United States Securities and Exchange Commission

Washington, D.C. 20549

FORM ~~10-KSB (Mark~~10-K

(Mark One) (x) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 ------------------------------- ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to

(x)	ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008

( )	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	FOR THE TRANSITION PERIOD FROM TO

Commission ~~file number~~ File Number 0-1665 ~~EXTECH CORPORATION (Name~~

DCAP GROUP, INC.

(Exact name of ~~small business issuer~~registrant as specified in its charter) Delaware 36-2476480 (State or other jurisdiction of (I.R.S Employer incorporation or organization) Identification No.) 90 Merrick Avenue, East Meadow, New York 11554 (Address of principal executive offices) (Zip Code) Issuer's telephone number (516) 794-6300

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

1158 Broadway, Hewlett, New York	11557
(Address of principal executive offices)	(Zip Code)

(516) 374-7600

(Registrant’s telephone number, including area code)

Securities registered ~~under~~pursuant to Section 12(b) of the ~~Exchange~~ Act: ~~Title of each class Name of each exchange on which registered none~~

Title of each class	Name of each exchange on which registered
Common Stock	NASDAQ

Securities registered ~~under~~pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes __ No X

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange ~~Act: Common Stock, $.01 par value (Title of class) Check~~Act. Yes __ No X

Indicate by check mark whether the ~~issuer~~registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the ~~past~~preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ~~. Check~~__

Indicate by check mark if disclosure of delinquent filers ~~in response~~pursuant to Item 405 of Regulation ~~S-B~~S-K is not contained ~~in this form,~~herein, and ~~no disclosure~~ will not be contained, to the best of ~~registrant's~~registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form ~~10-KSB~~10-K or any amendment to this Form ~~10-KSB.( ) State issuer's revenues for its most recent fiscal year: $1,082,038 State~~10-K. __

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer”” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer __	Accelerated filer __

Non-accelerated __ (Do not check if a smaller reporting company)	Smaller reporting company X

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes __ No X

As of June 30, 2008, the aggregate market value of the ~~voting~~registrant’s common stock held by non-affiliates ~~computed~~of the registrant was $1,155,744 based on the closing sale price as reported on the NASDAQ Capital Market. As of March 20, 2009, there were 2,972,746 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

INDEX

		Page No.
Forward-Looking Statements		1

PART I

Item 1.	Business.	2

Item 1A.	Risk Factors.	9

Item 1B.	Unresolved Staff Comments.	9

Item 2.	Properties.	10

Item 3.	Legal Proceedings.	10

Item 4.	Submission of Matters to a Vote of Security Holders.	10

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	11

Item 6.	Selected Financial Data.	12

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	12

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	27

Item 8.	Financial Statements and Supplementary Data.	27

Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.	27

Item 9A.	Controls and Procedures.	27

Item 9B.	Other Information.	29

PART III

Item 10.	Directors, Executive Officers and Corporate Governance.	30

Item 11.	Executive Compensation.	33

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	35

Item 13.	Certain Relationships and Related Transactions, and Director Independence.	37

Item 14.	Principal Accountant Fees and Services.	40

PART IV

Item 15.	Exhibits and Financial Statement Schedules.	41

Signatures

PART I

Forward-Looking Statements

This Annual 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 Annual 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 ~~reference~~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 7 of this Annual Report 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.

ITEM 1. BUSINESS.

(a) Business Development

General

Our continuing operations consist of franchising storefront insurance agencies under the DCAP brand name and earning placement fees based upon premium finance contracts purchased, assumed and serviced by the purchaser of our loan portfolio on February 1, 2008.

Our discontinued operations consist of the ownership and operation of storefront insurance agencies under the DCAP, Barry Scott, Atlantic Insurance and Accurate Agency brand names and premium financing of insurance policies for such agency clients as well as clients of non-affiliated entities.

In December 2008, due to declining revenues and profits, we made a decision to restructure our network of retail offices (the “Retail Business”). The plan of restructuring called for the closing of seven of our least profitable locations during December 2008 and the sale of the remaining 19 Retail Business locations. On March 30, 2009, as discussed below under “Recent Developments,” an asset purchase agreement (the “Purchase Agreement”) was fully executed pursuant to which we agreed to sell substantially all of the assets, including the book of business, of the 16 remaining Retail Business locations that we own in New York State (the “Assets”). The closing of the sale of the Assets is subject to a number of conditions. We are also seeking to sell the three remaining Retail Business locations that we own in Pennsylvania. As a result of the restructuring in December 2008, and the Purchase Agreement on March 30, 2009, our Retail Business has been reclassified as discontinued operations and prior periods have been restated.

On February 1, 2008, we sold our outstanding premium finance loan portfolio. As a result of the sale, our business of internally financing insurance contracts has been reclassified as discontinued operations.

See “Business - Commercial Mutual Insurance Company” below for a discussion of the status of our efforts to acquire ownership of Commercial Mutual Insurance Company (“Commercial Mutual”), a New York property and casualty insurance company.

Recent Developments

The following developments have occurred since January 1, 2009:

On March 30, 2009, an asset purchase agreement (the “Purchase Agreement”) was fully executed pursuant to which our wholly-owned subsidiaries, Barry Scott Agency, Inc. and DCAP Accurate, Inc., agreed to sell substantially all of their assets, including the book of business, of the 16 Retail Business locations that we own in New York State (the “Assets”). The closing of the sale of the Assets is subject to a number of conditions. The purchase price for the Assets is approximately $2,337,000, of which approximately $1,786,000 is to be paid to us at closing, and the remainder of the purchase price is to be satisfied by the delivery of promissory notes in the aggregate principal amount of $551,000. As additional consideration, we will be entitled to receive through September 2010 an amount equal to 60% of the net commissions derived from the book of business of six New York retail locations that were closed during 2008.

Developments During 2008

On February 1, 2008, our wholly-owned subsidiary, Payments Inc., sold its outstanding premium finance loan portfolio. The purchase price for the net loan portfolio was approximately $11,845,000, of which approximately $268,000 was paid to Payments Inc. The remainder of the purchase price was satisfied by the assumption of liabilities, including the satisfaction of Payments Inc.’s premium finance revolving credit line obligation to Manufacturers and Traders Trust Company (“M&T”). As additional consideration, Payments Inc. received an amount based upon the net earnings generated by the loan portfolio as it was collected. The purchaser of the portfolio also agreed that, during the five year period ending January 31, 2013 (subject to automatic renewal for successive two year terms under certain circumstances), it will purchase, assume and service all eligible premium finance contracts originated by Payments Inc. in the states of New York and Pennsylvania. In connection with such purchases, Payments Inc. will be entitled to receive a fee generally equal to a percentage of the amount financed.

In April 2008, the holder of our Series B preferred shares exchanged such shares for an equal number of Series C preferred shares. The Series C preferred shares provided for dividends at the rate of 10% per annum (as compared to 5% per annum for the Series B preferred shares) and an outside mandatory redemption date of April 30, 2009 (as compared to April 30, 2008 for the Series B preferred shares). Effective August 23, 2008, the outside mandatory redemption date for the preferred shares was further extended to July 31, 2009 through the issuance of Series D preferred shares in exchange for the Series C preferred shares. The outside mandatory redemption date was previously extended in March 2007 from April 30, 2007 to April 30, 2008. See Item 13 of this Annual Report.

In August 2008, the holders of $1,500,000 outstanding principal amount of notes payable (the “Notes Payable”) agreed to extend the maturity date of the debt from September 30, 2008 to the earlier of July 10, 2009 or 90 days following the conversion of Commercial Mutual to a stock property and casualty insurance company and the issuance to us of a controlling interest in Commercial Mutual (subject to acceleration under certain circumstances). In exchange for this extension, the holders are entitled to receive an aggregate incentive payment equal to $10,000 times the number of months (or partial months) the debt is outstanding after September 30, 2008 through the maturity date. If a prepayment of principal reduces the debt below $1,500,000, the incentive payment for all subsequent months will be reduced in proportion to any such reduction to the debt. The aggregate incentive payment is due upon full repayment of the debt. The maturity date of the Notes Payable was previously extended during 2007 from September 30, 2007 to September 30, 2008. See Items 1(b), 7 and 13 of this Annual Report.

·	On October 23, 2008, Michael R. Feinsod became a member of the board of directors.

·	On December 5, 2008, Morton L. Certilman retired from the board of directors.

·	In December 2008, we entered into a plan to restructure our Retail Business. The plan of restructuring called for the closing of seven of our least profitable locations during December 2008 and the sale of the remaining 19 Retail Business locations. See Item 1(b) of this Annual Report.

Developments During 2007

In March 2007, Commercial Mutual Insurance Company’s Board of Directors adopted a resolution to convert Commercial Mutual from an advance premium insurance company to a stock property and casualty insurance company. We hold surplus notes of Commercial Mutual in the aggregate principal amount of $3,750,000. We purchased such surplus notes in January 2006. Based upon the amount payable on the surplus notes and the statutory surplus of Commercial Mutual, the plan of conversion provides that, in the event of a conversion by Commercial Mutual into a stock corporation, in exchange for our relinquishing our rights to any unpaid principal and interest under the surplus notes, we would receive 100% of the stock of Commercial Mutual. See Items 1(b), 7 and 13 of this Annual Report.

(b)

Business

General

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

Currently there are 52 store locations owned or franchised by us of which 49 are located in New York State. In the New York metropolitan area, there are 33 DCAP franchises. There are also 12 Barry Scott locations and four Accurate Agency locations outside the New York metropolitan area (all located in central and western New York State). There are three Atlantic Insurance locations in eastern Pennsylvania. All of the Barry Scott, Atlantic Insurance and Accurate Agency locations (the “Retail Business”) are wholly-owned by us. In December 2008, we made a decision to restructure our Retail Business. The plan of restructuring called for the closing of seven of our least profitable locations during December 2008 and sale of the remaining 19 Retail Business locations. As a result of the restructuring, our Retail Business has been reclassified as discontinued operations and prior periods have been restated. See Item 1(a) for a discussion of an agreement to sell our remaining New York State locations and the contemplated sale of our Pennsylvania locations.

Through our wholly-owned subsidiary, Payments Inc., until February 1, 2008, we provided insurance premium financing services to our DCAP, Barry Scott, Atlantic Insurance and Accurate Agency locations as well as non-affiliated insurance agencies. Payments Inc. is licensed as an insurance premium finance agency in the states of New York and Pennsylvania. Effective February 1, 2008, Payments Inc. sold its outstanding premium finance loan portfolio. As a result of the sale, our business of internally financing insurance contracts has been reclassified as discontinued operations. Payments Inc. now receives revenues through placement fees rather than through the internally financing of contracts.

We were incorporated in 1961 and assumed our current name in 1999. In the event the Commercial Mutual conversion occurs, we will change our name to “Kingstone Companies, Inc.” We obtained stockholder approval for such name change in November 2008.

Our executive offices are located at 1158 Broadway, Hewlett, New York 11557; our telephone number is (516) 374-7600 and our fax number is (516) 295-7216.

Retail Business Discontinued Operations

Our storefront agencies deal primarily with the insurance needs of individuals. In the states in which we operate, all automobile owners must secure liability insurance coverage. We provide various choices to the insured depending on market conditions.

Our agencies currently operate under the DCAP, Barry Scott, Atlantic Insurance and Accurate Agency brand names. The stores receive commissions from insurance companies for their services. We do not currently serve as an insurance company and therefore do not assume underwriting risks; however, as discussed below under “Commercial Mutual Insurance Company,” Commercial Mutual is seeking to convert from an advance premium insurance company to a stock property and casualty insurance company. Based upon the amount payable on the surplus notes and the statutory surplus of Commercial Mutual, the plan of conversion provides that, in the event of a conversion by Commercial Mutual into a stock corporation, in exchange for our relinquishing our rights to any unpaid principal and interest under the surplus notes, we would receive 100% of the stock of Commercial Mutual.

In addition to automobile insurance, in our Retail Business discontinued operations, we offer:

·property and casualty insurance for motorcycles, boats and livery/taxis

·life insurance

·business insurance

·homeowner’s insurance

·excess coverage

As a complement to our Retail Business discontinued operations, we offer automobile club services for roadside emergencies. We offer memberships for such services, and we make arrangements with towing dispatch companies to fulfill service call requirements.

Franchises

Currently there are 33 DCAP franchises located in the New York metropolitan area. Franchisees currently pay us an initial franchise fee of $25,000 to offer insurance products under the DCAP name. Franchisees are obligated to also pay us monthly fees during the term of the franchise agreement, generally commencing after a six to twelve month period from the date on which the ~~stock was sold, or~~storefront opens for business. Monthly fees payable by franchisees constituted approximately 45% of our revenues from continuing operations during the ~~average bid~~year ended December 31, 2008. We received no initial franchise fees in 2008.

A number of our franchise locations provide income tax return preparation services. The tax return preparation service allows them to offer an additional service to the walk-in customers who comprise the bulk of their customer base, as well as to existing customers.

Structure and ~~asked prices~~Operations

As stated above, we currently have 52 offices, of which 33 are franchises and 19 are wholly-owned. Our franchises consist of both “conversion” and “startup” operations. In a conversion operation, an existing insurance brokerage with an established business becomes a DCAP office. In a startup operation, an entrepreneur begins operations as a DCAP office. Each franchise is managed by, and is under the supervision of the franchisee.

In order to promote consistency and efficiency, and as a service to our franchisees, we offer training to office managers. Our training program covers:

·	marketing, sales and underwriting

·	office and logistics

·	computer information

We also provide support services to stores such ~~stock,~~as:

·	assistance with regard to the hiring of employees

·	assistance with regard to the writing of local advertising

·	advice regarding potential carriers for certain customers

We also manage the cooperative advertising program in which all of our franchisees participate.

In addition to the above services, we provide to all of our franchisees a direct business relationship with nationally-known and local insurance carriers that may otherwise be beyond the reach of small, privately-owned retail insurance operations.

We also offer our franchisees the use of an agency software system, AMS 360, in connection with the management and operations of their retail insurance stores.

Internet

Our website (www.dcapagents.com) is a secure site for use by personnel of our company-owned stores as ~~of a specified date~~well as our franchisees. Incorporated within the ~~past 60 days: $1,064,668~~website are tools for managing the location’s business, including comparative quoting, lead generation and tracking.

Policy placement generates commission revenue. Since policy sales can be measured as of March 21, 1997 (ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS) Check whether the issuer has filed all documents and reportsthey relate 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 REGISTRANTS) State the number of ~~shares outstanding of each~~inquiries or leads, increased marketing will result in more leads. Our website, www.dcapinsurance.com, offers the prospective insured the opportunity to provide our company-owned stores as well as our franchisees the needed information in the very same manner as provided face to face or over the telephone. With the information provided, we and our franchisees can give multiple quotes to the prospect as well as track the status of the ~~issuer's classes of common equity, as~~lead from the moment it is received.

