SCHEDULE 14A
                                 (Rule 14a-101)
                     INFORMATION REQUIRED IN PROXY STATEMENT
                            SCHEDULE 14A INFORMATION

                Proxy Statement Pursuant to Section 14(a) of the
                         Securities Exchange Act of 1934

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[X]      Preliminary Proxy Statement
[ ]      Definitive Proxy Statement
[ ]      Definitive Additional Materials
[ ]      Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ]      Confidential, for use of the Commission only as permitted by Rule 14a-6
         (e)(2)

                                DCAP GROUP, INC.
- - ------------------------------------------------------------------------------
                (Name of Registrant as Specified in its Charter)

     (Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[ ]   No fee required.
[X]   Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

     1)   Title of each class of securities to which transaction applies:

          not applicable

     2)   Aggregate number of securities to which transaction applies:

          not applicable

     3)   Per unit  price  or other  underlying  value of  transaction  computed
          pursuant to Exchange Act Rule 0-11: (Set forth the amount on which the
          filing fee is calculated and state how it was determined)

          not applicable

     4)   Proposed maximum aggregate value of transaction:

          $1,563,500

     5)   Total fee paid:

          $312.70

     [ ]  Fee paid previously with preliminary materials:

[  ]      Check box if any part of the fee is offset as provided by Exchange Act
          Rule  0-11(a)(2)  and identify the filing for which the offsetting fee
          was paid  previously.  Identify  the previous  filing by  registration
          statement number, or the form or schedule and the date of its filing.

          1) Amount previously paid:

          2) Form, Schedule or Registration Statement no.:

          3) Filing Party:

          4) Date Filed:

                                DCAP GROUP, INC.
                             2545 Hempstead Turnpike
                           East Meadow, New York 11554

                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                           TO BE HELD ON JULY 18, 2001

To the Stockholders of DCAP Group, Inc.:

     NOTICE IS HEREBY  GIVEN that the Annual  Meeting  of  Stockholders  of DCAP
Group,  Inc.,  a  Delaware  corporation,  will be held on July  18,  2001 at The
Financial  Center at Mitchel Field, 90 Merrick Avenue,  9th Floor,  East Meadow,
New York 11554, at the hour of 10:00 a.m., for the following purposes:

     1.   To elect four directors for the coming year.

     2.   To approve  and ratify the sale by us and our  subsidiaries  of assets
          that may  constitute,  under  Delaware law,  substantially  all of our
          assets.

     3.   To approve an increase in the number of common shares authorized to be
          issued  pursuant  to our 1998  Stock  Option  Plan from  2,000,000  to
          3,000,000.

     4.   To  approve  an  amendment  to our  Certificate  of  Incorporation  to
          increase the number of  authorized  common  shares from  25,000,000 to
          40,000,000.

     5.   To approve an amendment to our Certificate of Incorporation to provide
          for the authority to issue up to 1,000,000 preferred shares.

     6.   To approve an amendment to our Certificate of Incorporation to broaden
          the corporate purposes to include any lawful act or activity for which
          corporations may be organized under Delaware law.

     7.   To  transact  such other  business  as may  properly  come  before the
          meeting.

     Only  stockholders  of record at the close of business on June 12, 2001 are
entitled to notice of and to vote at the meeting or at any adjournment thereof.

                                                      Morton L. Certilman
                                                      Secretary

East Meadow, New York
__________, 2001

================================================================================
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,  PLEASE  VOTE,  DATE AND SIGN THE
ENCLOSED PROXY,  WHICH IS SOLICITED BY OUR BOARD OF DIRECTORS,  AND RETURN IT IN
THE PRE-ADDRESSED ENVELOPE PROVIDED FOR THAT PURPOSE. ANY STOCKHOLDER MAY REVOKE
HIS PROXY AT ANY TIME BEFORE THE MEETING BY WRITTEN  NOTICE TO SUCH  EFFECT,  BY
SUBMITTING A SUBSEQUENTLY  DATED PROXY OR BY ATTENDING THE MEETING AND VOTING IN
PERSON.
================================================================================

                                TABLE OF CONTENTS

                                                                           Page

Explanatory Note                                                               1
Summary of the Sales Transactions                                              1
Soliciting, Voting and Revocability of Proxy                                   5
Forward-Looking Statements                                                     7
Executive Compensation                                                         7
Security Ownership of Certain Beneficial Owners and Management                 9
Certain Relationships and Related Transactions                                11
Proposal 1:  Election of Directors                                            16
Proposal 2:  Sale of Assets                                                   20
    Sales Transactions                                                        20
    Background of and Reasons for the Sales Transactions                      21
    Valuation Analysis                                                        22
    Stockholder Approval                                                      24
    Regulatory Requirements                                                   25
    Pro Forma Financial Statements                                            25
    Recommendation and Required Vote                                          31
Proposal 3: Amendment to 1998 Stock Option Plan to Increase Number
  of Authorized Shares                                                        31
Proposal 4:  Amendment to Certificate of Incorporation to Increase Number
  of Authorized Common Shares                                                 36
Proposal 5:  Amendment to Certificate of Incorporation to Provide for
  Authority to Issue Preferred Shares                                         37
Proposal 6:  Amendment to Certificate of Incorporation to Broaden Corporate
  Purposes                                                                    38
Independent Public Accountants                                                38
Stockholders Proposals                                                        39
Other Business                                                                41
Incorporation of Certain Information by Reference                             41
Appendix A - Authority of Board with respect to Preferred Shares Proposed
  to be Authorized
Appendix B - Proposed Revised Article THIRD of Certificate of Incorporation
  with respect to Corporate Purposes

                                DCAP GROUP, INC.
                             2545 Hempstead Turnpike
                           East Meadow, New York 11554
                          ----------------------------

                                 PROXY STATEMENT
                          -----------------------------

                                EXPLANATORY NOTE

     Throughout this proxy  statement,  the words "DCAP Group," "we," "our," and
"us" refer to DCAP Group,  Inc.  and the  operations  of DCAP  Group,  Inc. as a
whole.  References to "DCAP  Insurance"  and the "DCAP  Companies" in this proxy
statement mean our wholly-owned  subsidiary,  DCAP Insurance Agencies, Inc., and
affiliated companies, and the operations of our insurance-related subsidiaries.

                            SUMMARY OF SALE OF ASSETS

     The  following  is a  summary  of the  material  terms of the  transactions
pursuant to which we or our subsidiaries have sold or have agreed to sell assets
that may constitute,  under Delaware law,  substantially all of our assets.  The
summary is not intended to be a complete  description of the transactions and is
subject to and  qualified  in its  entirety by  reference  to the more  detailed
information  contained  later in this proxy statement under "Proposal 2: Sale of
Assets."

         Sales Transactions

     We or our subsidiaries  have entered into the following sales  transactions
since May 2000:

          In May 2000, we sold to Morton L. Certilman,  our then Chairman of the
          Board,  our 50%  interest  in four  DCAP  stores.  The  remaining  50%
          interest in each store is held by Mr. Certilman's daughter.  The total
          purchase price for our interest was approximately  $141,000. The other
          terms of the sale are described in this proxy statement under "Certain
          Relationships and Related Transactions - Sale of Interests in Stores."
          The  obligation  to pay  the  purchase  price  for  our  interest  was
          cancelled  in March  2001  concurrently  with the  termination  of Mr.
          Certilman's  employment  agreement  with  us.  This  is  described  in
          "Certain   Relationships   and  Related   Transactions  -  March  2001
          Transactions."

          Between  September  2000 and February  2001,  we sold seven other DCAP
          stores to persons who are not affiliated  with us for a total purchase
          price of approximately $555,000 (exclusive of contingent amounts).

          In March  2001,  we and our  subsidiaries  agreed to sell eight  other
          stores to Kevin Lang (three),  Abraham Weinzimer (three) and an entity
          owned by Mr. Certilman

          (two). At the time of the agreements,  Messrs. Lang and Weinzimer were
          our President  and Executive  Vice  President,  respectively,  and Mr.
          Certilman  was still  our  Chairman  of the  Board.  Also,  each was a
          director  of DCAP  Group  (Mr.  Certilman  remains a  director).   The
          purchase prices for the sales are as follows:

               Mr. Lang: $257,000;
               Mr. Weinzimer: $285,000; and
               Mr. Certilman: $225,000.

