   | 321,955 |   |
| Interest                expense                                                                |   |      | 23,508    |   |           |   | 218,452   |                     |   |   | 140,034  |   |   |   | 381,994 |   |
| Depreciation                and    amortization                            |   |      | 56,465    |   |           |   | 46,357    |                     |   |   | 10,495   |   |   |   | 113,317 |   |
| Segment                profit (loss)    before                income taxes |   |      | 410,097   |   |           |   | 295,782   |                     |   |   | (237,740 | )      |   |   | 468,139 |   |
| Segment                profit (loss)                                                           |   |      | 245,988   |   |           |   | 177,469   |                     |   |   | (142,844 | )      |   |   | 280,814 |   |

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

| 4.   | Employee                Stock Compensation |
|----------------|--------------------------------------------|

----

|     Stock                Options                 |   | Number                of Shares |    |   | Weighted                Average Exercise Price per Share |   |   | Weighted                Average Remaining Contractual Term |   |   | Aggregate                Intrinsic Value |   |
|----------------------------------------------------------------------|--------|---------------------------------|---------|--------|----------------------------------------------------------|--------|--------|------------------------------------------------------------|--------|--------|------------------------------------------|--------|
| Outstanding                at January 1, 2007                        |   |                            | 193,300 |   |                                                     | $      | 2.09   |                                                       |   |   | -                                        |   |   |   | - |   |
| Granted                                                              |   |                            | -       |   |                                                     |   | -      |                                                       |   |   | -                                        |   |   |   | - |   |
| Exercised                                                            |   |                            | (74,500 | )      |                                                     | $      | 1.51   |                                                       |   |   | -                                        |   |   |   | - |   |
| Forfeited/expired                                                    |   |                            | (39,500 | )      |                                                     | $      | 1.53   |                                                       |   |   | -                                        |   |   |   | - |   |
| Outstanding                atJune                30, 2007            |   |                            | 79,300  |   |                                                     | $      | 3.29   |                                                       |   |   | 2.44                                     |   |   | $ | 19,660 |   |
| Vested                and Exercisableat                June 30, 2007 |   |                            | 70,369  |   |                                                     | $      | 3.62   |                                                       |   |   | 1.75                                     |   |   | $ | 14,035 |   |

----

| 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 conversion of mandatorily redeemable preferred                shares.  The computation of diluted earnings per share excludes                those options and warrants with an exercise price in excess of the                average                market price of our common shares during the periods                presented.  The inclusion of such options and warrants in the                computation of diluted earnings per share would have been                anti-dilutive.  The number of excluded options and warrants were                149,800 for the three and six months ended June 30, 2007 and 158,000                for                the three and six months ended June 30,                2006. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                                    |   | Six                Months EndedJune                  30, |      |   | Three                Months EndedJune                  30, |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|-----------|--------|------------------------------------------------------------|--------|
|                                                                                                                                                    |   | 2007                                                     |      |   | 2006                                                       |   |   | 2007 |   |   | 2006 |   |
|                                                                                                                                                    |   |                                                     |      |   |                                                       |   |   |   |   |   |   |   |
| Weighted                Average Number of Shares Outstanding                                                                                            |   |                                                     | 2,954,538 |   |                                                       |   | 2,881,466 |   |   |   | 2,967,442 |   |   |   | 2,896,024 |   |
| Effect                of Dilutive Securities, Common Share     Equivalents                                                     |   |                                                     | 329,558   |   |                                                       |   | 362,380 |   |   |   | 317,081 |   |   |   | 352,644 |   |
| Weighted                Average Number of Shares Outstanding,     used                for computing diluted earnings per share |   |                                                     | 3,284,096 |   |                                                       |   | 3,243,846 |   |   |   | 3,284,523 |   |   |   | 3,248,668 |   |

|                                                                                                                                  |   | Six                Months EndedJune                  30, |    |   | Three                Months EndedJune                  30, |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|---------|--------|------------------------------------------------------------|--------|
|                                                                                                                                  |   | 2007                                                     |    |   | 2006                                                       |   |   | 2007 |   |   | 2006 |   |
|                                                                                                                                  |   |                                                     |    |   |                                                       |   |   |   |   |   |   |   |
| Net                Income                                                                                                             |   | $                                                        | 224,054 |   |                                                       | $      | 407,594 |   |   | $ | 135,260 |   |   | $ | 280,814 |   |
| Interest                Expense on Dilutive Convertible     Preferred                Shares                  |   |                                                     | 19,500  |   |                                                       |   | 19,500 |   |   |   | 9,750 |   |   |   | 9,750 |   |
| Net                Income Available to Common Shareholders     for                Diluted Earnings Per Share |   | $                                                        | 243,554 |   |                                                       | $      | 427,094 |   |   | $ | 145,010 |   |   | $ | 290,564 |   |

| 6.   | Extension                of Maturity Date of Subordinated                Debt |
|----------------|-------------------------------------------------------------------------------|