Premium Financing

Customers who purchase insurance policies are often unable to pay the premium in a lump sum and, therefore, require extended payment terms. Premium finance involves making a loan to the customer that is secured by the unearned portion of the ~~latest practicable date: 5,591,367 shares outstanding as of March 21, 1997 DOCUMENTS INCORPORATED BY REFERENCE None~~ ~~PART I ITEM 1. DESCRIPTION OF BUSINESS (a) Business Development (i) International Airport Hotel EXTECH Corporation (the "Company" or "EXTECH"), through a~~insurance premiums being financed and held by the insurance carrier. Our wholly-owned subsidiary, ~~IAH,~~Payments Inc. ~~("IAH")~~, ~~operates~~is licensed as a premium finance agency in the ~~International Airport Hotel~~states of New York and Pennsylvania.

Prior to February 1, 2008, Payments Inc. provided premium financing in ~~San Juan, Puerto Rico (the "Hotel").~~connection with the obtaining of insurance policies. Effective February 1, 2008, Payments Inc. sold its outstanding premium finance loan portfolio. The ~~Hotel is located on the site~~purchaser of the ~~San Juan International Airport (the "Airport")~~portfolio has agreed that, during the five year period following the closing (subject to automatic renewal for successive two year terms under certain circumstances), it will purchase, assume and ~~occupies~~service all eligible premium finance contracts originated by Payments in the ~~third~~states of New York and ~~fifth floors~~Pennsylvania. In connection with such purchases, Payments will be entitled to receive a fee generally equal to a percentage of the main terminal building. In addition to its 57 guest rooms, the Hotel has a lobby area. The Hotel caters generally to commercial and tourist travelers in transit. IAH also operates a video game room on the terminal levelamount financed. Our premium financing business currently consists of the Airport. Reference is also made to Item 6 hereof for additional information regarding the Hotel. The Hotel is marketed through brochures, local advertising and in-airport advertising. Itsplacement fees that Payments will earn from placing contracts. Placement fees earned from placing contracts constituted approximately 47% of our revenues from continuing operations ~~are highly seasonal, with the disproportionate share of its revenues being generated~~ during the ~~first several months~~year ended December 31, 2008.

The regulatory framework under which our premium finance procedures are established is generally set forth in the premium finance statutes of the ~~calendar year. Approximately 27%~~states in which we operate. Among other restrictions, the interest rate that may be charged to the insureds for financing their premiums is limited by these state statutes. See “Government Regulation.”

Commercial Mutual Insurance Company

In March 2007, Commercial Mutual Insurance Company’s Board of Directors approved a resolution to convert Commercial Mutual from an advance premium insurance company to a stock property and casualty insurance company pursuant to Section 7307 of the total room sales for the Hotel for 1996 were attributable to one customer. The Hotel is the only hotel actually located on the site of the Airport. As such, it has little direct competition for the tourist trade or commercial travelers seeking only sleeping accommodations at the Airport. The Puerto Rico Ports Authority (the "Ports Authority"), the owner of the Hotel, had authorized the construction of an additional hotel in the parking lot of the Airport; however, the Ports AuthorityNew York Insurance Law. Commercial Mutual has advised ~~IAH~~us that it has ~~abandoned its plan~~obtained permission from the Superintendent of Insurance of the State of New York (the “Superintendent of Insurance”) to ~~construct such hotel~~proceed with the conversion process (subject to certain conditions as discussed below).

We hold two surplus notes issued by Commercial Mutual in the aggregate principal amount of $3,750,000. Previously earned but unpaid interest on the notes as of December 31, 2008 was approximately $2,186,000. The surplus notes are past due and ~~instead has determined to upgrade and expand the Hotel. No assurance can be given, however, that an additional hotel or hotels will not be developed~~provide for interest at the ~~site~~prime rate or 8.5% per annum, whichever is less. Payments of ~~or near,~~principal and interest on the ~~Airport, in~~surplus notes may only be made out of the surplus of Commercial Mutual and require the approval of the Insurance Department of the State of New York (the “Insurance Department”). As of December 31, 2008, the statutory surplus of Commercial Mutual, as reported to the Insurance Department, was approximately $7,748,000.

The conversion by Commercial Mutual to a stock property and casualty insurance company is subject to a number of conditions, including the approval of the plan of conversion, which ~~case IAH could encounter significant competition~~was filed with the Superintendent of Insurance on April 25, 2008, by both the Superintendent of Insurance and Commercial Mutual’s policyholders. As part of the approval process, the Superintendent of Insurance conducted a five year examination of Commercial Mutual as of December 31, 2006 and had an appraisal performed with respect to the ~~operations~~fair market value of Commercial Mutual as of such date. We, as the holder of the ~~Hotel. On July 22, 1988, IAH entered~~Commercial Mutual surplus notes, at our option, would be able to exchange the surplus notes for an equitable share of the securities or other consideration, or both, of the corporation into which Commercial Mutual would be converted. Based upon the amount payable on the surplus notes and the statutory surplus of Commercial Mutual, the plan of conversion provides that, in the event of a conversion by Commercial Mutual into a ~~Lease Agreement with~~stock corporation, in exchange for our relinquishing our rights to any unpaid principal and interest under the ~~Ports Authority pursuant~~surplus notes, we would receive 100% of the stock of Commercial Mutual. Upon the effectiveness of the conversion, Commercial Mutual’s name will change to ~~which the Ports Authority granted IAH a lease~~“Kingstone Insurance Company.” We have obtained stockholder approval of an amendment to ~~operate the Hotel for five years until June 30, 1993, plus, at the option~~our certificate of ~~IAH, an additional five year term~~incorporation to ~~end June 30, 1998 (subject~~change our name to agreement as to the rental amount payable, which the parties agreed to negotiate in good faith). In 1992, in accordance with the Lease Agreement, IAH exercised its right for a five year extension of its lease. At the time, the Ports Authority was uncertain as to whether it wished to build a new hotel“Kingstone Companies, Inc.” Such name change would only take place in the parking lot of the Airport or upgrade the existing Hotel (located in the Airport terminal) and, therefore, requested that IAH accept an 18 month extension of the then existing term. IAH agreed to an 18 month extension and signed a supplemental lease agreement with the Ports Authority in May 1992 extending the lease term to December 31, 1995. IAH is of the belief that, pursuant to the supplemental lease agreement, it retained the option to continue the lease for a period of five years to December 31, 2000. In July 1993, the Assistant Director of Operations of the Ports Authority forwarded to IAH a letter containing the terms of a proposed ten year lease extension which IAH approved, signed and returned to the Ports Authority. Although the letter setting forth the terms of the extension agreement with IAH does not make the Ports Authority's approval conditional upon the approval of its Board of Directors, the Ports Authority has taken such position and, since Board of Directors approval was not obtained, the Ports Authority takes the positionevent that the ~~extension is not~~conversion occurs and we obtain a controlling interest in effect. IAH is of the belief that a ten year agreement has been entered into between IAH and the Ports Authority pursuant to the foregoing or that, alternatively, it exercised its right to extend the term of the lease to December 31, 2000. Based upon IAH's refusal to acknowledge that, effective January 1, 1996, it occupied the Hotel on a month-to-month basis, in February 1996, the Ports Authority requested that IAH vacate, surrender and deliver the premises by February 29, 1996. Following the receipt of such request, IAH brought an action in the Superior Court of San Juan, Puerto Rico for declaratory judgment and possessory injunction against the Ports Authority with respect to the Hotel. The action seeks a declaratory judgment that, among other alternatives, IAH exercised an option with respect to its lease for the Hotel for an extension of the term of five years commencing on January 1, 1996 or that the Ports Authority executed a new lease agreement for a ten year period commencing on such date. (ii) Pipe Harness Clamp The Company holds a patent for a specialized clamping device (the "Pipe Harness Clamp") designed to connect principally underground pipe lines of similar and dissimilar materials. In July 1991, the Company and an unrelated third party (the "Licensee") entered into a License and Royalty Agreement (the "License Agreement") pursuant to which the Licensee was granted the exclusive right to manufacture, use, market and sell (either directly or on the Licensee's behalf) the Pipe Harness Clamp. The License Agreement provides that, among other matters, the Licensee will pay royalty payments for the license of the Pipe Harness Clamp in an amount equal to 5% of Net Sales (as defined in the License Agreement) of the Pipe Harness Clamp until such time as the aggregate amount of the royalty payments total $1,000,000 and thereafter an amount equal to 2.5% of Net Sales of the Pipe Harness Clamp (the "Net Sales Royalty"). The License Agreement also provides that the Licensee will pay a percentage of royalty payments that are payable to the Licensee pursuant to a certain License and Technical Assistance Agreement (the "Technical Assistance Agreement"). The Company is to receive, for each twelve month period that the Technical Assistance Agreement is in effect, 23.68% of all amounts in excess of $100,000 received by the Licensee in accordance with the terms of the Technical Assistance Agreement (the "Technical Assistance Royalty"), the aggregate of which payments to the Company shall not exceed $1,480,000. Since inception of the License Agreement, the Company had received an aggregate of approximately $179,891 in Technical Assistance Royalty payments pursuant to the License Agreement (of which approximately $109,891 was accrued during 1996), but had received no Net Sales Royalty payments.Kingstone Insurance Company. No assurances can be given ~~regarding~~that the ~~commercial marketability~~conversion will occur or as to the timing or the terms of the ~~Pipe Harness Clamp. 2~~ ~~(iii) Robeson Industries Corp. In February 1993, EXTECH entered into a Subscription~~conversion.

Competition

We and ~~Stock Purchase Agreement (the "Subscription Agreement")~~our franchisees compete with ~~Robeson Industries Corp. ("Robeson") pursuant to which the Company agreed to purchase from Robeson, subject to the conditions set forth therein, (i) approximately 15% of the issued~~numerous insurance agents and ~~outstanding shares~~brokers in our market. The amount of capital ~~stock of Robeson~~required to commence operations is generally small and ~~(ii) all of~~ the ~~outstanding shares of capital stock of Robeson's wholly-owned Hong Kong subsidiary, Robeson Industries Hong Kong Ltd. ("Hong Kong") (the "Hong Kong Shares"). In May 1993,~~only material barrier to entry is the ~~Company advised Robeson that it was terminating~~ability to obtain the Subscription Agreement due to the nonfulfillment of certain of the conditions to the obligation of EXTECH to consummate the transactions contemplated thereby. The Company also made demand upon Robeson for repayment of the principal amount of $320,000 loaned by the Company during 1992required licenses and 1993, together with interest thereon, as well as reimbursement of expenses incurred by the Company in connection with the Subscription Agreement. Subsequently, in May 1993, Robeson filed a petition for bankruptcy under Chapter 11 of the Bankruptcy Act with the United States Bankruptcy Court for the District of New Jersey (the "Court"). In September 1993, the Company filed a proof of claim in such proceedingappointments as a secured creditor to recover the approximate amount of $534,000. Pursuant to a Plan of Reorganization of Robeson (the "Plan") approved by the Court, in September 1994, in consideration of the $320,000 in loans made by the Company to Robesonbroker or agent for insurance carriers. There is no price competition between us or our franchisees and other ~~recoverable expenses,~~agents and brokers. All must sell a particular carrier’s policies at exactly the ~~reorganized Robeson issued~~same price; however, we and our franchisees may be able to offer a different payment plan through the ~~Company a promissory note (the "Note")~~placement of premium financing.

In recent years, extensive competition has come from direct sales entities, such as Progressive Direct, Esurance and GEICO Insurance, who have concentrated their advertising efforts on television and radio. In addition, the Internet sales effort of some competitors has shown promise. Further, legislation that allows banks to offer insurance to their customers has taken market share from the storefront insurance operators.

Government Regulation

Our premium finance subsidiary, Payments Inc., is regulated by governmental agencies in the ~~principal amount~~states in which it conducts business. The regulations, which generally are designed to protect the interests of ~~$385,000.~~ policyholders who elect to finance their insurance premiums, vary by jurisdiction, but usually, among other matters, involve:

·	regulating the interest rates, fees and service charges we may charge our customers

·	imposing minimum capital requirements for our premium finance subsidiary or requiring surety bonds in addition to or as an alternative to such capital requirements

·	governing the form and content of our financing agreements

·	prescribing minimum notice and cure periods before we may cancel a customer’s policy for non-payment under the terms of the financing agreement

·	prescribing timing and notice procedures for collecting unearned premium from the insurance company, applying the unearned premium to our customer’s premium finance account, and, if applicable, returning any refund due to our customer

·	requiring our premium finance company to qualify for and obtain a license and to renew the license each year

·	conducting periodic financial and market conduct examinations and investigations of our premium finance company and its operations

·	requiring prior notice to the regulating agency of any change of control of our premium finance company

The ~~Note provided for~~offering of franchises is regulated by both the ~~payment of interest at the rate of 8% per annum~~federal government and the repayment of principal in 48 consecutive monthly installments of varying amounts. Pursuant to the Plan, payment of the Note was secured by a pledge of the Hong Kong Shares. In addition, pursuant to the Plan, the Company received a nominal minority equity interest in Robeson. The first three payments under the Note were received by the Company in October, November and December 1994. Effective January 1995, Robeson ceased making payments under the Note. In March 1995, the Company demanded full payment of the Note, foreclosed its security interest with respect to the Hong Kong Shares and purchased such shares at an auction sale. In September 1995, the Company agreed to cancel the Note in consideration for the issuance by Robeson of a new promissory note in the principal amount of $125,000 (the "New Note"). The New Note provides for interest at the rate of 8% per annum and is payable in 27 consecutive monthly installments of $5,000. The Company has received monthly installments sporadically under the New Note, but not on a current basis. 3 (iv) Phone America International, Inc. In February 1996, the Company announced that it had entered into a non-binding letter of intent to acquire Phone America International, Inc. ("Phone America"), an interexchange telecommunications carrier engaged in the design, development and marketing of prepaid telephone calling cards and other telephone products. Concurrently with the execution of the letter of intent, the Company loaned $50,000 to Transcends Telecom Corporation ("Transcends"), a wholly-owned subsidiary of Phone America, for working capital purposes. The note evidencing the loan was payable on or after August 26, 1996 upon 30 days notice. Payment of the principal amount of the note, together with interest at the rate of 10% per annum, was secured by a pledge of certain shares of Phone America Common Stock as well as by a lien on accounts receivable of Transcends. Subsequent to February 1996, the Company decided not to consummate the foregoing transaction due to Phone America's excessive funding requirements. Thereafter, in November 1996, following the discontinuance of operations by Transcends and Phone America, Transcends defaulted on its note and the Company foreclosed on its security interest in Transcend's accounts receivable. The Company obtained a peaceful surrender of the accounts receivable and has commenced collection proceedings against the account debtors. However, no assurances can be given regarding the satisfaction of the full amount due to the Company under the note. (v) Other Business Opportunities During 1996 and 1997, the Company explored a number of business opportunities in connection with the acquisition and/or operation of sports franchises and negotiated acquisition agreements in connection therewith. Although no transactions have been consummated to date, the Company is continuing to investigate opportunities in this industry. (vi) General The Company was incorporated in the State of ~~Delaware on August 25, 1961. The Company's~~New York, in which our franchisees operate.