          The terms of the sales are  described  in this proxy  statement  under
          "Certain   Relationships   and  Related   Transactions  -  March  2001
          Transactions."

     Background of and Reasons for the Sales Transactions

     In  February  1999,  we  acquired  DCAP  Insurance.  At  the  time  of  the
acquisition,  there were  approximately 56 DCAP stores. Of these,  one-half were
either  wholly-owned  by us or were owned  partially by us and  partially by the
operator of the location, and the other one-half were franchises. We provide the
administrative  services and functions of a "central office" to our wholly-owned
and  partially-owned  offices.  Franchises operate without the assistance of our
"central office" functions.

     During the fiscal year ended  December 31, 1999,  our insurance  operations
generated a net loss of  $173,160.  During the six months  ended June 30,  2000,
these  operations  continued  to  generate a net loss.  The losses  were  caused
primarily by the substantial  administrative  expenses incurred in operating the
insurance brokerage business.

     As a result, in August 2000, our Board of Directors  determined to commence
selling our interest in our wholly-owned and partially-owned stores and focus on
our franchise operations. This determination was made with a view toward raising
needed cash and  eliminating  the  overhead  expenses  that are not  incurred in
connection with franchise operations.

     Stockholder Approval

     We are submitting this matter to our  stockholders  for approval based upon
our belief  that the assets  sold and  agreed to be sold may  constitute,  under
Delaware law, substantially all of our assets.

     The assets sold by us during 2000 and 2001 constituted  approximately 9% of
our total  assets as of  December  31,  2000.  The DCAP  stores  subject  to the
completed sales generated approximately 28% and 24% of our total revenues during
the fiscal year ended  December  31, 1999 and the three  months  ended March 31,
2000, respectively.

     The  assets  agreed to be sold to Messrs.  Lang,  Weinzimer  and  Certilman
constituted  approximately  12% of our total assets as of December 31, 2000. The
stores subject to these sales generated  approximately 30% of our total revenues
for the year ended December 31, 2000.

     At the time of execution of the agreements with Messrs. Lang and Weinzimer,
each of them paid to us the entire purchase price for his stores.  Mr. Certilman
paid $197,000 of his purchase  price at the time of execution of his  agreement.
The  closing of the sales to them is subject to the  receipt of  approval by our
stockholders of the sales (either individually,  as a group or as part of a sale
of our assets that may constitute a sale of substantially all of our assets).

     As  security  for the  return  of the  amounts  paid  to us at the  time of
execution of the agreements,  we granted to each of Messrs.  Lang, Weinzimer and
Certilman a security interest in the assets they agreed to acquire. In the event
stockholder  approval is not  received by July 26, 2001,  each of Messrs.  Lang,
Weinzimer and Certilman may demand a return of his respective  payment.  We have
the option to require that,  instead of repaying the sums,  they  foreclose upon
their respective liens.

     The sales that were completed  between May 2000 and February 2001 are final
and binding and are not subject to stockholder approval. Stockholder approval of
Proposal 2 would serve to ratify these sales.

     Summary Historical and Pro Forma Data

     Summary Historical Data

     The summary  financial  information  set forth below for DCAP Group for the
years ended  December 31, 2000 and 1999 and for the three months ended March 31,
2001  and  2000  is  derived  from  the  more  detailed  consolidated  financial
statements  incorporated by reference in this proxy  statement.  The information
should  be read in  conjunction  with the  financial  statements  and the  notes
thereto. The consolidated  financial statements for the years ended December 31,
2000 and 1999 were audited by Holtz  Rubenstein & Co., LLP. The  information for
the three  months  ended March 31,  2001 is not  necessarily  indicative  of the
operating results for the entire year.

     Statement of Operations

                          Three Months Ended March 31,  Year Ended December 31,
                         ----------------------------  -----------------------
                            2001           2000          2000            1999
                            ----           ----          ----            ----

     Revenues             $1,165,145    $2,420,624     $7,815,424    $9,068,911
     Net (loss)             (612,944)      (16,598)    (3,718,297)     (450,042)
     Net (loss) per share       (.04)          .00           (.25)         (.04)

     Balance Sheet

                                              March 31, 2001   December 31, 2000
                                              --------------   -----------------

         Cash and cash equivalents            $   396,375       $   759,309
         Working capital (deficiency)          (1,400,006)         (161,156)
         Total assets                           3,138,178         4,430,623
         Total stockholders' equity                78,926         1,392,524

     Summary Pro Forma Financial Data

     The following  summary of financial  information  is based on our unaudited
pro forma condensed  consolidated  financial  statements  appearing elsewhere in
this proxy statement and should be read in conjunction with those statements and
the related notes thereto.  The summary pro forma financial data gives effect to
the  consummation  of the sales of stores  discussed  above (both  completed and
pending) as if the closings had occurred as of January 1, 2000.  The summary pro
forma  financial  data does not give  effect  to any of the  other  transactions
entered  into  concurrently  with the  agreements  to sell the stores to Messrs.
Lang,  Weinzimer and Certilman.  These other  transactions  are discussed  under
"Certain  Relationships and Related  Transactions - March 2001 Transactions" and
include the termination or amendment of employment agreements with Messrs. Lang,
Weinzimer and  Certilman  pursuant to which we were relieved of an obligation to
pay minimum aggregate salaries of approximately $1,760,000 through February 2004
in  addition  to other  amounts  that  may have  been  payable  pursuant  to the
employment agreements.

     Statement of Operations

                                 Three Months Ended               Year Ended
                                   March 31, 2001             December 31, 2000
                                 ------------------           -----------------

         Revenues                  $693,019                       $4,374,830
         Net (loss)                (610,741)                      (4,497,939)
         Net (loss) per share          (.04)                            (.30)

                  SOLICITING, VOTING AND REVOCABILITY OF PROXY

     This proxy  statement is being mailed to all  stockholders of record at the
close of business on June 12, 2001 in connection  with the  solicitation  by the
Board of Directors of proxies to be voted at the Annual Meeting of  Stockholders
to be held on July 18,  2001 at  10:00  a.m.,  local  time,  or any  adjournment
thereof.  The proxy and this proxy  statement were mailed to  stockholders on or
about ________, 2001

     All shares  represented by proxies duly executed and received will be voted
on the matters  presented  at the meeting in  accordance  with the  instructions
specified in such proxies.  Proxies so received without  specified  instructions
will be voted as follows:

     (1) FOR the nominees named in the proxy to our Board of Directors;

     (2) FOR the approval and ratification of the sale of assets;

     (3)  FOR the  approval  of an  increase  in the  number  of  common  shares
authorized to be issued pursuant to our 1998 Stock Option Plan from 2,000,000 to
3,000,000;

     (4) FOR the approval of an amendment to our Certificate of Incorporation to
increase the number of authorized common shares from 25,000,000 to 40,000,000;

     (5) FOR the approval of an amendment to our Certificate of Incorporation to
provide for the authority to issue up to 1,000,000 preferred shares; and

     (6) FOR the approval of an amendment to our Certificate of Incorporation to
broaden the  corporate  purposes to include any lawful act or activity for which
corporations may be organized under Delaware law.

     Our Board does not know of any other matters that may be brought before the
meeting nor does it foresee or have reason to believe  that proxy  holders  will
have to vote for  substitute  or alternate  nominees to the Board.  In the event
that any other  matter  should  come  before the  meeting or any  nominee is not
available  for  election,  the  persons  named in the  enclosed  proxy will have
discretionary  authority  to vote all  proxies not marked to the  contrary  with
respect to such matters in accordance with their best judgment.

     The total number of common  shares  outstanding  and entitled to vote as of
June 12, 2001 was 11,353,402. The common shares are the only class of securities
entitled  to vote on matters  presented  to our  stockholders,  each share being
entitled to one vote.

     Our Certificate of Incorporation  provides for cumulative  voting of shares
for the election of directors. This means that each stockholder has the right to
cumulate his votes and give to one or more  nominees as many votes as equals the
number of directors to be elected  (four)  multiplied by the number of shares he
is entitled to vote. A stockholder  may therefore cast his votes for one nominee
or distribute  them among two or more of the nominees.  A majority of the common

shares outstanding and entitled to vote as of June 12, 2001, or 5,676,702 common
shares,  must be  present  at the  meeting  in  person  or by  proxy in order to
constitute a quorum for the transaction of business. Only stockholders of record
as of the close of business  on June 12,  2001 will be  entitled  to vote.  With
regard to the election of directors, votes may be cast in favor or withheld. The
directors  shall  be  elected  by a  plurality  of  the  votes  cast  in  favor.
Accordingly,  based upon there being four nominees, each person who receives one
or more votes will be elected as a director.  Votes withheld in connection  with
the election of one or more of the nominees for director  will not be counted as
votes cast for such individuals.