----

| 7.   | Exchange                of Preferred Shares |
|----------------|---------------------------------------------|

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

***Overview***

----

***Critical      Accounting Policies***

***Commission      and fee income***

***Finance      income, fees and receivables***

----

***Allowance      for finance receivable losses***

***Goodwill      and intangible assets***

***Stock-based      compensation***

***Income      Taxes***

----

***Results      of Operations***

*Six      Months ended June 30, 2007 compared to Six Months ended June 30,      2006*

----

*Three      Months ended June 30, 2007 compared to Three Months ended June 30,      2006*

----

***Liquidity      and Capital Resources***

| ·   | Net                cash provided by operating activities during the six months ended                June 30,                2007 was $162,383 primarily due to the following:  (i) a                decrease in accounts receivable of $432,737 offset by (ii) the accretion                of discount on notes receivable of $493,902.  The decrease in                accounts receivable is primarily the result of a January 2007 payment                of a                revenue accrual from an insurance company, which did not continue                in 2007                and the conversion of certain amounts from franchisees into notes                receivable. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Though                fluctuations in our premium finance business impact our cash position                and                daily operations, our cash flows from operating activities do not                reflect                changes in the premium finance contract receivables or borrowing                under our                revolving credit facility associated with that business. Changes                in the                premium finance contract receivables are considered investing activities                as they include the making and collection of loans and borrowings                under                our revolving line of credit are considered financing                activities. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Net                cash provided by investing activities during the six months ended                June 30,                2007 was $856,042 primarily due to a decrease in finance contracts                receivable of $832,527. This reduction was caused by the financing                of                fewer insurance policies in 2007 than in                2006. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Net                cash used in financing activities during the six months ended June                30,                2007 was $1,264,695 primarily due to the following: (i) payments                of                $21,541,228 on our revolving credit line with Manufacturers and Traders                Trust Company (“M&T”) for premium finance purposes, offset                by  proceeds of $20,447,842 from the revolving credit                line. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

***Commercial      Mutual Insurance Company***

***Off-Balance      Sheet Arrangements***

----

**Item      3.    CONTROLS AND      PROCEDURES**

----

| **PART                II. OTHER INFORMATION** |
|-----------------------------------------------|
|                                          |   |
| **Item                1.**                    | **LEGAL                PROCEEDINGS** |
|                                          |   |
|                                          | None |
|                                          |   |
| **Item                2.**                    | **UNREGISTERED                SALES OF EQUITY SECURITIES AND USE OF                PROCEEDS** |
|                                          |   |

**Small      Business Issuer Purchases of Equity Securities**

|    **Period**          |  **(a)****Total                Number of Shares Purchased(1)** |  **(b)****Average                Price Paid per Share** | **(c)****Total                Number of Shares Purchased as Part of Publicly  Announced Plans                or Programs** | **(d)****Maximum                Number of Shares that May Yet Be Purchased Under the Plans or                Programs** |
|---------------------------------------|---------------------------------------------------------------------|--------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------|
|                                  |                                                                |                                                         |                                                                                                                                 |                                                                                                                    |
| 4/1/07                – 4/30/07 | -                                                                   | -                                                            |   -                                                                                                                        |   -                                                                                                           |
| 5/1/07                – 5/31/07 | -                                                                   | -                                                            |   -                                                                                                                        |   -                                                                                                           |
| 6/1/07                – 6/30/07 | 4,500                                                               | $1.61                                                        |   -                                                                                                                        |   -                                                                                                           |
| **Total**                             | **4,500**                                                           | **$1.61**                                                    | **  -**                                                                                                                    | **  -**                                                                                                       |

| **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**                                                           |
|                       |                                                                   |
|                       | 3(a)                                                                   | Restated                Certificate of Incorporation1 |
|                       |                                                                   |   |
|                       | 3(b)                                                                   | Certificate                of Designation of Series A Preferred Stock2 |

----

  

  

----

|   |   |                                                                                                                                                                                                                                      |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 3(c)   | Certificate                of Designation of Series B Preferred Stock3                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                      |
|   | 3(d)   | By-laws,                as amended4                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                      |
|   | 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 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 |

----

         

  

----

**SIGNATURES**

|                                                        | **DCAP                GROUP, INC.**                                                                                                                                                                  |
|-------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  Dated:  August 13,                2007 |  By:                /s/ Barry B. Goldstein Barry                B. Goldstein President(Principal                Executive, Financialand                Accounting Officer)  |