Employees

We currently employ five persons in our continuing operations and 46 persons in our discontinued operations. We believe that our relationship with our employees is good.

ITEM 1A. RISK FACTORS.

Not applicable.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not applicable.

ITEM 2. PROPERTIES.

Our principal executive offices and the administrative offices of Payments Inc. are located at 1158 Broadway, Hewlett, New York. Our central processing offices are located at ~~90 Merrick~~1762 Central Avenue, ~~East Meadow,~~Albany, New ~~York 11554,~~York.

Our 12 Barry Scott offices and ~~its telephone number at such office is (516) 794-6300. 4~~ (b) Business of Issuer (i) International Airport Hotel Reference is made to Items 1(a)(i) and 2 hereof. (ii) Pipe Harness Clamp Reference is made to Item 1(a)(ii) hereof. (iii) Other Business Opportunities Reference is made to Item 1(a)(v) hereof. (iv) Number of Employees As of December 31, 1996, the Company and its subsidiaries employed 17 persons. ITEM 2. DESCRIPTION OF PROPERTY The executivefour Accurate Agency offices ~~of the Company~~ are located ~~at 90 Merrick Avenue, East Meadow,~~in upstate New ~~York where approximately 200 square feet of space~~York. Our three Atlantic Insurance offices are ~~occupied on a month-to-month basis at a monthly~~located in eastern Pennsylvania.

Our 19 wholly-owned storefront locations and our executive and other offices are operated pursuant to lease agreements that expire from time to time through 2015. The current yearly aggregate base rental ~~of $500. The Hotel is leased by IAH from the Ports Authority. The annual rental obligation~~ for the ~~Hotel equals the greater~~offices is approximately $414,000.

See Item 1 of $169,400 or 20% of annual gross revenues, as defined. Total rent expense under the lease amounted to $189,610 for 1996 as compared to $191,335 for 1995. Reference is made to Item 1(a)(i) hereofthis Annual Report for a discussion of ~~certain pending litigation with regard to IAH's lease rights in the Hotel.~~ a contemplated sale of our Barry Scott and Accurate Agency operations.

ITEM 3. LEGAL PROCEEDINGS ~~Reference is made to Item 1(a)(i) hereof for a discussion of certain pending litigation with regard to the Hotel.~~ .

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ~~Not applicable. 5~~ .

Our Annual Meeting of Stockholders was held on November 26, 2008. The following is a listing of the votes cast for or withheld with respect to each nominee for director and a listing of the votes cast for and against, as well as abstentions and broker non-votes, with respect to the approval of an amendment to our Certificate of Incorporation to:

1. Election of Board of Directors

	Number of Shares
	For	Withheld

Barry B. Goldstein	2,519,847	160,443
Morton L. Certilman	1,097,249	939,126
Michael R. Feinsod	2,520,079	160,221
Jay M. Haft	1,351,726	939,126
David A. Lyons	2,520,039	160,251
Jack D. Seibald	2,520,089	160,211

2. Approval of amendment to Certificate of Incorporation to change our name to “Kingstone Companies, Inc.”

For	2,074,823
Against	6,137
Abstentions	167,470
Broker Non-Votes	0

PART II ~~ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (a)~~

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our common shares are quoted on The ~~Company's Common Stock is traded in the over-the-counter market on the National Association of Securities Dealers' Bulletin Board~~NASDAQ Capital Market under the symbol ~~"EXTH". The following table sets~~“DCAP.”

Set forth below are the high and low sales prices for our common shares for the periods indicated, ~~the high and low bid prices for the Company's Common Stock~~ as reported by the National Quotation Bureau, Inc.: 1996 Calendar Year High Low First Quarter $1/4 $1/16 Second Quarter 7/16 1/4 Third Quarter 7/16 3/8 Fourth Quarter 3/8 3/8 1995 Calendar Year High Low First Quarter $1/8 $1/16 Second Quarter 1/8 1/8 Third Quarter 1/8 1/16 Fourth Quarter 1/16 1/16on The ~~above quotations reflect interdealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions. (b)~~ NASDAQ Capital Market.

	High	Low
2008 Calendar Year
First Quarter	$1.75	$1.21
Second Quarter	1.67	.95
Third Quarter	1.20	.80
Fourth Quarter	.80	.25

	High	Low
2007 Calendar Year
First Quarter	$3.05	$2.33
Second Quarter	2.70	2.18
Third Quarter	2.75	1.95
Fourth Quarter	2.39	1.15

Holders

As of ~~March 21, 1997,~~April 6, 2009, there were ~~3,060~~approximately 852 record holders of ~~the Company's Common Stock. (c)~~ our common shares.

Dividends ~~The Company has neither~~

Holders of our common shares are entitled to dividends when, as and if declared ~~nor paid any cash dividends on its Common Stock during its two most recent fiscal years and the~~by our Board of Directors ~~does~~out of funds legally available. There are also currently outstanding 780 Series D preferred shares. These shares are entitled to cumulative aggregate dividends of $78,000 per annum (10% of their liquidation preference of $780,000). The Series D preferred shares are mandatorily redeemable on July 31, 2009. No dividends may be paid on our common shares unless a payment is made to the holders of the Series D preferred shares of all dividends accumulated or accrued at such time.

We have not ~~contemplate~~declared or paid any dividends in the ~~payment~~past to the holders of our common shares and do not currently anticipate declaring or paying any dividends in the foreseeable future. ~~Any decisions as~~We intend to retain earnings, if any, to finance the development and expansion of our business. Future dividend policy will be subject to the ~~future payment~~discretion of ~~dividends will depend on the earnings and financial position of the Company and such other factors as the~~our Board of Directors ~~deems relevant. (d)~~ and will be contingent upon future earnings, if any, our financial condition, capital requirements, general business conditions, and other factors. Therefore, we can give no assurance that any dividends of any kind will ever be paid to holders of our common shares.

Recent Sales of Unregistered Securities ~~Reference~~

None.

Issuer Purchases of Equity Securities

None.

ITEM 6. SELECTED FINANCIAL DATA.

Not applicable.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

Until December 2008, our continuing operations primarily consisted of the ownership and operation of 19 storefronts, including 12 Barry Scott locations, three Atlantic Insurance locations, and four Accurate Agency locations. In December 2008, due to declining revenues and profits, we made a decision to restructure our network of retail offices (the “Retail Business”). The plan of restructuring called for the closing of seven of our least profitable locations during December 2008 and the sale of the remaining 19 Retail Business locations. On March 30, 2009, an asset purchase agreement (the “Purchase Agreement”) was fully executed pursuant to which we agreed to sell substantially all of the assets, including the book of business, of the 16 remaining Retail Business locations that we own in New York State (the “Assets”). The closing of the sale of the Assets is ~~made~~subject to a number of conditions. As a result of the restructuring in December 2008, and the Purchase Agreement on March 30, 2009, our Retail Business has been reclassified as discontinued operations and prior periods have been restated.

In our continuing operations, we receive fees from 33 franchised locations in connection with their use of the DCAP name.

Payments Inc., our wholly-owned subsidiary, is an insurance premium finance agency that is licensed within the states of New York and Pennsylvania. Until February 1, 2008, Payments Inc. offered premium financing to clients of DCAP, Barry Scott, Atlantic Insurance and Accurate Agency offices, as well as non-affiliated insurance agencies. On February 1, 2008, Payments Inc. sold its outstanding premium finance loan portfolio. As a result of the sale, our business of internally financing insurance contracts has been reclassified as discontinued operations. Effective February 1, 2008, revenues from our premium financing business have consisted of placement fees based upon premium finance contracts purchased, assumed and serviced by the purchaser of the loan portfolio.

In our Retail Business discontinued operations, the insurance storefronts serve as insurance agents or brokers and place various types of insurance on behalf of customers. Our Retail Business focuses on automobile, motorcycle and homeowner’s insurance and our customer base is primarily individuals rather than businesses.

The stores also offer automobile club services for roadside assistance and some of our franchise locations offer income tax preparation services.

The stores from our Retail Business discontinued operations receive commissions from insurance companies for their services. Neither we nor the stores have served as an insurance company and therefore we have not assumed underwriting risks; however, as discussed in Item ~~12 hereof for discussion~~1(b) of this Annual Report, in March 2007, Commercial Mutual Insurance Company’s Board of Directors adopted a resolution to convert Commercial Mutual from an advance premium insurance company to a stock property and casualty insurance company. We hold surplus notes of Commercial Mutual in the aggregate principal amount of $3,750,000. Based upon the amount payable on the surplus notes and the statutory surplus of Commercial Mutual, the plan of conversion provides that, in the event of a ~~private placement of Common Stock~~conversion by Commercial Mutual into a stock corporation, in exchange for our relinquishing our rights to any unpaid principal and interest under the surplus notes, we would receive 100% of the ~~Company~~stock of Commercial Mutual.

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.

Franchise fee revenue

Franchise fee revenue on initial franchisee fees is recognized when substantially all of our contractual requirements under the franchise agreement are completed. Franchisees also pay a monthly franchise fee plus a monthly advertising fee. We are obligated to provide marketing and training support to each franchisee.

Commission revenue (discontinued operations)

We recognize commission revenue from insurance policies at the beginning of the contract period. Refunds of commissions on the cancellation of insurance policies are reflected at the time of cancellation.

Automobile club dues are recognized equally over the contract period.

Finance income, fees and receivables (discontinued operations)

For our premium finance operations, we used the interest method to recognize interest income over the life of each loan in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 91, “Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases.”

Upon the establishment of a premium finance contract, we recorded the gross loan payments as a receivable with a corresponding reduction for deferred interest. The deferred interest was amortized to interest income using the interest method over the life of each loan. The weighted average interest rate charged with respect to financed insurance policies was approximately 26.1% and 26.4% per annum for the years ended December 31, 2008 and 2007, respectively.

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

Allowance for finance receivable losses (discontinued operations)

Customers who purchase insurance policies are often unable to pay the premium in a lump sum and, therefore, require extended payment terms. Premium finance involves making a loan to the customer that is backed by the unearned portion of the insurance premiums being financed. No credit checks were made prior to the decision to extend credit to a customer. Losses on finance receivables included an estimate of future credit losses on premium finance accounts. Credit losses on premium finance accounts occurred when the unearned premiums received from the insurer upon cancellation of a financed policy were inadequate to pay the balance of the premium finance account. After collection attempts were exhausted, the remaining account balance, including unrealized interest, was written off. We reviewed historical trends of such losses relative to finance receivable balances to develop estimates of future losses.

Goodwill

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 reporting unit 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 impairment expense. Based on our most recent analysis, our results of operations for the year ended December 31, 2008 include a charge to impairment expense of approximately $394,000.

Stock-based compensation

Our stock option and other equity-based compensation plans are accounted for in accordance with the recognition and measurement provisions of SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”). FAS 123(R) requires compensation costs related to share-based payment transactions, including employee stock options, to be recognized in the financial statements. In addition, we adhere to the guidance set forth within Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 107, which provides the Staff's views regarding the interaction between SFAS 123(R) and certain SEC rules and regulations and provides interpretations with respect to the valuation of share-based payments for public companies.

Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141R “Business Combinations” (“SFAS 141R”). SFAS 141R establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. SFAS 141R also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R is effective for our fiscal year beginning January 1, 2009. We are currently evaluating this statement for the impact, if any, that SFAS 141R will have on our consolidated financial position and results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosure requirements about fair value measurements. SFAS 157 was effective for us on January 1, 2008. However, in February 2008, the FASB released FASB Staff Position (FSP FAS 157-2 — Effective Date of FASB Statement No. 157), which delayed the effective date of SFAS 157 for all nonfinancial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The adoption of SFAS 157 for our financial assets and liabilities did not have a material impact on our consolidated financial statements. We do not believe the adoption of SFAS 157 for our nonfinancial assets and liabilities, effective January 1, 2009, will have a material impact on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits companies to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing companies with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 is effective for fiscal years beginning after November 15, 2007. Companies are not allowed to adopt SFAS 159 on a retrospective basis unless they choose early adoption. We adopted SFAS 159 in 2008, and did not elect the fair value option for eligible items that existed at the date of adoption.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51” (“SFAS 160”). The new standard changes the accounting and reporting of noncontrolling interests, which have historically been referred to as minority interests. SFAS 160 requires that noncontrolling interests be presented in the consolidated balance sheets within shareholders’ equity, but separate from the parent’s equity, and that the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented in the consolidated statements of income. Any losses in excess of the noncontrolling interest’s equity interest will continue to be allocated to the noncontrolling interest. Purchases or sales of equity interests that do not result in a change of control will be accounted for as equity transactions. Upon a loss of control, the interest sold, as well as any interest retained, will be measured at fair value, with any gain or loss recognized in earnings. In partial acquisitions, when control is obtained, the acquiring company will recognize, at fair value, 100% of the assets and liabilities, including goodwill, as if the entire target company had been acquired. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, with early adoption prohibited. The new standard will be applied prospectively, except for the presentation and disclosure requirements, which will be applied retrospectively for all periods presented. We have not yet determined the impact, if any, that this statement will have on our consolidated financial statements and we will adopt the standard at the beginning of fiscal 2009.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 applies to all entities. SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. SFAS 161 encourages, but does not require, comparative disclosures for earlier periods at initial adoption. We are currently evaluating this statement for the impact, if any, that SFAS 161 will have on our consolidated financial position and results of operations.

In April 2008, the FASB issued FASB Staff Position ("FSP") No. 142-3, “Determination of the Useful Life of Intangible Assets” ("FSP 142-3"). FSP 142-3 removes the requirement under SFAS 142 to consider whether an intangible asset can be renewed without substantial cost of material modifications to the existing terms and conditions, and replaces it with a requirement that an entity consider its own historical experience in renewing similar arrangements, or a consideration of market participant assumptions in the absence of historical experience. FSP 142-3 also requires entities to disclose information that enables users of financial statements to assess the extent to which the expected future cash flows associated with the asset are affected by the entity's intent and/or ability to renew or extend the arrangement. The guidance will become effective as of the beginning of our fiscal year beginning after December 15, 2008. We are currently evaluating the impact this standard will have on our financial statements.

In June 2008, the FASB ratified Emerging Issues Task Force (“EITF”) No. 07-5, “Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity's Own Stock” ("EITF 07-5"). EITF 07-5 provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument's contingent exercise and settlement provisions. EITF 07-5 is effective for financial statements issued for fiscal years beginning after December 15, 2008. Early application is not permitted. We are assessing the potential impact of this EITF on our financial condition and results of operations.

In June 2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“EITF 03-6-1”). EITF 03-6-1 clarifies that all outstanding unvested share-based payment awards that contain rights to non-forfeitable dividends participate in undistributed earnings with common shareholders. Awards of this nature are considered participating securities and the two-class method of computing basic and diluted earnings per share must be applied. EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the potential impact, if any; the new pronouncement will have on our consolidated financial statements.