     Stockholders may expressly  abstain from voting on Proposals 2, 3, 4, 5 and
6 by so  indicating  on the  proxy.  Abstentions  and broker  non-votes  will be
counted for purposes of determining  the presence or absence of a quorum for the
transaction of business. Abstentions are counted as present in the tabulation of
votes on each of the proposals  presented to stockholders.  Broker non-votes are
not counted for the purpose of  determining  whether a  particular  proposal has
been approved.  Since Proposals 2, 4, 5 and 6 require the approval of a majority
of our outstanding common shares, abstentions and broker non-votes will have the
effect of a negative vote. Since Proposal 3 requires the affirmative approval of
a majority of the common shares present in person or represented by proxy at the
meeting  and  entitled to vote  (assuming  a quorum is present at the  meeting),
abstentions  will have a  negative  vote  while  broker  non-votes  will have no
effect.

     Any person giving a proxy in the form accompanying this proxy statement has
the power to revoke it at any time before its exercise. The proxy may be revoked
by filing with us written notice of revocation or a fully executed proxy bearing
a later date. The proxy may also be revoked by affirmatively electing to vote in
person while in attendance at the meeting.  However,  a stockholder  who attends
the  meeting  need  not  revoke a proxy  given  and vote in  person  unless  the
stockholder  wishes to do so. Written  revocations or amended  proxies should be
sent to us at 2545 Hempstead Turnpike,  East Meadow, New York 11554,  Attention:
Corporate Secretary.

     The proxy is being  solicited by our Board of  Directors.  We will bear the
cost of the  solicitation  of proxies,  including  the  charges and  expenses of
brokerage  firms and other  custodians,  nominees and fiduciaries for forwarding
proxy materials to beneficial owners of our shares.  Solicitations  will be made
primarily  by mail,  but certain of our  directors,  officers or  employees  may
solicit  proxies  in person or by  telephone,  telecopier  or  telegram  without
special compensation.

     A list of  stockholders  entitled to vote at the meeting  will be available
for  examination  by any  stockholder  for any purpose  germane to the  meeting,
during  ordinary  business  hours,  for ten days  prior to the  meeting,  at our
offices,  2545 Hempstead Turnpike,  East Meadow, New York 11554, and also during
the whole time of the meeting for inspection by any stockholder who is present.

     Stockholders  do not  have  any  appraisal  rights  under  Delaware  law in
connection  with the sale of  assets.  Therefore,  even if a  stockholder  votes
against the approval and  ratification  of the sale,  he will not be entitled to
seek payment from us for his common shares.

                           FORWARD-LOOKING STATEMENTS

     Certain  information  contained in this proxy statement and/or incorporated
by  reference  in this proxy  statement  includes  "forward-looking  statements"
within the meaning of the Private Securities  Litigation Reform Act of 1995, and
is  subject to the safe  harbor  created by that act.  We caution  readers  that
certain  important  factors  may affect our actual  results and could cause such
results to differ  materially from any  forward-looking  statements which may be
deemed to have been made in this proxy  statement or which are otherwise made by
or on behalf of us. For this purpose,  any statements  contained or incorporated
by reference in this proxy  statement that are not statements of historical fact
may be deemed to be forward-looking statements.  Without limiting the generality
of  the   foregoing,   words  such  as  "may,"  "will,"   "expect,"   "believe,"
"anticipate,"  "intend,"  "could,"  "estimate,"  or  "continue"  or the negative
variations   thereof  or  comparable   terminology   are  intended  to  identify
forward-looking  statements.  Factors which may affect our results include,  but
are not  limited to, the risks and  uncertainties  associated  with  undertaking
different  lines of business,  the lack of experience  in operating  certain new
business  lines,  the  decline in the  number of  insurance  companies  offering
insurance products in our markets,  the volatility of insurance premium pricing,
government  regulation,  competition  from  larger,  better  financed  and  more
established  companies,  the possibility of tort reform and a resultant decrease
in the demand for insurance,  the  uncertainty of litigation  with regard to our
hotel lease,  the  dependence  on our executive  management,  and our ability to
raise additional capital which may be required in the near term. 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 publically update or
revise any  forward-looking  statements,  whether from new  information,  future
events or otherwise.

                             EXECUTIVE COMPENSATION

     Summary Compensation Table

     The  following  table  sets  forth  certain   information   concerning  the
compensation  for the fiscal years ended  December  31, 2000,  1999 and 1998 for
each of our  executive  officers as of December  31, 2000 who had a total salary
and bonus for that year in excess of $100,000.

                                                            Long-Term Compensation
Name and                          Annual Compensation              Awards                   All Other
Principal Position         Year         Salary             Shares Underlying Options      Compensation
- - ------------------         ----         ------             -------------------------      ------------

Morton L. Certilman        2000      $125,000                        -                         -0-*
 Chairman of Board(1)      1999       129,167                     225,000                      -0-*
                           1998       150,000                        -                         -0-*

Kevin Lang                 2000      $250,000                        -                          -
 President(2)              1999       208,000(3)                  200,000                       -
                           1998          -                           -                          -

Abraham Weinzimer          2000      $250,000                        -                          -
 Executive Vice            1999       208,000(3)                  200,000                       -
 President(4)              1998          -                           -                          -

*    Excludes fees payable during 1998,  1999 and 2000 by us to Certilman  Balin
     Adler & Hyman, LLP, a law firm of which Mr. Certilman is a member.

(1)  Effective  March 28,  2001,  Mr.  Certilman  resigned  his  position as our
     Chairman of the Board.

(2)  Effective  March 28, 2001,  Mr. Lang resigned his position as our President
     and a director,  and he became  President  of DCAP  Management  Corp.,  our
     wholly-owned subsidiary that operates our franchise business.

(3)  Represents  salary paid from February 25, 1999, the date of our acquisition
     of the DCAP  Companies.  Messrs.  Lang and Weinzimer were the principals of
     these companies.

(4)  Effective  March 28,  2001,  Mr.  Weinzimer  resigned  his  position as our
     Executive Vice President and a director.

     Options

     No grants of stock options were made to any of Messrs.  Certilman,  Lang or
Weinzimer during the fiscal year ended December 31, 2000.

                   AGGREGATED OPTION EXERCISES IN FISCAL YEAR
            ENDED DECEMBER 31, 2000 AND FISCAL YEAR-END OPTION VALUES

                                                               Number of Shares
                               Number of                    Underlying Unexercised          Value of Unexercised
                                Shares                            Options at                In-the-Money Options
                               Acquired        Value           December 31, 2000            at December 31, 2000
Name                          on Exercise     Realized     Exercisable/Unexercisable      Exercisable/Unexercisable
- - ----                          -----------     --------     -------------------------      -------------------------

Morton L. Certilman                -            N/A             112,500/112,500                      0/0

Kevin Lang                         -            N/A             100,000/100,000                      0/0

Abraham Weinzimer                  -            N/A             100,000/100,000                      0/0

     Long-Term Incentive Plan Awards

     No awards were made to any of Messrs.  Certilman,  Lang or Weinzimer during
the fiscal year ended December 31, 2000 under any long-term incentive plan.

     Compensation of Directors

     Our  directors  are not  entitled  to receive  any  compensation  for their
services as directors.

     Employment  Contracts,  Termination  of  Employment  and  Change-in-Control
Arrangements

     Effective March 28, 2001, our subsidiary,  DCAP Management,  entered into a
six month employment agreement with Mr. Lang pursuant to which he is employed as
its President.

     During the term of the employment agreement, Mr. Lang is required to expend
all of his  working  time for DCAP  Management,  except that he may expend up to
eight hours per week in  connection  with the operation of the three DCAP stores
he has agreed to purchase, as discussed under "Certain Relationships and Related
Transactions."

     Pursuant  to the  employment  agreement,  Mr. Lang is entitled to receive a
salary of $125,000 per annum.  In addition,  in connection  with each  franchise
agreement  approved by the DCAP  Management  Board of Directors and entered into
solely as a result of Mr. Lang's efforts, he is entitled to receive $2,000.

                    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                              OWNERS AND MANAGEMENT

     The  following  table sets forth  certain  information  as of May 31,  2001
regarding the  beneficial  ownership of our common shares by (i) each person who
we believe to be the beneficial owner of more than 5% of our outstanding  common
shares,  (ii) each  present  director,  (iii) each person  listed in the Summary
Compensation  Table under "Executive  Compensation," and (iv) all of our present
executive officers and directors as a group.

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

Jay M. Haft                          1,788,893(1) (2)              15.5%
1001 Brickell Bay Drive
Miami, Florida

Eagle Insurance Company              1,486,893(3)                  13.1%
c/o The Robert Plan
  Corporation
999 Stewart Avenue
Bethpage, New York

Morton L. Certilman                  1,336,005(1)(4)               11.5%
The Financial Center at
  Mitchel Field
90 Merrick Avenue
East Meadow, New York

Kevin Lang                             851,460(1)(5)                7.4%
3789 Merrick Road
Seaford, New York

Abraham Weinzimer                      783,924(1)                   6.9%
418 South Broadway
Hicksville, New York

Barry Goldstein                              0                      -
2545 Hempstead Turnpike
East Meadow, New York

Robert M. Wallach                            0(6)                   -
c/o The Robert Plan
  Corporation
999 Stewart Avenue
Bethpage, New York

All executive officers
and directors as a group             5,463,251(1)(2)(4)            45.5%
(5 persons)                                   (5)(7)

(1)  Based upon Schedule 13D filed under the Securities Exchange Act of 1934.

(2)  Includes 225,000 shares issuable upon the exercise of currently exercisable
     options and 15,380 shares held in a retirement trust for the benefit of Mr.
     Haft.

(3)  Eagle is a wholly-owned subsidiary of The Robert Plan Corporation.

(4)  Includes 225,000 shares issuable upon the exercise of currently exercisable
     options and 902,452  shares held in a  retirement  trust for the benefit of
     Mr. Certilman.

(5)  Includes 200,000 shares issuable upon the exercise of currently exercisable
     options.

(6)  Excludes shares owned by Eagle, of which Mr. Wallach, one of our directors,
     is a Vice President. Eagle is a wholly-owned subsidiary of The Robert Plan,
     of which Mr. Wallach is President, Chairman and Chief Executive Officer.

(7)  Includes  shares owned by Eagle,  of which Mr. Wallach is a Vice President.
     Mr. Wallach is also President,  Chairman and Chief Executive Officer of The
     Robert Plan, Eagle's parent.

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     DCAP Agreement

     On February 25, 1999, pursuant to the terms of an Agreement dated as of May
8, 1998 between Messrs. Lang, Weinzimer,  Certilman and Haft and us, as amended,
we acquired DCAP Insurance.  The following is a summary of the material terms of
the agreement:

     Acquisition of Common Shares

     Pursuant to the agreement,  we acquired DCAP  Insurance.  At the closing of
the acquisition, we issued the following common shares:

          3,300,000 shares to Messrs.  Lang and Weinzimer  (1,650,000  shares to
          each) in  consideration  for  their  transfer  of the  shares  of DCAP
          Insurance.

          950,000 shares to Messrs.  Lang and Weinzimer (475,000 shares to each)
          at a purchase price of $.25 per share (an aggregate of $237,500), paid
          as follows:

          an amount in cash  equal to the par value of the  950,000  shares  (an
          aggregate of $9,500); and

          the balance by the delivery by each of Messrs. Lang and Weinzimer of a
          promissory  note in the principal  amount of $114,000 (an aggregate of
          $228,000).   These  notes  provided  for,  among  other  things,   the
          following:

               interest at the rate of 6% per annum; and

               payment  of   principal   and   interest  in  six  equal   annual
               installments  commencing  April 15, 2001 and  continuing  through
               April 15, 2006,  subject to  acceleration  to the extent that Mr.
               Lang or Mr.  Weinzimer  received  any  proceeds  from the sale or
               other disposition of any common shares; and

          452,000  shares  to  Messrs.  Certilman  and Haft or  their  designees
          (208,500  shares  to  each  of  Messrs.  Certilman  and  Haft  or  his
          retirement  trust and an aggregate  of 35,000  shares to a designee of
          Mr.  Certilman) at a purchase price of $.25 per share (an aggregate of
          $113,000), paid in cash.

     At the closing of our acquisition of DCAP Insurance,  each of Messrs. Haft,
Lang and Weinzimer and Mr.  Certilman's  retirement trust also purchased 450,000
of our common shares (1,800,000 shares in the aggregate)  beneficially  owned by
Sterling  Foster  Holding  Corp.  and held by Mr.  Certilman  as voting  trustee
pursuant to a Voting Trust Agreement with Sterling  Foster,  at a purchase price
of $.25 per share.  Mr.  Certilman  did not receive any portion of such purchase
price.  Upon such purchase,  the Voting Trust Agreement was  terminated.

     At the  closing of the  acquisition,  we also  loaned  $112,500  to each of
Messrs. Lang and Weinzimer (an aggregate of $225,000). The proceeds of the loans
were used by Messrs.  Lang and  Weinzimer  solely for the purpose of  purchasing
their  shares  from  Sterling  Foster.  Each of the  loans  was  evidenced  by a
promissory note that provided for, among other things, the following:

          interest at the rate of 6% per annum;

          payment of principal  and  interest in six equal  annual  installments
          commencing  April 15,  2001 and  continuing  through  April 15,  2006,
          subject to acceleration  to the extent that Mr. Lang or Mr.  Weinzimer
          received any proceeds from the sale or other disposition of any common
          shares;

          non-recourse  against Messrs.  Lang and Weinzimer,  i.e., Messrs. Lang
          and Weinzimer  would not be  personally  liable for the payment of the
          notes;  instead,  in the event of a default,  our sole remedy would be
          pursuant to a pledge by Messrs.  Lang and Weinzimer of their  Sterling
          Foster shares, as discussed below; and

          the right of each of Messrs. Lang and Weinzimer to satisfy the amounts
          due under his  respective  note by delivering our common shares valued
          at the greater of (i) $.25 per share or (ii) the average  market price
          of our common shares for the 20 trading days immediately preceding the
          date of delivery of the shares.

     The payment of all amounts  due under the  $114,000  notes was secured by a
pledge by each of Messrs. Lang and Weinzimer to us of 570,000 common shares. The
payment of all amounts due under the  $112,500  notes was secured by a pledge by
each of Messrs.  Lang and  Weinzimer  to us of the shares  acquired  by him from
Sterling Foster.

     See "March 2001  Transactions"  for a discussion of our  reacquisition of a
portion of the shares issued to Messrs.  Lang and Weinzimer and the cancellation
of the notes discussed above.

     Restrictive Covenant Agreements

     At the  closing of our  acquisition  of DCAP  Insurance,  Messrs.  Lang and
Weinzimer  executed  and  delivered  to  us a  restrictive  covenant  agreement.
Pursuant to this  agreement,  each agreed that for five years he will not engage
or participate in a business that is similar to or competitive with our business
anywhere  within five miles of the  location  of any of our  offices  (including
franchises).

     The restrictive  covenants contained in the restrictive  covenant agreement
are separate and  independent  from the restrictive  covenants  contained in the
employment and franchise agreements entered into with them.

     Sale of Company Shares

     Pursuant to an  employment  agreement  we entered into with Mr. Lang at the
time of our acquisition of the DCAP Companies, we have loaned him $36,000. While
such loan is outstanding, Mr. Lang will be obligated to sell, as soon as legally
permissible, the maximum number of our common shares that he is permitted by law
to sell,  and to use the  proceeds to satisfy his  obligations  under his notes.
Until  the  above  loan has been  satisfied  in full,  Mr.  Lang may not sell or
otherwise  dispose  of any of his  common  shares  for less  than $.25 per share
(subject to adjustment  for stock splits and the like) without our prior written
consent.

     Eagle

     Concurrently with our acquisition of the DCAP Companies, we issued and sold
to Eagle  1,486,893  of our common  shares for an  aggregate  purchase  price of
approximately $1,000,000, or $.67 per share.