In October 2008, the FASB issued FSP No. 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Is Asset Not Active” (“FSP 157-3”) with an immediate effective date, including prior periods for which financial statements have not been issued. FSP 157-3 clarifies the application of fair value in inactive markets and allows for the use of management's internal assumptions about future cash flows with appropriately risk-adjusted discount rates when relevant observable market data does not exist. The objective of SFAS 157 has not changed and continues to be the determination of the price that would be received in an orderly transaction that is not a forced liquidation or distressed sale at the measurement date. The adoption of FSP 157-3 did not have a material effect on our results of operations, financial position or liquidity.

Results of Operations

In December 2008, due to declining revenues and profits, we made a decision to restructure our network of retail offices (the “Retail Business”). The plan of restructuring called for the closing of seven of our least profitable locations during December 2008 and the sale of the remaining 19 Retail Business locations. On March 30, 2009, an asset purchase agreement (the “Purchase Agreement”) was fully executed pursuant to ~~Section 4(2)~~which we agreed to sell substantially all of the ~~Securities Act~~assets, including the book of ~~1933,~~business, of the 16 remaining Retail Business locations that we own in New York State (the “Assets”). The closing of the sale of the Assets is subject to a number of conditions. As a result of the restructuring in December 2008, and the Purchase Agreement on March 30, 2009, our Retail Business has been reclassified as ~~amended. 6~~ ~~ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Results~~discontinued operations and prior periods have been restated.

On February 1, 2008, we sold our outstanding premium finance loan portfolio. As a result of ~~Operations: In 1996,~~ the ~~Company had total~~sale, our premium financing operations have been reclassified as discontinued operations.

Separate discussions follow for results of continuing operations and discontinued operations.

Continuing Operations

The following table summarizes the changes in the significant components of the results of continuing operations (in thousands) for the periods indicated:

	December 31,
							Change
	2008			2007			$			%
Commissions and fee revenue	$	911		$	649		$	262		40	%
General and administrtaive expenses		1,860			2,275			(415	)	(18	) %
Interest expense		271			432			(161	)	(37	) %
Interest income - notes receivable		765			1,288			(523	)	(41	) %
(Loss) from continuing operations before taxes		(587	)		(885	)		298		34	%
(Benefit from) income taxes		(391	)		(419	)		28		7	%
(Loss) from continuing operations		(196	)		(465	)		269		58	%

During the year ended December 31, 2008 (“2008”), revenues from continuing operations were $911,000 as compared to $649,000 for the year ended December 31, 2007 (“2007”). The 40% net increase of ~~$1,118,647~~$262,000 in commissions and fees was a result of $427,000 in premium finance placement fees earned in 2008, compared to none in 2007. Effective February 1, 2008, we began earning placement fees in accordance with the terms of the sale of our premium finance portfolio. The increase in revenue was offset by a reduction of $110,000 in initial franchise fees, due to a lack of new franchises in 2008 compared to five in 2007.

Our general and administrative expenses in 2008 were $1,860,000, as compared to $2,275,000 in 2007. The 18% decrease of $415,000 was primarily attributable to decreases in: (i) franchise advertising costs, (ii) executive compensation, and (iii) fees paid to consultants.

Our interest expense in 2008 was $271,000, as compared to $432,000 in 2007. The 37% decrease of $161,000 was primarily due to: (i) a reduction in the principal balance of our debt and (ii) our no longer allocating a portion of the interest on our revolving credit line from our discontinued premium finance business to continuing operations.

Our interest income from notes receivable in 2008 was $765,000, as compared to $1,288,000 in 2007. The 41% decrease of $523,000 was primarily due to: (i) the discount on surplus notes and the accrued interest at the time of acquisition being fully accreted in July 2008, and (ii) a reduction in the variable interest rate in 2008 due to a decrease in the prime rate.

Our continuing operations generated a net loss before income taxes of $587,000 in 2008 as compared to a net loss before income taxes of $885,000 in 2007. The 34% decrease of $298,000 was primarily due to the inception of earning premium finance placement fees in 2008 and reductions in general and administrative and interest expenses, offset by a decrease in interest income from our surplus notes.

Discontinued Operations

Premium Finance

The following table summarizes the changes in the results of our premium finance discontinued operations (in thousands) for the periods indicated:

	Years ended
	December 31,
						Change
		2008*		2007		$			%
Premium finance revenue	$	225		$	3,167	$	(2,942	)	(93	) %

Operating Expenses:
General and administrative expenses		182			1,432		(1,250	)	(87	) %
Provision for finance receivable losses		89			472		(383	)	(81	) %
Depreciation and amortization		47			100		(53	)	(53	) %
Interest expense		45			646		(601	)	(93	) %
Total operating expenses		363			2,650		(2,287	)	(86	) %

(Loss) income from operations		(138	)		517		(655	)	(127	) %
Loss on sale of premium financing portfolio		(102	)		-		(102	)	-	%
(Loss) income before provision for income taxes		(240	)		517		(757	)	(146	) %
Provision for income taxes		69			246		(177	)	(72	) %
(Loss) income from discontinued operations	$	(309	)	$	271	$	(580	)	(214	) %

___________________

* Our premium finance portfolio was sold on February 1, 2008. Premium finance revenue for 2008 only includes the period from January 1, 2008 through January 31, 2008.

Our premium finance revenue decreased $2,942,000 in 2008 as compared to 2007. The 93% decrease is due to only including one month of revenue in 2008 compared to 12 months in 2007.

Our general and administrative expenses from discontinued operations decreased $1,250,000 in 2008 as compared to 2007. The 87% decrease is due to only including one month of operating expenses related to revenue in 2008 compared to 12 months in 2007.

Our provision for finance receivable losses for 2008 was $383,000 less than for 2007. The 81% decrease was due to the discontinuance of loan originations offset by a provision for losses from loans originated in the prior year.

Our premium finance interest expense for 2008 was $601,000 less than for 2007. The 93% decrease was due to the payment in full of the outstanding balance of our revolving credit line on February 1, 2008.

Loss on sale of premium financing portfolio was $102,000 in 2008, compared to no such loss in 2007. The 2008 loss was primarily due to $83,000 in fees related to the sale of our premium finance portfolio, and an adjustment to the selling price as a result of a change in the estimated collectible amount of the portfolio.

Our discontinued premium finance operations, on a stand-alone basis, generated a net loss before income taxes of $240,000 in 2008 as compared to a net profit before income taxes of $517,000 in 2007. The decrease in profit of $757,000 in 2008 was primarily due to: (i) the cessation of revenues as of January 31, 2008, and (ii) the loss on sale of our premium financing portfolio, offset by the elimination and reductions in operating expenses.

Retail Business

The following table summarizes the changes in the results of our Retail Business discontinued operations (in thousands) for the periods indicated:

	Years ended
	December 31,
						Change
	2008			2007		$			%

Commissions and fee revenue	$	4,042		$	5,096	$	(1,054	)	(21	) %

Operating Expenses:
General and administrative expenses		3,895			4,479		(584	)	(13	) %
Depreciation and amortization		212			204		8		4	%
Interest expense		41			44		(3	)	(7	) %
Impairment of goodwill and intangibles		394			95		299		315	%
Total operating expenses		4,542			4,822		(280	)	(6	) %

(Loss) income from operations		(500	)		274		(774	)	(282	) %
Gain on sale of book of business		-			66		(66	)	(100	) %
(Loss) income before provision for income taxes		(500	)		340		(840	)	(247	) %
(Benefit from) provision for income taxes		(28	)		193		(221	)	(115	) %
(Loss) income from discontinued operations	$	(472	)	$	147	$	(619	)	(421	) %

Our Retail Business revenue was $4,042,000 in 2008 as compared to $5,096,000 in 2007. The 21% revenue decrease of $1,054,000 was primarily attributable to a reduction in commissions and fees earned due to the sale of fewer insurance policies in 2008 than in 2007. Such reduction in sales was generally caused by the continued heightened competition from the voluntary insurance market, which is offering lower premium rates to our main customer, the non-standard insured.

Our Retail Business general and administrative expenses in 2008 were $3,895,000, as compared to $4,479,000 in 2007. The 13% net decrease of $584,000 was primarily attributable to decreases in fixed and variable compensation paid to employees due to a reduction in policies sold at our stores, and a reduction in advertising expenses, offset by an increase in occupancy costs due to rent increases and escalations.

Our Retail Business impairment of goodwill and intangibles for 2008 was $299,000 greater than for 2007. The increase in 2008 was due to goodwill impairment of $394,000 in 2008, compared to the cessation of utilization of the vanity telephone number included in intangible assets in 2007.

Our gain on sale of book of business in 2008 was $-0-, as compared to $66,000 in 2007. The $66,000 decrease in 2008 was due to a sale in 2007, compared to no such sales in 2008.

During 2008, we recorded a benefit from income taxes of $28,000 compared to a provision for income taxes of $193,000 in 2007. The change of $221,000 is due to an $840,000 decrease in income before taxes in 2008 as compared to 2007.

Our discontinued Retail Business operations, on a stand-alone basis, generated a net loss before income taxes of $500,000 in 2008 as compared to a net profit before income taxes of $340,000 in 2007. The decrease in profit of $840,000 in 2008 was primarily due to the $1,054,000 decrease in revenues, and increase in impairment of intangibles, offset by a decrease in general and administrative expenses.

Net Loss

The following table summarizes our change in net loss for the periods indicated.

	Years ended
	December 31,
							Change
	2008			2007			$			%
Loss from continuing operations	$	(196	)	$	(465	)	$	269		58	%
(Loss) income from discontinued operations, net of taxes		(781	)		418			(1,199	)	(287	) %
Net loss	$	(977	)	$	(47	)	$	(930	)	1,979	%

Our net loss for the year ended December 31, 2008 was $977,000 as compared to a net loss of ~~$5,099 as compared to revenues of $1,024,057 and a net profit of $51,229 for 1995. Room rental and other departmental revenue~~$47,000 for the Hotel decreased by $13,016 (1.32%) during 1996. The net profit for the Hotel, on a "stand-alone" basis, was $109,322 in 1996 as compared to $144,351 in 1995. Interest income increased by $16,929 from 1995 to 1996 due to the receipt of $800,000 in funds from the private placement of Common Stock discussed under "Liquidity and Capital Resources". Royalty income earned during 1996 with respect to the Pipe Harness Clamp was $109,891 as compared to $19,214 in 1995 (see Item 1(a)(ii)). In 1996, the Company incurred costs and expenses of $1,119,090 as compared to $967,152 in 1995, representing an increase of $151,938. The increase was attributable primarily to an increase of $162,079 in corporate and sundry costs and expenses arising from the professional fees incurred in connection with, among other things, the Company's investigation and negotiation of other business opportunities (see Item 1(a)(v)) and an increase in the salary of an executive officer of the Company, which increase was granted in view of the greater amount of effort required to be expended by him in connection with the aforementioned investigation and negotiation of business opportunities. Reference is made to Item 1(a)(i) hereof for a discussion of a certain litigation with the Ports Authority with regard to the Hotel. year ended December 31, 2007.

Liquidity and Capital ~~Resources:~~ Resources

As of December 31, ~~1996, the Company~~2008, we had ~~$1,318,121~~$142,949 in cash and cash equivalents ~~as compared to $644,956 in 1995, representing an increase~~and a working capital deficit of $673,165. Such increase was primarily the result of an $800,000 equity investment made during 1996 by the President and Chairman of the Board of the Company and another investor (see Items 5 and 12 hereof). 7 $175,105. As of December 31, ~~1996, the Company~~2007, we had $1,030,822 in cash and cash equivalents and a working capital ~~surplus~~deficit of ~~$1,299,647~~$1,603,288.

During 2007, the holders of $1,500,000 outstanding principal amount of notes payable (the “Notes Payable”) agreed to extend the maturity date of the debt from September 30, 2007 to September 30, 2008. In August 2008, the maturity date of the Notes Payable was further extended from September 30, 2008 to the earlier of July 10, 2009 or 90 days following the conversion of Commercial Mutual to a stock property and ~~had~~casualty insurance company and the issuance to us of a controlling interest in Commercial Mutual (subject to acceleration under certain circumstances). In exchange for this extension, the holders are entitled to receive an aggregate incentive payment equal to $10,000 times the number of months (or partial months) the debt is outstanding after September 30, 2008 through the maturity date. If a prepayment of principal reduces the debt below $1,500,000, the incentive payment for all subsequent months will be reduced in proportion to any such reduction to the debt. The aggregate incentive payment is due upon full repayment of the debt. The $1,500,000 principal balance of the Notes Payable is included in our December 31, 2008 balance sheet under “Current portion of long-term debt.”

Effective April 16, 2008, the holder of our Series B preferred shares (which provided for dividends at the rate of 5% per annum and an outside mandatory redemption date of April 30, 2008) exchanged such shares for an equal number of Series C preferred shares (which provided for dividends at the rate of 10% per annum and an outside mandatory redemption date of April 30, 2009). Effective August 23, 2008, the outside mandatory redemption date for the preferred shares was further extended to July 31, 2009 through the issuance of Series D preferred shares in exchange for the Series C preferred shares. The mandatorily redeemable balance of $780,000 is included in our December 31, 2008 balance sheet under “Current Liabilities”.

On March 30, 2009, an asset purchase agreement (the “Purchase Agreement”) was fully executed pursuant to which our wholly-owned subsidiaries, Barry Scott Agency, Inc. and DCAP Accurate, Inc. agreed to sell substantially all of their assets, including the book of business, of the 16 Retail Business locations that we own in New York State (the “Assets”). The closing of the sale of the Assets is subject to a number of conditions. We expect to satisfy the conditions and complete the sale of the Assets in April 2009. The purchase price for the Assets is approximately $2,337,000, of which approximately $1,786,000 is to be paid to us at closing, and the remainder of the purchase price is to be satisfied by the delivery of promissory notes in the aggregate principal amount of $551,000. As additional consideration, we will be entitled to receive through September 2010 an amount equal to 60% of the net commissions derived from the book of business of six retail locations that were closed in 2008. The proceeds from the sale of the Assets that we expect to receive in April 2009 will not be sufficient to fully satisfy the Notes Payable and preferred stock obligations on their respective maturity dates. We plan to seek to further extend the maturity dates and/or refinance the Notes Payable and preferred stock obligations.

We believe that, based on our present cash resources, and assuming that our efforts to further extend the maturity dates of the Notes Payable and preferred stock obligations, as discussed above, are successful and that we complete the sale of the Assets as contemplated, including the collection of the $551,000 of promissory notes discussed above in accordance with their terms, we will have sufficient cash on a short-term basis and over the next 12 months to fund our working capital needs. No definitive arrangements are in place with regard to any further extension of the maturity dates and/or refinancing the Notes Payable and preferred stock obligations and no ~~material~~assurances can be given that any will occur on commercially reasonable terms or otherwise. No assurances can be given that we will complete the sale of the Assets as contemplated.