     Eagle is a New Jersey  insurance  company  wholly-owned by The Robert Plan,
one of the  largest  insurers  of  assigned-risk  drivers in the United  States.
Pursuant  to  separate  agency  agreements  between  some of our DCAP stores and
certain insurance company  subsidiaries of The Robert Plan, the DCAP stores have
been appointed agents of the insurance  companies with regard to the offering of
automobile and other insurance products.

     Pursuant to our  agreement  with Eagle,  Robert M.  Wallach,  Eagle's  Vice
President and the President,  Chairman and Chief Executive Officer of The Robert
Plan,  was  appointed  as a member of our Board of  Directors.  We agreed  that,
during the five year period  following the closing,  provided that Eagle remains
the  beneficial  owner of at least  1,000,000 of our common  shares  (subject to
adjustment  for stock  splits and the like),  we shall  continue to nominate Mr.
Wallach as a director.

     Sale of Interests in Stores

     Prior to May 31, 2000,  four of the DCAP stores were owned  one-half by the
daughter of Mr. Certilman and one-half by us. Effective May 31, 2000 we sold our
50% interest in each of the stores to Mr. Certilman upon the following  material
terms and conditions:

          The purchase  price for our  interest in the stores was  approximately
          $141,000, after certain credits.

          The purchase price was payable as follows:

               $66,000 was payable at the rate of $6,000 per month,  starting on
               the first anniversary of the closing, and

               the balance of the  purchase  price was payable  over five years,
               together  with  6%  interest,   in  equal  monthly   installments
               commencing on the second anniversary of the closing.

          We agreed to waive all  indebtedness  owing by the stores to us. As of
          the closing, the approximate amount of such indebtedness was $210,000.

          As part of the transaction,  the stores became conversion franchisees,
          and the first annual franchise charge of $18,000 per store was paid in
          full at the  closing  in  consideration  for a  waiver  of the  annual
          franchise charges during the second year.

          The  stores  entered  into  franchise  agreements  with us,  which are
          similar  in  most  respects  to  our  standard  conversion   franchise
          agreement (including standard territorial rights), except that

               the stores have a right of first refusal with regard to franchise
               locations to be offered in zip codes adjoining those in which the
               stores are located, and

               in the  event we sell  another  franchise  to be  located  in the
               territory  with  respect to which a store  currently  has certain
               rights (which is more expansive than the rights granted  pursuant
               to the franchise  agreements),  the annual  franchise fee for the
               particular store will be waived for six months.

          These  rights were granted in  consideration  of the waiver of certain
          other geographic rights not granted to other franchisees.

          Certain  license  fees  totaling  $40,000  previously  prepaid  by Mr.
          Certilman  will be  retained  by us, to be applied  generally  against
          franchise fees for any new franchises  granted to Mr. Certilman or his
          designee.

     See "March 2001  Transactions"  for a discussion of the cancellation of the
above amount due by Mr.  Certilman as well as of  agreements to sell DCAP stores
to Messrs. Lang, Weinzimer and Certilman.

     March 2001 Transactions

     In March 2001, the following transactions occurred:

          We entered into agreements with Messrs.  Lang, Weinzimer and Certilman
          that  provide  for our  sale to them of a total  of  eight of our DCAP
          stores.  Pursuant to the  agreements,  Mr. Lang is to acquire three of
          the stores for a total purchase

          price of approximately  $257,000, Mr. Weinzimer is to acquire three of
          the stores for a total  purchase price of $285,000 and an entity owned
          by Mr.  Certilman  (we refer to the entity as "Mr.  Certilman")  is to
          acquire two of the stores for a total purchase price of  approximately
          $225,000. At the time of execution of the agreements with Messrs. Lang
          and  Weinzimer,  each  of  them  paid to us the  total  amount  of his
          respective  purchase  price. At the time of execution of the agreement
          with Mr. Certilman, we received approximately $197,000 of the purchase
          price.  The  balance  is payable  at the  closing  of the  acquisition
          through the  assumption  of a  liability.  The closing of the sales is
          subject to the receipt of approval  by our  stockholders  of the sales
          (either  individually,  as a group or as part of a sale of our  assets
          that  may  constitute  a sale  of  substantially  all of our  assets).
          Pending the closing,  each of Messrs. Lang, Weinzimer and Certilman is
          managing  his  respective  stores  and will be  entitled  to receive a
          management  fee equal to the net profits of the  stores.  Each of them
          will also be responsible  for all losses  incurred during this interim
          period.

          As security  for the return of the  amounts  paid to us at the time of
          execution of the agreements,  we granted to Messrs. Lang and Weinzimer
          a lien in the  outstanding  shares of the respective  stores they have
          agreed to  acquire  and to Mr.  Certilman  a lien in the assets of the
          stores he has agreed to acquire. In the event stockholder  approval is
          not received by July 26, 2001,  each of Messrs.  Lang,  Weinzimer  and
          Certilman may demand a return of his respective payments.  We have the
          option to require that,  instead of repaying the sums,  they foreclose
          upon their respective liens. In this event, in order to foreclose upon
          his lien, Mr.  Certilman would have to assume the liability  discussed
          above.

          We agreed with Messrs.  Lang,  Weinzimer  and  Certilman  that, at the
          closing of the store sales,  we would enter into franchise  agreements
          with them on terms similar to those  entered into by Mr.  Certilman in
          May 2000 (as  described  above under "Sale of  Interests  in Stores"),
          except that, in general,  none of the  franchisees  will be allowed to
          terminate their  respective  franchise  agreements  prior to March 31,
          2003. Messrs.  Lang, Weinzimer and Certilman have agreed that, pending
          the closing, they would be responsible for charges as if the franchise
          agreements had been executed.

          We  reacquired a total of  3,714,616  of the shares  issued to Messrs.
          Lang and  Weinzimer  (see  "DCAP  Agreement  -  Acquisition  of Common
          Shares") in consideration of the cancellation of indebtedness  owed to
          us by them in the aggregate amount of $928,654.

          We agreed with Mr. Lang to terminate his employment agreement that was
          scheduled  to  expire  in  February  2004,  and DCAP  Management,  our
          wholly-owned subsidiary that operates our franchise business,  entered
          into a new employment agreement with him as discussed under "Executive
          Compensation  - Employment  Contracts;  Termination  of Employment and
          Change-in-Control Arrangements."

          We agreed with Mr.  Weinzimer to terminate  his  employment  agreement
          that was scheduled to expire in February 2004.

          We agreed with Mr.  Certilman to terminate  his  employment  agreement
          that was scheduled to expire in February 2004. Concurrently, we agreed
          to cancel  indebtedness of  approximately  $141,000 that Mr. Certilman
          owed to us  pursuant  to his  purchase  of our  interest  in four DCAP
          stores as discussed above under "Sale of Interests in Stores."

          We agreed with Mr. Haft to terminate his employment agreement that was
          scheduled to expire in February 2004.

          Each of Messrs.  Lang,  Weinzimer,  Certilman  and Haft resigned as an
          officer of DCAP Group.  Messrs.  Lang and  Weinzimer  also resigned as
          directors.

     Relationship

     Certilman Balin Adler & Hyman,  LLP, a law firm of which Mr. Certilman is a
member,  serves as our counsel. It is presently  anticipated that such firm will
continue to  represent 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.  Certilman  Balin has also served as counsel to DCAP Insurance and The
Robert  Plan with  respect  to  certain  matters;  however,  it did not serve as
counsel to DCAP Insurance or Messrs.  Lang and Weinzimer in connection  with our
acquisition of DCAP Insurance,  to Messrs.  Lang or Weinzimer in connection with
the transactions with them discussed under "March 2001 Transactions" or to Eagle
in connection with the issuance of shares to Eagle. In addition, Certilman Balin
did not serve as counsel to either us or Mr.  Certilman in  connection  with the
transactions  with him discussed  under "Sale of Interests in Stores" and "March
2001 Transactions" above.

                        PROPOSAL 1: ELECTION OF DIRECTORS

     Four  directors  are to be elected at the  meeting to serve  until the next
annual meeting of stockholders and until their respective  successors shall have
been elected and have qualified.

     Our Certificate of Incorporation  provides for cumulative  voting of shares
for the election of directors. This means that each stockholder has the right to
cumulate his votes and give to one or more  nominees as many votes as equals the
number of directors to be elected  (four)  multiplied by the number of shares he
is entitled to vote. A stockholder  may therefore cast his votes for one nominee
or distribute them among two or more of the nominees.

     Nominees for Directors

     All  four of the  nominees  are  currently  directors  of DCAP  Group.  The
following  table sets forth each nominee's age as of May 31, 2001, the positions
and  offices  presently  held by him with us,  and the year in which he became a
director.  The Board  recommends  a vote FOR all

nominees.  The person  named as proxy  intends to vote  cumulatively  all shares
represented  by proxies  equally  among all nominees for election as  directors,
unless proxies are marked to the contrary.

                                                                                          Director
 Name                     Age       Positions and Offices Held                              Since
 ----                     ---       --------------------------                            --------

Barry Goldstein           48        President, Chairman of the Board, Chief Executive        2001
                                    Officer, Chief Financial Officer, Treasurer and
                                    Director

Morton L. Certilman       69        Secretary and Director                                   1989

Jay M. Haft               65        Director                                                 1989

Robert M. Wallach         48        Director                                                 1999

     Barry Goldstein

     Mr.  Goldstein was elected our Chief Executive  Officer and Chief Financial
Officer in  February  2001,  our  Chairman  of the Board and a director in March
2001,  and our  President  and  Treasurer in May 2001.  Since April 1997, he has
served as President of AIA Acquisition Corp., which operates insurance agencies.
Since 1982, he has served as President of Stone Equities, a consulting firm.

     Morton L. Certilman

     Mr.  Certilman  served as our  Chairman  of the Board  from  February  1999
(concurrently  with our  acquisition of DCAP  Insurance)  until March 2001. From
October 1989 to February 1999, he served as our President.  He has served as one
of our  directors  since 1989.  He was elected our  Secretary  in May 2001.  Mr.
Certilman  has been engaged in the practice of law since 1956 and is a member of
the law firm of Certilman Balin Adler & Hyman, LLP. Mr. Certilman is Chairman of
the  Long  Island   Regional   Planning   Board,   the  Nassau  County  Coliseum
Privatization  Commission,  and the Northrop/Grumman Master Planning Council. He
served as a director  of the Long  Island  Association  and the New Long  Island
Partnership for a period of ten years and currently  serves as a director of 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 Institute 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 was 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." Mr. Certilman  received an LL.B. degree, cum laude, from
Brooklyn Law School.

     Jay M. Haft

     Mr.  Haft  served as our Vice  Chairman  of the Board  from  February  1999
(concurrently  with our  acquisition of DCAP  Insurance)  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 since 1959 and since 1994 has served as counsel to Parker Duryee
Rosoff & Haft.  From 1989 to 1994,  he was a senior  corporate  partner  of that
firm.  Mr.  Haft is a  strategic  and  financial  consultant  for  growth  stage
companies.  He is active in  international  corporate  finance  and  mergers and
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 is a Managing General Partner of Gen
Am "1"  Venture  Fund,  an  international  venture  capital  fund.  He is also a
director of many  public and  private  corporations,  including  Robotic  Vision
Systems,   Inc.,   NCT   Group,   Inc.,   Encore   Medical   Corporation,   DUSA
Pharmaceuticals, Inc., Oryx Technology Corp., and Thrift Management, Inc, all of
whose securities are traded in the  over-the-counter  market. Mr. Haft is a past
member of the Florida  Commission for Government  Accountability  to the People,
and a national  trustee and Treasurer of the Miami Ballet.  He is also a trustee
of Florida  International  University  and serves on the  advisory  board of the
Wolfsonian Museum in Miami,  Florida.  Mr. Haft received B.A. and LL.B.  degrees
from Yale University.

     Robert M. Wallach

     Mr.  Wallach  has  served  since  1993 as  President,  Chairman  and  Chief
Executive Officer of The Robert Plan  Corporation,  an insurance company holding
company that provides services to insurance  companies.  He has served as one of
our directors since 1999.

     There are no family  relationships  among any of our executive officers and
directors.

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

     Committees

     The  Audit  Committee  of the Board of  Directors  is  responsible  for (i)
recommending  independent accountants to the Board, (ii) reviewing our financial
statements  with  management and the  independent  accountants,  (iii) making an
appraisal of our audit effort and the  effectiveness  of our financial  policies
and  practices  and  (iv)   consulting   with  management  and  our  independent
accountants  with regard to the adequacy of internal  accounting  controls.  The

members of the Audit  Committee  currently are Messrs.  Certilman and Haft.  The
directors who serve on the Audit Committee are not "independent" directors based
on the  definition  of  independence  in the listing  standards  of the National
Association  of  Securities  Dealers.  To date,  our Board of Directors  has not
adopted a written charter for the Audit Committee.

     The Finance  Committee  of the Board of Directors  is  responsible  for (i)
developing and analyzing plans for corporate expansion,  examining and adjusting
our capital structure and determining long-range financial requirements and (ii)
other  matters  relating to our  financial  affairs.  The members of the Finance
Committee currently are Messrs. Certilman and Haft.

     We do not have any standing  nominating or  compensation  committees of the
Board of Directors or committees  performing similar functions.  These functions
are currently performed by our Board as a whole.

     Report of the Audit Committee

     In overseeing the  preparation of DCAP's  financial  statements,  the Audit
Committee met with  management  to review and discuss all  financial  statements
prior to their issuance and to discuss significant accounting issues. Management
advised the Committee that all financial  statements were prepared in accordance
with generally accepted accounting  principles,  and the Committee discussed the
statements with management.

     The  Committee  received  the  written  disclosures  and letter  from Holtz
Rubenstein LLP, DCAP's outside auditors,  required by the Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees).

     On the basis of these reviews and discussions, the Committee recommended to
the Board of  Directors  that the audited  financial  statements  be included in
DCAP's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2000,
for filing with the Securities and Exchange Commission.

Members of the Audit Committee

Morton L. Certilman
Jay M. Haft

     Meetings

     Our Board of  Directors  held five  meetings  during the fiscal  year ended
December 31, 2000. All of our then directors attended all such meetings with the
exception of Mr. Wallach, who attended three of the meetings.  Neither the Audit
Committee nor the Finance  Committee of the Board of Directors held any meetings
during the fiscal year ended December 31, 2000.

     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 proxy
statement 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, 2000. To our knowledge,  based solely on a review of written representations
that no reports were  required,  during the fiscal year ended December 31, 2000,
our  officers,  directors and 10%  stockholders  complied with all Section 16(a)
filing requirements applicable to them.

                           PROPOSAL 2: SALE OF ASSETS

     At the  meeting,  the  stockholders  of DCAP will  consider and vote upon a
proposal  to approve  and ratify the sale by us and our  subsidiaries  of assets
that may  constitute,  under Delaware law,  substantially  all of our assets.  A
summary of the sales is included in this proxy statement  beginning on the cover
page hereof.

     Sales Transactions

     We or our subsidiaries  have entered into the following sales  transactions
since May 2000:

          In May 2000, we sold to Morton L. Certilman,  our then Chairman of the
          Board,  our 50%  interest  in four DCAP  stores  located in Queens and
          Nassau Counties, New York. The remaining 50% interest in each store is
          held by Mr.  Certilman's  daughter.  The total  purchase price for our
          interest was approximately  $141,000.  The other terms of the sale are
          described in this proxy  statement  under "Certain  Relationships  and
          Related Transactions - Sale of Interests in Stores." The obligation to
          pay the purchase  price for our  interest was  cancelled in March 2001
          concurrently  with  the  termination  of  Mr.  Certilman's  employment
          agreement  with us. This is  described in "Certain  Relationships  and
          Related Transactions - March 2001 Transactions."