During 2008, cash and cash equivalents decreased by approximately $888,000 primarily due to the following:

Net cash used in operating activities during 2008 was $753,000 due primarily to the net loss of $977,000. Non-cash items totaling $820,000 increased the net cash used in operating activities to $1,797,000. These non-cash items included depreciation and amortization, bad debt expense, accretion of discount on notes receivable, amortization of warrants, stock-based payments, and deferred income taxes. The use of cash was offset by: (i) the receipt of a $368,000 Federal tax refund claim resulting from the carry-back of our 2007 net operating loss, (ii) an increase in accounts payable and accrued expenses of $252,000, and (iii) cash provided by the operating activities of our discontinued operations of $498,000.

·	Net cash provided by investing activities during 2008 was $1,034,000 primarily due to the $1,008,000 cash flow from finance contracts receivable included in discontinued operations.

Net cash used in financing activities during 2008 was $1,169,000 due to: (i) a $562,000 decrease in our revolving credit line utilized in our discontinued operations prior to the sale of our premium finance portfolio on February 1, 2008, and (ii) principal payments on long-term debt and lease obligations of $607,000.

We have no current commitments for capital expenditures. ~~Reference~~However, we may, from time to time, consider acquisitions of complementary businesses, products or technologies.

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 ~~made~~material to ~~Items 1(a)(iii)~~investors.

Factors That May Affect Future Results and ~~(iv) hereof~~Financial Condition

Based upon the following factors, as well as other factors affecting our operating results and financial condition, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods. In addition, such factors, among others, may affect the accuracy of certain forward-looking statements contained in this Annual Report.

Because our core revenue is derived from personal automobile insurance, our business may be adversely affected by negative developments in the conditions in this industry.

All of our revenues from continuing operations for 2008 related to the sale of personal automobile and other property and casualty insurance policies. As a ~~discussion~~result of our concentration in this line of business, negative developments in the economic, competitive or regulatory conditions affecting the personal automobile insurance industry could have a material adverse effect on our results of operations and financial condition.

Because substantially all of our operations are derived from sources located in New York and Pennsylvania, our business may be adversely affected by conditions in these states.

All of our revenue is derived from sources located in the states of New York and Pennsylvania and, accordingly, is affected by the prevailing regulatory, economic, demographic, competitive and other conditions in these states. Changes in any of these conditions could make it more costly or difficult for us to conduct our business. Adverse regulatory developments in New York or Pennsylvania, which could include fundamental changes to the design or implementation of the ~~status~~automobile insurance regulatory framework, could have a material adverse effect on our results of operations and financial condition.

If we lose key personnel or are unable to recruit qualified personnel, our ability to implement our business strategies could be delayed or hindered.

Our future success will depend, in part, upon the efforts of Barry Goldstein, our Chief Executive Officer. The loss of Mr. Goldstein or other key personnel could prevent us from fully implementing our business strategies and could materially and adversely affect our business, financial condition and results of operations. We have an employment agreement with Mr. Goldstein that expires on June 30, 2009. As we continue to grow, we will need to recruit and retain additional qualified management personnel, but we may not be able to do so. Our ability to recruit and retain such personnel will depend upon a ~~certain note~~number of factors, such as our results of operations and prospects and the level of competition then prevailing in the market for qualified personnel.

If we obtain a controlling interest in Commercial Mutual Insurance Company, we will face new risks and uncertainties.

As discussed in Item 1 hereof, in March 2007, Commercial Mutual Insurance Company’s Board of Directors adopted a resolution to convert Commercial Mutual from an advance premium insurance company to a stock property and casualty insurance company. We hold surplus notes of Commercial Mutual in the aggregate principal amount of ~~$125,000 issued~~$3,750,000. Based upon the amount payable on the surplus notes and the statutory surplus of Commercial Mutual, the plan of conversion provides that, in the event of a conversion by ~~Robeson~~Commercial Mutual into a stock corporation, in exchange for our relinquishing our rights to any unpaid principal and interest under the surplus notes, we would receive 100% of the stock of Commercial Mutual. We have never operated as an insurance company and would face all of the risks and uncertainties that come with operating such a company, including underwriting risks.

As a holding company, we are dependent on the results of operations of our operating subsidiaries; there would be restrictions on the payment of dividends by Commercial Mutual.

We are a holding company and a legal entity separate and distinct from our operating subsidiaries. As a holding company without significant operations of our own, the principal sources of our funds are dividends and other payments from our operating subsidiaries. Consequently, we must rely on our subsidiaries for our ability to repay debts, pay expenses and pay cash dividends to our shareholders. In connection with the plan of conversion of Commercial Mutual, we have agreed with the New York State Insurance Department that, for a period of two years following the conversion, without the approval of the Insurance Department, no dividend may be paid by Commercial Mutual to us.

We have determined to discontinue our Retail Business operations prior to our obtaining a controlling interest in Commercial Mutual.

We have determined to close or sell our Retail Business locations and such operations are reflected as discontinued operations in our financial statements. Such action has taken in anticipation of a change in business strategy from operating storefront insurance agencies to operating an insurance company through Commercial Mutual. To date, the conditions to the ~~Company in September 1995~~conversion of Commercial Mutual to a stock property and ~~a certain note~~casualty insurance company, namely the approval of the plan of conversion by the Insurance Department and Commercial Mutual’s policyholders, have not yet been satisfied. No assurances can be given that the conversion will occur.

Reductions in the ~~principal~~New York involuntary automobile insurance market may adversely affect our premium finance revenue.

Prior to the sale of our premium finance loan portfolio, our primary source of premium finance loans had been the assigned risk, or involuntary, automobile insurance market. In New York, since mid-2003, there has been a significant decline in the number of new applications for coverage at the New York Auto Insurance Plan. This has led to a reduction in the number of loans where policies of this type are the collateral. Beginning in 2004, we began to finance certain voluntary auto insurance policies. We are now entitled to a placement fee based upon the amount of ~~$50,000 issued~~new premium finance loans made by ~~Transcends~~the purchaser of our loan portfolio in the states of New York and Pennsylvania. There is no guaranty that the number or size of the loans in the voluntary marketplace will offset the declines experienced in the involuntary market.

The volatility of premium pricing and commission rates could adversely affect our operations.

We currently derive revenue from commissions paid by insurance companies. In addition, our franchisees rely on such revenue. The commission is usually a percentage of the premium billed to an insured. Historically, property and casualty premiums have been cyclical in nature and have displayed a high degree of volatility based on economic and competitive conditions. Because such commission revenue is based on insurance premiums, a decline in premium levels will have an adverse effect on our discontinued operations and our franchisees. In addition, in many cases, insurance companies may seek to reduce their expenses by reducing the ~~Company~~commission rates payable to insurance agents or brokers and generally reserve the right to make such reductions. We cannot predict the timing or extent of future changes in ~~February 1996. Reference~~commission rates or premiums and therefore cannot predict the effect, if any, that such changes would have on our discontinued operations or our franchisees.

We are subject to regulation that may restrict our ability to earn profits.

Our premium finance subsidiary is subject to regulation and supervision by the financial institution departments in the states where it offers to finance premiums. Certain regulatory restrictions, including restrictions on the maximum permissible rates of interest for premium financing, and prior approval requirements may affect its ability to place premium contracts and generate placement fees.

In addition, there are currently 33 DCAP franchises. The offering of franchises is regulated by both the federal government and some states, including New York.

We may seek to expand through acquisitions of complementary businesses or other assets which involve additional risks that may adversely affect us.

We continually evaluate the possible expansion of our operations through the acquisition of businesses or other assets which we believe will complement or enhance our business. We may also ~~made~~acquire or make investments in complementary businesses, products, services or technologies. In the event we effect any such acquisition, we may not be able to ~~Item 1(a)(i) hereof~~successfully integrate any acquired business, asset, product, service or technology in our operations without substantial costs, delays or other problems or otherwise successfully expand our operations. In addition, efforts expended in connection with such acquisitions may divert our management’s attention from other business concerns. We also may have to borrow money to pay for future acquisitions and we may not be able to do so at all or on terms favorable to us. Additional borrowings and liabilities may have a ~~discussion~~materially adverse effect on our liquidity and capital resources.

We rely on our information technology and telecommunication systems, and the failure of ~~certain litigation~~these systems could materially and adversely affect our business.

Our business is highly dependent upon the successful and uninterrupted functioning of our information technology and telecommunications systems. We rely on these systems to support our operations. The failure of these systems could interrupt our operations and result in a material adverse effect on our business.

We have incurred, and will continue to incur, increased costs as a result of being an SEC reporting company.

The Sarbanes-Oxley Act of 2002, as well as a variety of related rules implemented by the SEC, have required changes in corporate governance practices and generally increased the disclosure requirements of public companies. As a reporting company, we incur significant legal, accounting and other expenses in connection with our public disclosure and other obligations. Based upon SEC regulations currently in effect, we are required to establish, evaluate and report on our internal control over financial reporting and will be required to have our registered independent public accounting firm issue an attestation as to such reports commencing with our financial statements for the year ending December 31, 2009. We believe that, based upon SEC regulations currently in effect, our general and administrative expenses, including amounts that will be spent on outside legal counsel, accountants and professionals and other professional assistance, will increase in 2009 over 2008, which could require us to allocate what may be limited cash resources away from our operations and business growth plans. We also believe that compliance with the ~~Ports Authority with regard~~myriad of rules and regulations applicable to reporting companies and related compliance issues will divert time and attention of management away from operating and growing our business.

The enactment of tort reform could adversely affect our business.

Legislation concerning tort reform is from time to time considered in the ~~Hotel.~~ United States Congress and in several states. Among the provisions considered for inclusion in such legislation are limitations on damage awards, including punitive damages. Enactment of these or similar provisions by Congress or by states in which we sell insurance could result in a reduction in the demand for liability insurance policies or a decrease in the limits of such policies, thereby reducing our revenues. We cannot predict whether any such legislation will be enacted or, if enacted, the form such legislation will take, nor can we predict the effect, if any, such legislation would have on our business or results of operations.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 7.8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements required by this Item 78 are included in this Annual Report ~~on Form 10-KSB~~ following Item 1315 hereof. ~~ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE~~ As a smaller reporting company, we are not required to provide supplementary financial information.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING AND FINANCIAL DISCLOSURE.

There were no changes in accountants due to disagreements on accounting and financial disclosure during the twenty-four month period ended December 31, ~~1996. 8~~ 2008.

ITEM 9A. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) that are designed to assure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.

As required by Exchange Act Rule 13a-15(b), as of the end of the period covered by this Annual Report, under the supervision and with the participation of our principal executive officer and principal financial officer, we evaluated the effectiveness of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of that date.

Internal Control over Financial Reporting

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process designed by, or under the supervision of, our principal executive officer and principal financial officer, and effected by the board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US GAAP including those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with US GAAP and that receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.

Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was not effective as of December 31, 2008.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Management identified the following material weaknesses in our internal control over financial reporting as of December 31, 2008:

Information Technology Applications and Infrastructure

We did not maintain effective controls over financial reporting related to information technology applications and infrastructure. Specifically, the following deficiencies in the aggregate constituted a material weakness:

·	We did not maintain effective design of controls over access to financial reporting applications and data. Controls did not limit access to programs and data to only authorized users. In addition, controls lack the requirement of periodic reviews and monitoring of such access.

·	We did not maintain effective controls to communicate policies and procedures governing information technology security and access. Furthermore, we did not maintain effective logging and monitoring of servers and databases to ensure that access was both appropriate and authorized.

These deficiencies have had a pervasive impact on our information technology control environment. Additionally, these deficiencies could result in a misstatement of account balances or disclosure to substantially all accounts that could result in a material misstatement to the consolidated financial statements that would not be prevented or detected.

Remediation of Material Weaknesses

In January 2009, we effectively implemented controls to rectify the weaknesses discussed above. These controls have been tested by an independent consulting firm and, based on the favorable results, management believes that these issues have been successfully remediated.

This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this Annual Report.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

None.

PART III ~~ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT Directors and~~

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Executive Officers and Directors

The following table sets forth the positions and offices presently held ~~with the Company~~ by each ~~Director~~of our current directors and executive ~~officer, his age~~officers and the year from which such person's service on the Company's Board of Directors dates: Positions and Offices Director Name Age held with the Company Since ---- --- --------------------- ----- Jay M. Haft 61their ages:

Name	Age	Positions and Offices Held

Barry B. Goldstein	56	President, Chairman of the Board, Chief Executive Officer, Treasurer and Director
Michael R. Feinsod	38	Director
Jay M. Haft	73	Director
David A. Lyons	59	Director
Jack D. Seibald	48	Director

Barry B. Goldstein

Mr. Goldstein was elected our President, Chief Executive Officer, Chairman of the Board, ~~1989 Morton L. Certilman 65 President~~ and ~~Director 1989 Leon Lapidus 52 Director 1989 Brian K. Ziegler 42 Secretary~~a director in March 2001 and our Treasurer ~~-- Jay M. Haft~~in May 2001. He served as our Chief Financial Officer from March 2001 to November 2007. Since January 2006, Mr. Goldstein has served as ~~the Company's~~ Chairman of the Board of Commercial Mutual Insurance Company, a New York property and casualty insurer, as well as Chairman of its Executive Committee. In August 2008, Mr. Goldstein was appointed Chief Investment Officer of COMMERCIAL MUTUAL. From April 1997 to December 2004, he served as President of AIA Acquisition Corp., which operated insurance agencies in Pennsylvania and which sold substantially all of its assets to us in May 2003. Mr. Goldstein received his B.A. and M.B.A. from State University of New York at Buffalo, and has been a certified public accountant since 1979.

Michael R. Feinsod

Mr. Feinsod has been Chief Executive Officer of Ameritrans Capital Corporation, a closed-end investment company, since October 10, 2008. Mr. Feinsod has been President of Ameritrans Capital since November 2006 and also serves as its Chief Compliance Officer. He serves as Senior Vice President of Elk Associates Funding Corporation, a subsidiary of Ameritrans Capital, and has served as a director of Ameritrans Capital and Elk Associates Funding Corporation since December 2005. Since January 1999, Mr. Feinsod has been Managing Member of Infinity Capital, LLC, an investment management company. He served as an investment analyst and portfolio manager at Mark Boyar & Company, Inc., a broker-dealer, from June 1997 to January 1999. He is admitted to practice law in New York and served as an associate in the Corporate Law Department of Paul, Hastings, Janofsky & Walker LLP from 1996 to 1997. Mr. Feinsod holds a Juris Doctorate degree from Fordham University School of Law and a Bachelor of Arts degree from George Washington University.