          Between  September  2000 and February  2001,  we sold seven other DCAP
          stores to persons who are not affiliated  with us for a total purchase
          price of approximately  $555,000 (exclusive of contingent  amounts). A
          summary of the sales is set forth below:

Date              Store Location(s)   Purchase Price              Payment Terms
- - ----              -----------------   --------------              -------------

September 2000    Staten Island, NY   $128,000 (net of            Payable in full at
                                      $10,000 credit)             closing

September 2000    Brooklyn, NY        One times commissions       $15,000 at closing;
                                      received during 12 months   balance monthly
                                      following closing from
                                      book of business sold

October 2000      Manhattan, NY       $100,000                    $80,000 at closing;
                 (2 stores)                                       balance on December
                                                                  31, 2000

November 2000     Bronx, NY           $115,000                    Payable in full at or
                                                                  shortly following
                                                                  closing

December 2000     Yonkers, NY         $112,500                    Payable in full at or
                                                                  shortly following
                                                                  closing

February 2001     Woodhaven, NY       $100,000                    Payable in full at or
                                                                  shortly following
                                                                  closing

               In March 2001, we and our subsidiaries agreed to sell eight other
               stores to Kevin Lang (three),  Abraham  Weinzimer  (three) and an
               entity  owned  by  Mr.  Certilman  (two).  At  the  time  of  the
               agreements,  Messrs.  Lang and  Weinzimer  were our President and
               Executive Vice President, respectively, and Mr. Certilman was our
               Chairman  of the Board.  Also,  each was a director of DCAP Group
               (Mr.  Certilman remains a director).  The purchase prices for the
               sales are as follows:

                    Mr. Lang: $257,000;
                    Mr. Weinzimer: $285,000; and
                    Mr. Certilman: $225,000.

               The terms of the  sales are  described  in this  proxy  statement
               under  "Certain  Relationships  and Related  Transactions - March
               2001 Transactions."

     Background of and Reasons for the Sales Transactions

     In  February  1999,  we  acquired  DCAP  Insurance.  At  the  time  of  the
acquisition,  there were  approximately 56 DCAP stores. Of these,  one-half were
either  wholly-owned  by us or were owned  partially by us and  partially by the
operator of the location, and the other one-half were franchises. We provide the
administrative  services and functions of a "central office" to our wholly-owned
and  partially-owned  offices.  Franchises operate without the assistance of our
"central office" functions.

     During the fiscal year ended  December 31, 1999,  our insurance  operations
generated a net loss of  $173,160.  During the six months  ended June 30,  2000,
these  operations  continued  to  generate a net loss.  The losses  were  caused
primarily by the substantial  administrative  expenses incurred in operating the
insurance brokerage business.

     As a result, in August 2000, our Board of Directors  determined to commence
selling our interest in our wholly-owned and partially-owned stores and focus on
our franchise operations. This determination was made with a view toward raising
needed cash and  eliminating  the  overhead  expenses  that are not  incurred in
connection with franchise operations.

     Valuation Analysis

     In  connection  with the  contemplated  sale of the eight stores to Messrs.
Lang, Weinzimer and Certilman,  an analysis was prepared that compared the terms
of the sales to the terms of other recent sales of our stores to nonaffiliates.

     Terms of Comparable Sales

     We  reviewed  the terms of sale  with  respect  to five  stores we had sold
between September and November 2000 (Staten Island, Brooklyn,  Manhattan (2) and
Bronx,  New York). We also reviewed the terms of sale with respect to two of our
stores we contemplated selling at the time (Yonkers and Brentwood, New York - we
did in fact  sell our  Yonkers  store in  December  2000).  Based on each of the
store's historical level of commission  income,  there was derived a sales price
multiple of trailing twelve month commission  income for the twelve months ended
(i) December 31, 1999; (ii) September 30, 2000; and (iii) December 31, 2000. The
sales  price  multiple  was  determined  by  dividing  the  sales  price  by the
historical commission income for the relevant period.

     The mean  multiples  for the  closed  sales of our  five  stores,  the then
pending  sales of the two other  stores and the entire group of the seven stores
were  calculated  with respect to each of the time frames set forth in (i), (ii)
and (iii) above, and applied to the eight stores that are proposed to be sold to
Messrs.  Lang,  Weinzimer and Certilman.  This yielded  implied sales prices for
each of the eight stores in the proposed transactions, and in the aggregate.

     The mean sales price  multiple  for the closed sales of the five stores was
as follows:

          .63 for the twelve months ended December 31, 1999; and
          .73 for the twelve months ended September 30, 2000.

     The mean sales price  multiple for the then pending sales of the two stores
was as follows:

          .54 for the twelve months ended December 31, 1999;
          .55 for the twelve months ended September 30, 2000; and
          .57 for the twelve months ended December 31, 2000.

     The mean sales price  multiple for all of the  transactions  involving  the
sales of the seven stores in total was as follows:

          .60 for the twelve months ended  December 31, 1999;
          .67 for the twelve months ended September 30, 2000; and

          .57 for the twelve months ended December 31, 2000.

     Application of Multiples to Proposed Transactions

     We then applied the mean sales  multiples  for the five closed and two then
pending  store  sales  (seven in total) to the  contemplated  sales of the eight
stores and found the following:

     Lang Stores

Aggregate Historical Commission Income

                               Twelve Months Ended
- - --------------------------------------------------------------------------------
December 31, 1999          September 30, 2000                 December 31, 2000
- - -----------------          ------------------                 -----------------

  $555,625                     $560,974                            $537,621

Implied Aggregate Sale Price for the Stores Using Mean Multiple of Commission Income

                                  Twelve Months Ended
- - -----------------------------------------------------------------------------------------------
     December 31, 1999                 September 30, 2000                December 31, 2000
- - ---------------------------       ----------------------------     ----------------------------
                                                              
Closed      Pending     All       Closed     Pending       All     Closed   Pending   All
- - ------      -------     ---       ------     -------       ---     ------   -------   ---
 .63x           .54x     .60x       .73x       .55x         .67x      n/a      .57x    .57x
- - ----           ----     ----       ----       ----         ----      ---      ----    ----

$350,044   $300,038   $333,375    $409,511   $308,536   $375,853      -    $306,444  $306,444

                                   *** *** ***

         Weinzimer Stores

Aggregate Historical Commission Income

                               Twelve Months Ended
- - --------------------------------------------------------------------------------
December 31, 1999          September 30, 2000                 December 31, 2000
- - -----------------          ------------------                 -----------------

 $605,811                      $608,373                           $618,006

Implied Aggregate Sale Price for the Stores Using Mean Multiple of Commission Income

                               Twelve Months Ended
- - --------------------------------------------------------------------------------------------------------------
      December 31, 1999                          September 30, 2000                     December 31, 2000
- - ----------------------------                ----------------------------          ----------------------------
                                                                             
Closed      Pending     All                 Closed     Pending       All          Closed   Pending   All
- - ------      -------     ---                 ------     -------       ---          ------   -------   ---
 .63x         .54x      .60x                 .73x        .55x         .67x           n/a     .57x     .57x
- - ----         ----       ----                 ----       ----         ----           ---     ----     ----

$381,661   $327,138   $363,487             $444,112     $334,605    $407,610        -     $352,263  $352,263

                                   *** *** ***

     Certilman Stores

Aggregate Historical Commission Income

                               Twelve Months Ended
- - --------------------------------------------------------------------------------

 December 31, 1999          September 30, 2000                 December 31, 2000
 -----------------          ------------------                 -----------------

    $381,681                    $390,629                            $379,303

Implied Aggregate Sale Price for the Stores Using Mean Multiple of Commission Income

                               Twelve Months Ended
- - --------------------------------------------------------------------------------------------------------------
     December 31, 1999                           September 30, 2000                     December 31, 2000
- - ---------------------------                 ----------------------------          ----------------------------
                                                                             
Closed      Pending     All                 Closed     Pending       All          Closed   Pending   All
- - ------      -------     ---                 ------     -------       ---          ------   -------   ---
 .63x         .54x       .60x                 .73x       .55x         .67x           n/a     .57x     .57x
- - ----         ----       ----                  ----       ----        ----           ---     ----     ----

$240,459   $206,108   $229,009             $285,159   $214,846    $261,721           -    $216,203  $216,203

                                   *** *** ***

     It should be noted that,  as discussed  under  "Certain  Relationships  and
Related Transactions - March 2001 Transactions," concurrently with the execution
of the agreements to sell the stores to Messrs.  Lang,  Weinzimer and Certilman,
each of them agreed to the termination of his employment agreement with DCAP. In
connection  with  the  termination  of  Mr.  Certilman's  employment  agreement,
indebtedness of  approximately  $141,000 owed by him to us was cancelled.  Since
neither Mr. Lang nor Mr.  Weinzimer  received  any sums or debt  forgiveness  in
connection  with the  termination  of his  employment  agreement,  certain price
concessions  were  given  to each of them in  connection  with  the  sale of the
stores. As a result of the termination of the employment agreements with Messrs.
Lang, Weinzimer and Certilman,  we were relieved of an obligation to pay minimum
aggregate   salaries  of   approximately   $1,760,000   through   February  2004
(approximately $667,000 for Mr. Lang (net of the $62,500 payable to him pursuant
to his new employment agreement with our subsidiary, DCAP Management);  $729,000
for Mr. Weinzimer;  and $365,000 for Mr. Certilman) in addition to other amounts
that may have been payable pursuant to the employment agreements.