Jay M. Haft

Mr. Haft served as our Vice Chairman of the Board from February 1999 until March 2001. From October 1989 to February 1999, he served as our Chairman of the Board. He has served as one of our directors since 1989. Mr. Haft has been engaged in the practice of law ~~for more than the past five years~~since 1959 and ~~serves~~since 1994 has served as counsel to Parker Duryee Rosoff & ~~Haft. He~~Haft (and since December 2001, its successor, Reed Smith). From 1989 to 1994, he was ~~previously~~ a senior corporate partner of ~~such firm (1989-1994).~~Parker Duryee. Mr. Haft is a strategic and financial consultant for growth stage companies. He is active in international corporate finance and mergers and ~~acquisitions, as well as in the representation of~~acquisitions. Mr. Haft also represents emerging growth companies. He has actively participated in strategic planning and fund raising for many high-tech companies, leading edge medical technology companies and ~~technical product, service and~~ marketing companies. Mr. Haft has been a partner of Columbus Nova, a private investment firm, since 2000. He is a ~~Managing General Partner~~director of ~~Venture Capital Associates, Ltd. and Gen Am "1" Venture Fund,~~ a ~~domestic and an international venture capital fund, respectively. Mr. Haft is also a Director~~number of ~~numerous~~ public and private corporations, including ~~Robotic Vision Systems, Inc., Noise Cancellation Technologies, Inc., Encore Medial Corporation, Viragen, Inc., PC Service Source, Inc.,~~ DUSA Pharmaceuticals, Inc., ~~Oryx Technology Corp. and Jenna Lane, Inc., all of~~ whose securities are traded ~~in the over- the-counter market,~~on Nasdaq, and also serves ~~as Chairman of~~on the Board of ~~Noise Cancellation Technologies, Inc., and Jenna Lane, Inc.~~the United States-Russian Business Counsel. Mr. Haft is a past member of the Florida Commission for Government Accountability to the People, ~~Co-President of the Dade Venue~~a past national trustee and Treasurer of the Miami City Ballet, and a ~~Director~~past Board member of the Concert Association of Florida. He is also a past trustee of Florida International University Foundation and previously served on the advisory board of the Wolfsonian Museum and Florida International University Law School. Mr. Haft received B.A. and ~~L.L.B.~~LL.B. degrees from Yale University. 9 ~~Morton L. Certilman~~

David A. Lyons

Mr. Lyons has served since 2004 as a principal of Den Ventures, LLC, a consulting firm focused on business, financing, and merger and acquisition strategies for public and private companies. From 2002 until 2004, Mr. Lyons served as a managing partner of the Nacio Investment Group, and President of Nacio Systems, Inc., a managed hosting company that provides outsourced infrastructure and communication services for mid-size businesses. Prior to forming the Nacio Investment Group, Mr. Lyons served as Vice President of Acquisitions for Expanets, Inc., a national provider of converged communications solutions. Previously, he was Chief Executive Officer of Amnex, Inc. and held various executive management positions at Walker Telephone Systems, Inc. and Inter-tel, Inc. He has served as ~~the Company's President~~one of our directors since ~~October 1989.~~ July 2005.

Jack D. Seibald

Mr. ~~Certilman~~Seibald is a Managing Director of Concept Capital, a division of SMH Capital, Inc., a broker-dealer. Mr. Seibald has been ~~engaged~~affiliated with SMH Capital, Inc. and its predecessor firms since 1995 and is a registered representative with extensive experience in ~~the practice~~equity research and investment management dating back to 1983. Since 1997, Mr. Seibald has also been a Managing Member of ~~law for more than the past five years~~Whiteford Advisors, LLC, an investment management firm. He began his career at Oppenheimer & Co. and has also been affiliated with Salomon Brothers, Morgan Stanley & Co. and Blackford Securities. Mr. Seibald is a member of the ~~law firm~~Board of ~~Certilman Balin Adler & Hyman, LLP. Mr. Certilman is~~Directors of Commercial Mutual Insurance Company, a New York property and casualty insurer, and serves as Chairman of ~~the Long Island Regional Planning Board, the Northrop/Grumman Master Planning Council~~its Investments Committee. He holds an M.B.A. from Hofstra University and a ~~Director~~B.A. from George Washington University. He has served as one of ~~the Long Island Association, the New Long Island Partnership~~our directors since 2004.

Family Relationships

There are no family relationships among any of our executive officers and the Long Island Sports Commission. Mr. Certilman has lectured extensively before bar associations, builders' institutes, title companies, real estate institutes, banking and law school seminars, The Practicing Law Institute, The Institutedirectors.

Term of Real Estate Management and at annual conventions of such organizations as the National Association of Home Builders, the Community Associations Institute and the National Association of Corporate Real Estate Executives. He is a member of the faculty of the American Law Institute/American Bar Association, as well as the Institute on Condominium and Cluster Developments of the University of Miami Law Center. Mr. Certilman has written various articles in the condominium field, is the author of the New York State Bar Association Condominium Cassette and the Condominium portion of the State Bar Association book on "Real Property Titles", and is the editor of the New York Land Report. Mr. Certilman is a member of the Advisory Board of First American Title Insurance Company of New York and the American College of Real Estate Lawyers. Mr. Certilman received an L.L.B. degree, cum laude, from Brooklyn Law School. Leon Lapidus has been the President of the Mibro Group, a privately held importer, packager and distributor of hardware, for more than the past five years. Mr. Lapidus received a B.A. degree from Hunter College and an M.B.A. degree from the Bernard M. Baruch College of the City of New York. Mr. Lapidus is the brother-in-law of Mr. Haft. Brian K. Ziegler has been engaged in the practice of law for more than the past five years and is a member of the law firm of Certilman Balin Adler & Hyman, LLP. Mr. Ziegler received a B.S. degree, cum laude, from the Wharton School of the University of Pennsylvania, and a J.D. degree and an L.L.M. degree in Taxation from the University of Miami. Mr. Ziegler is the son- in-law of Mr. Certilman. Office

Each ~~Director~~director will hold office until the next ~~Annual Meeting~~annual meeting of ~~Stockholders~~stockholders and until his successor is elected and qualified or until his earlier resignation or removal. Each executive officer will hold office until the ~~next regular~~initial meeting of the Board of Directors following the next ~~Annual Meeting~~annual meeting of ~~Stockholders~~stockholders and until his successor is elected ~~or appointed~~ and qualified or until his earlier resignation or removal.

Audit Committee

The Audit Committee of the Board of Directors is responsible for overseeing our accounting and financial reporting processes and the audits of our financial statements. The members of the Audit Committee are Messrs. Lyons, Haft and Seibald.

Audit Committee Financial Expert

Our Board of Directors has determined that Mr. Lyons is an “audit committee financial expert,” as that is defined in Item 401(e)(2) of Regulation S-B. Mr. Lyons is an “independent director” based on the definition of independence in Rule 4200(a)(15) of the listing standards of The Nasdaq Stock Market.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16 of the Exchange Act requires that reports of beneficial ownership of common shares and changes in such ownership be filed with the Securities and Exchange Commission by Section 16 “reporting persons,” including directors, certain officers, holders of more than 10% of the outstanding common shares and certain trusts of which reporting persons are trustees. We are required to disclose in this Annual Report each reporting person whom we know to have failed to file any required reports under Section 16 on a timely basis during the fiscal year ended December 31, 2008. To ~~the Company's~~our knowledge, based solely on a review of ~~the~~ copies of Forms 34 filed with the Securities and ~~4 furnished to the Company~~Exchange Commission and written representations that no other reports were required, during the fiscal year ended December 31, ~~1996,~~2008, our officers, directors and 10% stockholders complied with all Section 16(a) filing requirements applicable to ~~the Company's officers, Directors and 10% stockholders were complied with,~~them, except that ~~Brian K. Ziegler, Treasurer~~Mr. Haft filed a Form 4 late on two occasions and ~~Secretary~~each of Messrs. Lyons and Seibald, and Morton L. Certilman, a former director, filed a Form 4 late on one occasion. Each filing reported one transaction.

Code of Ethics for Senior Financial Officers

Our Board of Directors has adopted a Code of Ethics for our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the ~~Company, inadvertently failed~~Code of Ethics is posted on our website, www.dcapgroup.com. We intend to satisfy the disclosure requirement under Item 10 of Form 8-K regarding an amendment to, or a waiver from, our Code of Ethics by posting such information on our website, www.dcapgroup.com.

ITEM 11. EXECUTIVE COMPENSATION.

Summary Compensation Table

The following table sets forth certain information concerning the compensation for the fiscal years ended December 31, 2008 and 2007 for certain executive officers, including our Chief Executive Officer:

Name and Principal Position	Year	Salary	Option Awards	All Other Compensation		Total
				Country Club Dues	Other
Barry B. Goldstein Chief Executive Officer	2008	$275,000	-	-	$15,770	$290,770
Barry B. Goldstein Chief Executive Officer	2007	$350,000	$148,070	$21,085	$15,770	$534,925

Curt Hapward (1) President, DCAP Management Corp.	2008	$115,107	-	-	$6,000	$121,107
Curt Hapward (1) President, DCAP Management Corp.	2007	$82,374	$84,122	-	$4,430	$170,926

___________

(1) Mr. Hapward served as President of our subsidiary, DCAP Management Corp., until July 3, 2008.

Employment Contracts

Mr. Goldstein is employed as our President, Chairman of the Board and Chief Executive Officer pursuant to an employment agreement dated October 16, 2007 (the “Employment Agreement”) that expires on June 30, 2009. The Employment Agreement will automatically renew for a one-year term if Mr. Goldstein is in our employ on June 30, 2009. Pursuant to the Employment Agreement, Mr. Goldstein is entitled to receive an annual base salary of $350,000 (which base salary has been in effect since January 1, 2004) (“Base Salary”) and annual bonuses based on our net income. On August 25, 2008, we and Mr. Goldstein entered into an amendment (the “Amendment”) to the Employment Agreement. The Amendment entitles Mr. Goldstein to devote up to 750 hours per year, as currently provided for in an employment contract with Commercial Mutual, to fulfill his duties and responsibilities as Chairman of the Board and Chief Investment Officer of Commercial Mutual. Such permitted activity is subject to a reduction in Base Salary under the Employment Agreement on a ~~timely~~dollar-for-dollar basis to ~~file~~the extent of the salary payable by Commercial Mutual to Mr. Goldstein pursuant to the Commercial Mutual employment contract, which is currently $150,000 per year. Commercial Mutual is a ~~Form 5~~New York property and casualty insurer.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

	Option Awards
Name	Number of Securities Underlying Unexercised Options		Number of Securities Underlying Unexercised Options			Option Exercise Price		Option Expiration Date
	Exercisable		Unexercisable

Barry B. Goldstein		65,000		65,000	(1)	$	2.06	10/16/12
Curt Hapward		-		-			-	-

_______________

(1) Such options are exercisable to the extent of 32,500 shares effective as of October 16, 2009 and 2010.

Termination of Employment and Change-in-Control Arrangements

Pursuant to the Employment Agreement with Mr. Goldstein and as provided for in his prior employment agreement which expired on April 1, 2007, Mr. Goldstein would be entitled, under certain circumstances, to a ~~certain gift transaction. This was~~payment equal to one and one-half times his then annual salary in the event of the termination of his employment following a change of control of DCAP. In addition, in the event Mr. ~~Ziegler's first late filing~~Goldstein’s employment is terminated by us without cause or he resigns with good reason (each as defined in ~~connection with Section 16(a) filing requirements. 10~~ ~~ITEM 10. EXECUTIVE COMPENSATION (a) Summary~~ the Employment Agreement), Mr. Goldstein will be entitled to receive his base salary and bonuses for the remainder of the term.

Compensation ~~Table~~ of Directors

The following table sets forth certain information concerning the compensation of ~~Morton L. Certilman, President of the Company,~~our directors for the fiscal years ended December 31, 1994, 1995 and 1996. No other person who served as an executive officer of the Company as of December 31, 1996 had a total salary and bonus for the year then ended in excess of $100,000. Annual Compensation Name and Principal All Other Position Year Salary Compensation Morton L. Certilman, 1996 $101,250 -0-* President 1995 $50,000 -0-* 1994 $40,000 -0-* ____________ * Excludes fees payable during 1994, 1995 and 1996 by the Company to Certilman Balin Adler & Hyman, LLP, a law firm of which Mr. Certilman is a member. (b) Option Grants No grants of stock options were made to Mr. Certilman during the fiscal year ended December 31, 1996. (c) Aggregated Option Exercises and Fiscal Year-End Option Value Mr. Certilman did not exercise any options during the year ended December 31, 1996 and held no options as of such date. (d) Long-Term Incentive Plan Awards No awards were made to Mr. Certilman during the fiscal year ended December 31, 1996 under any long-term incentive plan. 11 ~~(e) Compensation of Directors Each Director is~~2008:

DIRECTOR COMPENSATION

Name	Fees Earned or Paid in Cash	Stock Awards	Option Awards	Total

Morton L. Certilman(1)	$4,271	$10,125	-	$14,396

Michael R. Feinsod	$2,822	-	-	$2,822

Jay M. Haft	$4,475	$7,500	-	$11,975

David A. Lyons	$5,725	$10,125	-(2)	$15,850

Jack D. Seibald	$6,225	$12,750	-	$18,975

_______________

(1)	Mr. Certilman retired as a director effective December 5, 2008.

(2)	As of December 31, 2008, Mr. Lyons held options for the purchase of 20,000 common shares.

Our non-employee directors are entitled to receive ~~a $500 fee~~compensation for ~~each Directors' meeting he attends. In addition, Directors are reimbursed for travel expenses incurred~~their services as directors as follows:

·	$8,333 per annum (1)
·	additional $3,500 per annum for committee chair (1)
·	$350 per Board meeting attended ($175 if telephonic)
·	$200 per committee meeting attended ($100 if telephonic)

_______________

(1) One-half payable in ~~connection with attendance~~stock; other one-half payable in stock or, at ~~such meetings. (f) Employment Contracts, Termination of Employment and Change-in-Control Arrangements Not applicable. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND~~ the director’s option, in cash.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Security Ownership

The following table sets forth certain information as of March ~~27, 1997~~31, 2009 regarding the beneficial ownership of ~~the Company's~~our common shares ~~of Common Stock~~ by (i) each person who ~~is known by~~we believe to be the ~~Company to beneficially own or exercise voting or dispositive control over~~beneficial owner of more than 5% of ~~the Company's Common Stock,~~our outstanding common shares, (ii) each present ~~Director~~director, (iii) each person listed in the Summary Compensation Table under “Executive Compensation,” and ~~(iii)~~(iv) all of ~~the Company's~~our present executive officers and ~~Directors~~directors as a group: Approximate Name and Address Number of Shares Percentage of Beneficial Owner Beneficially Owned of Class Morton L. Certilman............ 2,611,893(1)(2)(3) 46.7% The Financial Center at Mitchel Field 90 Merrick Avenue East Meadow, New York Adam R. Lieberman.................. 1,800,000(2)(4) 32.2% 125 Baylis Road Melville, New York Jay M. Haft.................... 910,393(1)(5) 16.3% 201 S. Biscayne Blvd. Suite 3000 Miami, Florida Leon Lapidus................... 20,000 * 111 Sinnott Road Scarborough Ontario M1L 4S6 Canada All executive officers and Directors as a group (4 persons).................... 3,587,286(3)(5)(6) 64.2% 12 * Less than 1%. (1) Messrs. Certilman and Haft have previouslygroup.

Name and Address of Beneficial Owner	Number of Shares Beneficially Owned	Approximate Percent of Class

Barry B. Goldstein 1158 Broadway Hewlett, New York	763,078 (1)(2)	25.1 %

Michael R. Feinsod Infinity Capital Partners, L.P. 767 Third Avenue, 16th Floor New York, New York	487,495 (1)(3)	16.4%

AIA Acquisition Corp 6787 Market Street Upper Darby, Pennsylvania	361,600 (4)	11.0%

Jack D. Seibald 1336 Boxwood Drive West Hewlett Harbor, New York	238,065 (1)(5)	8.0%

Morton L. Certilman 90 Merrick Avenue East Meadow, New York	179,829 (1)	6.0%

Jay M. Haft 69 Beaver Dam Road Salisbury, Connecticut	165,797 (1)(6)	5.6%

David A. Lyons 252 Brookdale Road Stamford, Connecticut	29,581 (7)	1.0%

All executive officers and directors as a group (5 persons)	1,684,016 (1)(2)(3)(5)(6)(7)	55.1%

__________

(1)	Based upon Schedule 13D filed ~~a Schedule 13D and amendments thereto~~ under the Securities Exchange Act of 1934, as amended, and other information that is publicly available.

(2)	Includes (i) 8,500 shares held by Mr. Goldstein’s children, (ii) 11,900 shares held in a retirement trust for the benefit of Mr. Goldstein and (iii) 65,000 shares issuable upon the exercise of options that are currently exercisable. Excludes shares beneficially owned by AIA Acquisition Corp. (“AIA ”) of which members of Mr. Goldstein’s family are principal stockholders. Mr. Goldstein disclaims beneficial ownership of the shares held by his children and retirement trust and the shares owned by AIA.

(3)	Shares are owned by Infinity Capital Partners, L.P. (“Partners”). Each of (i) Infinity Capital, LLC (“Capital”), as the general partner of Partners, (ii) Infinity Management, LLC (“Management”), as the Investment Manager of Partners, and (iii) Michael Feinsod, as the Managing Member of Capital and Management, the General Partner and Investment Manager, respectively, of Partners, may be deemed to be the beneficial owners of the shares held by Partners. Pursuant to the Schedule 13D filed under the Securities Exchange Act of 1934, as amended, by Partners, Capital, Management and Mr. Feinsod, each has sole voting and dispositive power over the shares.

(4)	Based upon Schedule 13G filed under the Securities Exchange Act of 1934, as amended, and other information that is publicly available. Includes 312,000 shares issuable upon the conversion of preferred shares that are currently convertible.

(5)	Includes (i) 113,000 shares owned jointly by Mr. Seibald and his wife, Stephanie Seibald; (ii) 100,000 shares owned by SDS Partners I, Ltd., a limited partnership (“SDS”); (iii) 3,000 shares owned by Boxwood FLTD Partners, a limited partnership (“Boxwood”); (iv) 3,000 shares owned by Stewart Spector IRA (“S. Spector”); (v) 3,000 shares owned by Barbara Spector IRA Rollover (“B. Spector”); and (vi) 4,000 shares owned by Karen Dubrowsky IRA (“Dubrowsky”). Mr. Seibald has voting and dispositive power over the shares owned by SDS, Boxwood, S. Spector, B. Spector and Dubrowsky.


(6)	Includes 3,076 shares held in a retirement trust for the benefit of Mr. Haft.

(7)	Includes 20,000 shares issuable upon the exercise of currently exercisable options.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information as of December 31, 2008 with respect to ~~their respective equity interests~~compensation plans (including individual compensation arrangements) under which our common shares are authorized for issuance, aggregated as follows:

·	All compensation plans previously approved by security holders; and

·	All compensation plans not previously approved by security holders.

EQUITY COMPENSATION PLAN INFORMATION

	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	177,400	$2.40	367,724
Equity compensation plans not approved by security holders	-0-	-0-	-0-
Total	177,400	$2.40	367,724

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Debt Financing

Effective July 10, 2003, in order to fund our premium finance operations, we obtained $3,500,000 from a private placement of debt. The debt was initially repayable on January 10, 2006 and provides for interest at the rate of 12.625% per annum, payable semi-annually. We have the right to prepay the debt. During 2005, we utilized our bank line of credit then in effect to repay $2,000,000 of the debt.

In consideration of the debt financing, we issued to the lenders warrants for the purchase of an aggregate of 105,000 of our common shares at an exercise price of $6.25 per share. The warrants were initially scheduled to expire on January 10, 2006. Effective May 25, 2005, the holders of the remaining $1,500,000 of debt agreed to extend the maturity date of the debt to September 30, 2007. The debt extension was given to satisfy a requirement of a lender that arose in connection with a December 2004 increase in the lender’s revolving line of credit and an extension of the line to June 30, 2007. In consideration for the extension of the due date for the debt, we extended the expiration date of warrants held by the debtholders for the purchase of 97,500 common shares to September 30, 2007. Between March 2007 and September 2007, the holders of the outstanding debt agreed to a further extension of the due date to September 30, 2008. In consideration for such further extension, we further extended the expiration date of the warrants held by the debtholders to September 30, 2008.

In August 2008, the maturity date was further extended from September 30, 2008 to July 10, 2009 (or earlier if certain conditions are met). In exchange for this extension, the holders will receive an aggregate incentive payment equal to $10,000 times the number of months (or partial months) the debt is outstanding after September 30, 2008 through the maturity date. If a prepayment of principal reduces the debt below $1,500,000, the incentive payment for all subsequent months will be reduced in proportion to any such reduction to the debt. The aggregate incentive payment is due upon full repayment of the debt.

One of the private placement lenders was a retirement trust established for the benefit of Jack Seibald which loaned us $625,000 and was issued a warrant for the purchase of 18,750 of our common shares. Mr. Seibald is one of our principal stockholders and, effective September 2004, became one of our directors. Mr. Seibald’s retirement trust currently holds approximately $288,000 of the debt.

In September 2007, a limited liability company of which Mr. Goldstein is a minority member purchased from a debtholder a note in the approximate principal amount of $115,000 and a warrant for the purchase of 7,500 shares. In connection with the purchase, the maturity date of the debt and the expiration date of the warrant were extended as discussed above.

The warrants expired on September 30, 2008.

Commercial Mutual Insurance Company

On January 31, 2006, we purchased two surplus notes in the aggregate principal amount of $3,750,000 issued by Commercial Mutual Insurance Company. Commercial Mutual is a New York property and casualty insurer.

Concurrently with the purchase, the new Commercial Mutual Board of Directors elected Barry Goldstein, our President, Chairman of the Board and Chief Executive Officer, as its Chairman. Mr. Goldstein had been elected as a director of Commercial Mutual in December 2005.

In ~~view~~March 2007, Commercial Mutual’s Board of ~~their intention~~Directors adopted a resolution to ~~consult~~convert Commercial Mutual from an advance premium cooperative insurance company to a stock property and casualty insurance company. Commercial Mutual has advised us that it has obtained permission from the Superintendent of Insurance of the State of New York (the “Superintendent of Insurance”) to proceed with ~~each other~~the conversion process (subject to certain conditions as discussed below).

The conversion by Commercial Mutual to a stock property and casualty insurance company is subject to a number of conditions, including the approval of the plan of conversion, which was filed with the Superintendent of Insurance on April 25, 2008, by both the Superintendent of Insurance and Commercial Mutual’s policyholders. As part of the approval process, the Superintendent of Insurance had an appraisal performed with respect to the ~~acquisition, voting and disposition~~fair market value of their respective shares, Messrs. Certilman and Haft may be deemed a group. Accordingly, the group of Messrs. Certilman and Haft beneficially owns 3,522,286 shares of Common Stock. Such amount represents approximately 63.0% of the outstanding shares of Common Stock of the Company. However, each of Messrs. Certilman and Haft independently makes his own decisions with respect to the acquisition, voting and disposition of the shares of Common Stock directly owned by him. Further, neither Mr. Certilman nor Mr. Haft has any economic interest in the shares of Common Stock directly owned by the other. (2) Pursuant to a certain Amended and Restated Voting Trust Agreement, datedCommercial Mutual as of December ~~30, 1996, between Sterling Foster Holding Corp. ("SFHC") and Mr. Certilman,~~31, 2006. In addition, the Insurance Department conducted a five year examination of Commercial Mutual as ~~voting trustee (the "Voting Trust Agreement"), SFHC transferred voting control over all 1,800,000 shares~~ of ~~Common Stock~~December 31, 2006. We, as the holder of the ~~Company it presently owns~~Commercial Mutual surplus notes, at our option, would be able to ~~Mr. Certilman during~~exchange the ~~three year term~~surplus notes for an equitable share of the ~~Voting Trust Agreement. (3) Includes 1,800,000~~securities or other consideration, or both, of the corporation into which Commercial Mutual would be converted. Based upon the amount payable on the surplus notes and the statutory surplus of Commercial Mutual, the plan of conversion provides that, in the event of a conversion by Commercial Mutual into a stock corporation, in exchange for our relinquishing our rights to any unpaid principal and interest under the surplus notes, we would receive 100% of the stock of Commercial Mutual. No assurances can be given that the conversion will occur or as to the timing or terms of the conversion.

Exchange of Preferred Stock

Effective March 23, 2007, the outside mandatory redemption date for the preferred shares held by ~~Mr. Certilman pursuant~~AIA Acquisition Corp. (“AIA”) was extended from April 30, 2007 to April 30, 2008 through the ~~Voting Trust Agreement and 360,000~~issuance of Series B preferred shares ~~held~~ in ~~a retirement trust~~exchange for ~~his benefit. (4) The shares are registered in the name~~an equal number of SFHC; Mr. Lieberman is the beneficial owner of these shares by reason of his position as President and sole stockholder of SFHC. (5) Includes 12,500 shares held in a retirement trust for the benefit of Mr. Haft. (6) Includes 5,000 shares held in a retirement trust for the benefit of an executive officer and 20,000Series A preferred shares held by ~~such executive officer's wife. Such executive officer disclaims beneficial ownership~~AIA.

Effective April 16, 2008, the outside mandatory redemption date for the preferred shares held by AIA was further extended to April 30, 2009 through the issuance of Series C preferred shares in exchange for an equal number of Series B preferred shares held by AIA. In addition, the Series C preferred shares ~~owned~~provide for dividends at the rate of 10% per annum (as compared to 5% per annum for the Series B preferred shares).

Effective August 23, 2008, the outside mandatory redemption date for the preferred shares held by ~~his wife. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Pursuant~~AIA was further extended to ~~a certain Subscription Agreement, dated June 3, 1996,~~July 31, 2009 through the issuance of Series D preferred shares in exchange for an equal number of Series C preferred shares held by AIA.

The current aggregate redemption amount for the Series D preferred shares held by AIA is $780,000, plus accumulated and ~~between the Company, Mr. Certilman, Mr. Haft, and SFHC, the Company issued 3,200,000~~unpaid dividends. The Series D preferred shares ~~of Common Stock~~are convertible into our common shares at a price of ~~$0.25~~$2.50 per share (the "Offering") for a total subscription price of $800,000. Of such amount, $450,000 was paid by SFHC for the purchase of 1,800,000 shares and $175,000 was paid by each of Mr. Haft and Mr. Certilman for the purchase of 700,000 shares each. The proceedsshare. Members of the ~~Offering were intended to be used in connection with the business opportunities described in Item 1(a)(v) hereof. 13~~ family of Barry Goldstein, our Chief Executive Officer, are principal stockholders of AIA.

Relationship

Certilman Balin Adler & Hyman, LLP, a law firm ofwith which ~~Mr.~~Morton L. Certilman, a principal stockholder, is ~~a member,~~affiliated, serves as ~~counsel to the Company.~~our counsel. It is presently anticipated that such firm will continue to represent ~~the Company and/or its affiliates~~us and will receive fees for its services at rates and in amounts not greater than would be paid to unrelated law firms performing similar services. ~~ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K (a) Exhibits Exhibit Number Description~~

Director Independence

Board of Exhibit - ------ ---------------------- 3(a) Certificate of Incorporation, as amended(1) 3(b) By-laws, as amended(2) 9 Amended and Restated Voting Trust Agreement, dated December 30, 1996, among Sterling Foster Holding Corp. and Morton L. Certilman, as voting trustee. 10(a) Agreement, dated July 22, 1988, between the Ports Authority and IAH(1) 10(b) Resolution ofDirectors

Our Board of Directors is currently comprised of ~~Ports Authority, dated August 10, 1994, regarding rental obligation~~Barry B. Goldstein, Michael R. Feinsod, Jay M. Haft, David A. Lyons and Jack D. Seibald. Each of Messrs. Feinsod, Haft, Lyons and Seibald is currently an “independent director” based on the definition of independence in Rule 4200(a)(15) of the ~~Hotel(3) 10(c) Amended~~listing standards at The Nasdaq Stock Market.

Audit Committee

The members of our Board’s Audit Committee currently are Messrs. Lyons, Haft and ~~Restated 1990 Stock Option Plan(1) 10(d) License and Royalty Agreement, dated July 1991, among~~Seibald, each of whom is an “independent director” based on the ~~Company, IFTI Capital Appreciation Management Corporation, and NPS Products, Inc.(4) 10(e) Subscription Agreement, dated as~~definition of ~~June 3, 1996, between Mr. Certilman, Mr. Haft, SFHC and the Company (5) 21 Subsidiaries~~independence in Rule 4200(a)(15) of the ~~Registrant(4) 27 Financial Data Schedule. __________~~ listing standards of The Nasdaq Stock Market and Rule 10A-3(b)(1) ~~Denotes document filed as~~under the Securities Exchange Act of 1934.

Nominating Committee

The members of our Board’s Nominating Committee currently are Messrs. Feinsod, Haft, Lyons and Seibald, each of whom is an ~~exhibit~~“independent director” based on the definition of independence in Rule 4200(a)(15) of the listing standards of The Nasdaq Stock Market.

Compensation Committee

The members of our Board’s Compensation Committee currently are Messrs. Seibald, Haft and Lyons, each of whom is an “independent director” based on the definition of independence in Rule 4200(a)(15) of the listing standards of The Nasdaq Stock Market.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The following is a summary of the fees billed to ~~the Company's Annual Report on Form 10-KSB~~us by Holtz Rubenstein Reminick LLP, our independent auditors, for professional services rendered for the ~~year~~fiscal years ended December 31, ~~1993~~2008 and ~~incorporated herein by reference. (2) Denotes document filed as an exhibit to the Company's Annual Report on Form 10-KSB~~December 31, 2007:

Fee Category	Fiscal 2008 Fees		Fiscal 2007 Fees
Audit Fees(1)	$	110,000	$	116,000
Audit-Related Fees(2)		-		-
Tax Fees(3)		47,600		28,000
All Other Fees(4)		8,910		8,419
Total Fees	$	166,510	$	152,419

__________

(1)

Audit Fees consist of aggregate fees billed for professional services rendered for the audit of our annual financial statements and review of the interim financial statements included in quarterly reports or services that are normally provided by the independent auditors in connection with statutory and regulatory filings or engagements for the fiscal years ended December 31, 2008 and December 31, 2007, respectively.


(2)	Audit-Related Fees consist of aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.”

(3)	Tax Fees consist of aggregate fees billed for preparation of our federal and state income tax returns and other tax compliance activities.

(4)	All Other Fees consist of aggregate fees billed for products and services provided by Holtz Rubenstein Reminick LLP, other than those disclosed above. These fees related to the review of the Uniform Franchise Offering Circular of our wholly-owned subsidiary, DCAP Management Corp., and other general accounting services.

The Audit Committee is responsible for the appointment, compensation and oversight of the work of the independent auditors and approves in advance any services to be performed by the independent auditors, whether audit-related or not. The Audit Committee reviews each proposed engagement to determine whether the provision of services is compatible with maintaining the independence of the independent auditors. All of the fees shown above were pre-approved by the Audit Committee.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

Exhibit Number	Description of Exhibit

2(a)	Amended and Restated Purchase and Sale Agreement, dated as of February 1, 2008, by and among Premium Financing Specialists, Inc., Payments Inc. and DCAP Group, Inc. (1)

2(b)	Asset Purchase Agreement, dated as of March 27, 2009, by and among NII BSA LLC, Barry Scott Agency, Inc., DCAP Accurate, Inc. and DCAP Group, Inc.

3(a)	Restated Certificate of Incorporation (2)

3(b)	Certificate of Designations of Series A Preferred Stock (3)

3(c)	Certificate of Designations of Series B Preferred Stock (4)

3(d)	Certificate of Designations of Series C Preferred Stock (5)

3(e)	Certificate of Designations of Series D Preferred Stock (6)

3(f)	By-laws, as amended (7)

10(a)	1998 Stock Option Plan, as amended (8)


10(b)	Unit Purchase Agreement, dated as of July 2, 2003, by and among DCAP Group, Inc. and the purchasers named therein (9)

10(c)	Form of Secured Subordinated Promissory Note, dated July 10, 2003, issued by DCAP Group, Inc. with respect to indebtedness in the original aggregate principal amount of $3,500,000 (9)

10(d)	Letter agreement, dated May 25, 2005, between DCAP Group, Inc. and Jack Seibald as representative and attorney-in-fact with respect to the outstanding debt (6)

10(e)	Letter agreement, dated March 23, 2007, between DCAP Group, Inc. and Jack Seibald as representative and attorney-in-fact with respect to the outstanding debt (6)

10(f)	Letter agreement, dated September 30, 2007, between DCAP Group, Inc. and Jack Seibald as representative and attorney-in-fact with respect to the outstanding debt (10)

10(g)	Letter agreement, dated August 13, 2008, between DCAP Group, Inc. and Jack Seibald as representative and attorney-in-fact with respect to the outstanding debt (6)

10(h)	Registration Rights Agreement, dated July 10, 2003, by and among DCAP Group, Inc. and the purchasers named therein (9)

10(i)	2005 Equity Participation Plan (11)

10(j)	Surplus Note, dated April 1, 1998, in the principal amount of $3,000,000 issued by Commercial Mutual Insurance Company to DCAP Group, Inc. (11)

10(k)	Surplus Note, dated March 12, 1999, in the principal amount of $750,000 issued by Commercial Mutual Insurance Company to DCAP Group, Inc. (11)

10(l)	Employment Agreement, dated as of October 16, 2007, between DCAP Group, Inc. and Barry B. Goldstein (12)

10(m)	Amendment No. 1, dated as of August 25, 2008, to Employment Agreement between DCAP Group, Inc. and Barry B. Goldstein (6)

10(n)	Stock Option Agreement, dated as of October 16, 2007, between DCAP Group, Inc. and Barry B. Goldstein (12)

14	Code of Ethics (13)

21	Subsidiaries

23	Consent of Holtz Rubenstein Reminick LLP


31(a)	Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31(b)	Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer 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

__________

(1)	Denotes document filed as an exhibit to our Current Report on Form 8-K for an event dated February 1, 2008 and incorporated herein by reference.

(2)	Denotes document filed as an exhibit to our Quarterly Report on Form 10-QSB for the period ended September 30, 2004 and incorporated herein by reference.

(3)	Denotes document filed as an exhibit to our Current Report on Form 8-K for an event dated May 28, 2003 and incorporated herein by reference.

(4)	Denotes document filed as an exhibit to our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006 and incorporated herein by reference.

(5)	Denotes document filed as an exhibit to our Quarterly Report on Form 10-QSB for the period ended March 31, 2008 and incorporated herein by reference.

(6)	Denotes document filed as an exhibit to our Quarterly Report on Form 10-Q for the period ended September 30, 2008 and incorporated herein by reference.

(7)	Denotes document filed as an exhibit to our Current Report on Form 8-K for an event dated December 26, 2007 and incorporated herein by reference.

(8)	Denotes document filed as an exhibit to our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2002 and incorporated herein by reference.

(9)	Denotes document filed as an exhibit to Amendment No. 1 to our Current Report on Form 8-K for an event dated May 28, 2003 and incorporated herein by reference.

(10)	Denotes document filed as an exhibit to our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007 and incorporated herein by reference.

(11)	Denotes document filed as an exhibit to our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005 and incorporated herein by reference.

(12)	Denotes document filed as an exhibit to our Current Report on Form 8-K for an event dated October 16, 2007 and incorporated herein by reference.


(13)	Denotes document filed as an exhibit to our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003 and incorporated herein by reference.

Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm	F-2

Consolidated Balance Sheets	F-3

Consolidated Statements of Operations	F-4

Consolidated Statement of Stockholders' Equity	F-5

Consolidated Statements of Cash Flows	F-6 - F-7

Notes to Consolidated Financial Statements	F-8 - F-29

DCAP GROUP, INC. AND
SUBSIDIARIES
Consolidated Balance Sheets
December 31,	2008			2007

Assets
Current Assets:
Cash and cash equivalents	$	142,949		$	1,030,822
Accounts receivable, net of allowance for doubtful accounts of
$40,000 at December 31, 2008 and $50,000 at December 31, 2007		201,787			215,179
Prepaid expenses and other current assets		130,457			290,885
Assets from discontinued operations		2,913,147			16,352,308
Total current assets		3,388,340			17,889,194
Property and equipment, net		90,493			155,679
Notes receivable		5,935,704			5,170,804
Deposits and other assets		6,096			29,649
Total assets	$	9,420,633		$	23,245,326

Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses	$	822,350		$	570,449
Current portion of long-term debt		1,593,210			2,098,989
Other current liabilities		154,200			154,200
Liabilities from discontinued operations		213,685			12,682,268
Mandatorily redeemable preferred stock		780,000			780,000
Total current liabilities		3,563,445			16,285,906

Long-term debt		415,618			499,065
Deferred income taxes		184,000			303,000

Commitments

Stockholders' Equity:
Common stock, $.01 par value; authorized 10,000,000 shares; issued
3,788,771 at December 31, 2008 and 3,750,447 shares at December 31, 2007		37,888			37,505
Preferred stock, $.01 par value; authorized
1,000,000 shares; 0 shares issued and outstanding		-			-
Capital in excess of par		11,962,512			11,850,872
Deficit		(5,522,448	)		(4,545,242	)
		6,477,952			7,343,135
Treasury stock, at cost, 816,025 shares at December 31, 2008 and
781,423 shares at December 31, 2007		(1,220,382	)		(1,185,780	)
Total stockholders' equity		5,257,570			6,157,355
Total liabilities and stockholders' equity	$	9,420,633		$	23,245,326

DCAP GROUP, INC. AND
SUBSIDIARIES

Consolidated Statements of Operations
Years Ended December 31,	2008			2007

Commissions and fee revenue	$	911,225		$	649,246

Operating expenses:
General and administrative expenses		1,860,485			2,275,441
Depreciation and amortization		69,624			84,422
Total operating expenses		1,930,109			2,359,863

Operating loss		(1,018,884	)		(1,710,617	)

Other (expense) income:
Interest income		4,338			9,633
Interest income - notes receivable		764,899			1,287,819
Interest expense		(270,646	)		(432,351	)
Interest expense - mandatorily redeemable preferred stock		(66,625	)		(39,000	)
Total other income		431,966			826,101

Loss from continuing operations before benefit from income taxes		(586,918	)		(884,516	)
Benefit from income taxes		(391,225	)		(419,232	)
Loss from continuing operations		(195,693	)		(465,284	)
(Loss) income from discontinued operations, net of income taxes		(781,513	)		417,839
Net loss	$	(977,206	)	$	(47,445	)

Basic and Diluted Net (Loss) Income Per Common Share:

Loss from continuing operations	$	(0.07	)	$	(0.16	)
(Loss) income from discontinued operations	$	(0.26	)	$	0.14
Loss per common share	$	(0.33	)	$	(0.02	)

Number of weighted average shares used in computation
of basic and diluted loss per common share		2,972,597			2,963,036

DCAP GROUP, INC. AND
SUBSIDIARIES

Consolidated Statement of Stockholders' Equity
Years Months Ended December 31, 2007 and 2008

									Capital
	Common Stock				Preferred Stock				in Excess					Treasury Stock
	Shares		Amount		Shares		Amount		of Par		(Deficit)			Shares		Amount			Total
Balance, December 31, 2006		3,672,947	$	36,730		-	$	-	$	11,633,884	$	(4,497,797	)		776,923	$	(1,178,555	)	$	5,994,262
Exercise of stock options		74,500		745		-		-		111,455		-			-		-			112,200
Stock-based payments		3,000		30		-		-		105,533		-			-		-			105,563
Return of stock as settlement of liability		-		-		-		-		-		-			4,500		(7,225	)		(7,225	)
Net loss		-		-		-		-		-		(47,445	)		-		-			(47,445	)
Balance, December 31, 2007		3,750,447		37,505		-		-		11,850,872		(4,545,242	)		781,423		(1,185,780	)		6,157,355
Stock-based payments		38,324		383		-		-		111,640		-			-		-			112,023
Return of stock as settlement of liability		-		-		-		-		-		-			34,602		(34,602	)		(34,602	)
Net loss		-		-		-		-		-		(977,206	)		-		-			(977,206	)
Balance, December 31, 2008		3,788,771	$	37,888		-	$	-	$	11,962,512	$	(5,522,448	)		816,025	$	(1,220,382	)	$	5,257,570

DCAP GROUP, INC. AND
SUBSIDIARIES

Consolidated Statements of Cash Flows
Years Ended December 31,	2008			2007

Cash Flows from Operating Activities:
Net loss	$	(977,206	)	$	(47,445	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		69,624			121,555
Bad debt expense		44,091			37,070
Accretion of discount on notes receivable		(576,228	)		(987,818	)
Amortization of warrants		17,731			40,120
Stock-based payments		112,023			105,563
Deferred income taxes		(487,000	)		(34,000	)
Changes in operating assets and liabilities:
Decrease (increase) in assets:
Accounts receivable		(104,221	)		41,382
Prepaid expenses and other current assets		7,500			(208,622	)
Deposits and other assets		23,553			(26,990	)
Increase (decrease) in liabilities:
Accounts payable, accrued expenses and taxes payable		251,901			126,180
Other current liabilities		-			(11,946	)
Deferred taxes payable		368,000			-
Net cash used in operating activities of continuing operations		(1,250,232	)		(844,951	)
Operating activities of discontinued operations		497,592			470,575
Net Cash Used in Operating Activities		(752,640	)		(374,376	)

Cash Flows from Investing Activities:
Decrease in notes and other receivables - net		3,176			2,374
Purchase of property and equipment		(4,438	)		(58,937	)
Net cash used in investing activities of continuing operations		(1,262	)		(56,563	)
Investing activities of discontinued operations		1,035,163			2,190,386
Net Cash Provided by Investing Activities		1,033,901			2,133,823

Cash Flows from Financing Activities:
Principal payments on long-term debt		(606,957	)		(570,589	)
Proceeds from exercise of options and warrants		-			112,200
Net cash used in financing activities of continuing operations		(606,957	)		(458,389	)
Financing activities of discontinued operations		(562,177	)		(1,466,648	)
Net Cash Used in Financing Activities		(1,169,134	)		(1,925,037	)

DCAP GROUP, INC. AND
SUBSIDIARIES

Consolidated Statements of Cash Flows (continued)
Years Ended December 31,	2008			2007

Net Decrease in Cash and Cash Equivalents		(887,873	)		(165,590	)
Cash and Cash Equivalents, beginning of year		1,030,822			1,196,412
Cash and Cash Equivalents, end of year	$	142,949		$	1,030,822

Supplemental Schedule of Non-Cash Investing and Financing Activities:
Liabilties assumed by purchaser of premium finance portfolio	$	11,229,060		$	-
Computer equipment acquired under capital leases	$	-		$	89,819

December 31,	Useful Lives	2008		2007

Furniture, fixtures & equipment	5 years	$	186,889	$	184,581
Leasehold improvements	3 - 5 years		61,465		60,227
Computer hardware, software and office equipment	2 - 5 years		526,595		487,097
Entertainment facility	20 years		200,538		200,538
			975,487		932,443
Less accumulated depreciation			884,994		776,764
		$	90,493	$	155,679

Years ended December 31,
2009	$	1,593,210
2010		134,031
2011		129,041
2012		126,471
2013		26,075
	$	2,008,828

Years ended December 31,
2009	$	383,376
2010		221,539
2011		136,734
2012		36,493
2013		37,200
Thereafter		74,400
	$	889,742

	Dividend Yield	0.00%
	Volatility	60.79%
	Risk-Free Interest Rate	5.00%
	Expected Life	5 years

Stock Options	Number of Shares			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value

Outstanding at January 1, 2008		268,624		$	2.55		-		-

Forfeited		(91,224	)	$	2.84		-		-

Outstanding at December 31, 2008		177,400		$	2.40		3.35	$	-

Vested and Exercisable at December 31, 2008		112,921		$	2.60		3.11	$	-

	Options			Weighted Average Grant Date Fair Value
Nonvested at December 31, 2007		142,756		$	1.21
Vested		(44,854	)		1.16
Forfeited		(33,423	)		1.41
Nonvested at December 31, 2008		64,479		$	1.10

	DCAP GROUP, INC.
Dated: April 13, 2009	By: /s/ Barry B. Goldstein Barry B. Goldstein Chief Executive Officer

Signature	Capacity	Date

/s/ Barry B. Goldstein Barry B. Goldstein	President, Chairman of the Board, Chief Executive Officer, Treasurer and Director (Principal Executive Officer)	April 13, 2009
/s/ Victor Brodsky Victor Brodsky	Chief Accounting Officer (Principal Financial and Accounting Officer) and Secretary	April 13, 2009
/s/ Michael R. Feinsod Michael R. Feinsod	Directors	April 13, 2009
/s/ Jay M. Haft Jay M. Haft	Director	April 13, 2009
/s/ David A. Lyons David A. Lyons	Director	April 13, 2009
/s/ Jack D. Seibald Jack D. Seibald	Director	April 13, 2009