     Stockholder Approval

     We are submitting this matter to our  stockholders  for approval based upon
our belief  that the assets  sold and  agreed to be sold may  constitute,  under
Delaware law, substantially all of our assets.

     The assets sold by us during 2000 and 2001 constituted  approximately 9% of
our total  assets as of  December  31,  1999.  The DCAP  stores  subject  to the
completed sales generated

approximately  28% and 24% of our total  revenues  during the fiscal  year ended
December 31, 1999 and the three months ended March 31, 2000, respectively.

     The  assets  agreed to be sold to Messrs.  Lang,  Weinzimer  and  Certilman
constituted  approximately  12% of our total assets as of December 31, 2000. The
stores subject to these sales generated  approximately 30% of our total revenues
for the year ended December 31, 2000.

     At the time of execution of the agreements with Messrs. Lang and Weinzimer,
each of them paid to us the entire purchase price for his stores.  Mr. Certilman
paid $197,000 of his purchase  price at the time of execution of his  agreement.
The  closing of the sales to them is subject to the  receipt of  approval by our
stockholders of the sales (either individually,  as a group or as part of a sale
of our assets that may constitute a sale of substantially all of our assets).

     As  security  for the  return  of the  amounts  paid  to us at the  time of
execution of the agreements,  we granted to each of Messrs.  Lang, Weinzimer and
Certilman a security interest in the assets they agreed to acquire. In the event
stockholder  approval is not  received by July 26, 2001,  each of Messrs.  Lang,
Weinzimer and Certilman may demand a return of his respective  payment.  We have
the option to require that,  instead of repaying the sums,  they  foreclose upon
their respective liens.

     The sales that were completed  between May 2000 and February 2001 are final
and binding and are not subject to stockholder approval. Stockholder approval of
Proposal 2 would serve to ratify these sales.

     Regulatory Requirements

     No  federal  or state  regulatory  requirements  must be  complied  with or
approval must be obtained (other than  stockholder  approval) in connection with
the sales of the stores.

     Pro Forma Financial Statements

     The  following  unaudited  pro  forma  condensed   consolidated   financial
statements give effect to the sale of our interest in eleven DCAP stores in 2000
and 2001 and our  contemplated  sale of the eight DCAP  stores to Messrs.  Lang,
Weinzimer and Certilman.  These pro forma financial statements are presented for
illustrative  purposes only and therefore are not necessarily  indicative of the
operating  results that might have been achieved had the sales occurred as of an
earlier date. They are also not necessarily  indicative of the operating results
which may occur in the future.

     Pro forma condensed consolidated  statements of operations are provided for
the three month  period  ended March 31,  2001 and the year ended  December  31,
2000, giving effect to the sales as though they had occurred on January 1, 2000.

     The pro forma  financial  statements are based on preliminary  estimates of
values and transaction costs and preliminary appraisals. The actual recording of
the  transactions  will be

based on final appraisals, values and transaction costs. Accordingly, the actual
recording  of the  transactions  can be  expected to differ from these pro forma
financial statements.

     The pro  forma  financial  data  does not give  effect  to any of the other
transactions entered into concurrently with the agreements to sell the stores to
Messrs.  Lang,  Weinzimer and Certilman.  These other transactions are discussed
under "Certain Relationships and Related Transactions - March 2001 Transactions"
and include the  termination or amendment of employment  agreements with Messrs.
Lang,  Weinzimer  and  Certilman  pursuant  to  which  we  were  relieved  of an
obligation to pay minimum aggregate salaries of approximately $1,760,000 through
February 2004 in addition to other  amounts that may have been payable  pursuant
to the employment agreements.

     The historical  consolidated statement of operations presented for the year
ended  December 31, 2000 is derived from our  separate  historical  consolidated
financial  statements  and should be read in  conjunction  with these  financial
statements  which are  incorporated  by reference in this proxy  statement.  The
historical  condensed  statement of operations  for the three months ended March
31,  2001  is  derived  from  our  historical  interim  consolidated   financial
statements  incorporated by reference in this proxy  statement.  This historical
three month  financial  statement has been prepared in accordance with generally
accepted accounting principles applicable to interim financial information, and,
in the opinion of our management,  includes all adjustments necessary for a fair
presentation of the financial information for such interim period.

- - --------------------------------------------------------------------------------------------------------------------
                                                 DCAP GROUP, INC.
                             PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                         THREE MONTHS ENDED MARCH 31, 2001

                                                Historical             Adjustments                  Pro Forma
REVENUES:
                                                                                   
  Commissions and fees                      $          886,617     $         (472,126)  (1)    $            414,491
  Rooms                                                272,136                       0                      272,136
  Other operating departments                            6,392                       0                        6,392
                                            -------------------    --------------------        ---------------------

     Total revenues                                  1,165,145               (472,126)                      693,019

OPERATING EXPENSES:
  General and administrative expenses                1,590,914               (466,980)  (2)               1,123,934
  Departmental                                          73,447                       0                       73,447
  Depreciation and amortization                         94,683                (40,602)  (3)                  54,081
                                            -------------------    --------------------        ---------------------

     Total operating expenses                        1,759,044               (507,582)                    1,251,462

OPERATING LOSS                                       (593,899)                  35,456                    (558,443)

OTHER (EXPENSE) INCOME:
  Interest income                                        8,743                       0                        8,743
  Interest expense                                    (67,222)                  46,949  (4)                (20,273)
  Gain on sale of DCAP stores                           56,043                (56,043)  (5)                       0
                                            -------------------    --------------------        ---------------------

                                                       (2,436)                 (9,094)                     (11,530)
LOSS BEFORE INCOME TAXES
  AND MINORITY INTEREST                              (596,335)                  26,362                    (569,973)

INCOME TAXES                                            17,921                       0                       17,921
                                            -------------------    --------------------        ---------------------

LOSS BEFORE MINORITY INTEREST                        (614,256)                  26,362                    (587,894)

MINORITY INTEREST                                        1,312                       0                        1,312
                                            -------------------    --------------------        ---------------------

NET LOSS                                    $        (612,944)     $            26,362         $          (586,582)
                                            ===================    ====================        =====================

NET LOSS PER COMMON SHARE
     Basic                                  $           (0.04)                                 $             (0.04)
                                            ===================                                =====================
     Diluted                                $           (0.04)                                 $             (0.04)
                                            ===================                                =====================

WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
     Basic                                          15,068,018                                           15,068,018
                                            ===================                                =====================
     Diluted                                        15,068,018                                           15,068,018
                                            ===================                                =====================

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

                        DCAP GROUP, INC. AND SUBSIDIARIES

                     NOTES TO UNAUDITED PRO FORMA CONDENSED
                      CONSOLIDATED STATEMENT OF OPERATIONS

                        THREE MONTHS ENDED MARCH 31, 2001

1.   To eliminate  commissions and fees earned by wholly-owned offices that were
     sold and agreed to be sold.

2.   To eliminate the general and administrative costs generated by wholly-owned
     offices that were sold and agreed to be sold.

3.   To eliminate the  amortization of goodwill and depreciation on property and
     equipment related to the wholly-owned  offices that were sold and agreed to
     be sold.

4.   To  eliminate  the  interest  expense  on  capital  leases  assumed  by the
     purchasers of the wholly-owned offices.

5.   To give effect to the sale of wholly-owned offices as of January 1, 2000.

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

                                                 DCAP GROUP, INC.
                             PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                           YEAR ENDED DECEMBER 31, 2000

                                                 Historical               Adjustments                  Pro Forma
                                            ---------------------      -------------------          ----------------
REVENUES:
                                                                                           
  Commissions and fees                      $          6,716,356       $      (3,440,594)   (1)    $      3,275,762
  Rooms                                                  970,195                                            970,195
  Other operating departments                            128,873                                            128,873
                                            ---------------------      -------------------          ----------------

     Total revenues                                    7,815,424              (3,440,594)                 4,374,830

OPERATING EXPENSES:
  General and administrative expenses                  7,858,726              (2,414,394)    (2)          5,444,332
  Impairment of intangible assets                      2,370,000                  951,713    (3)          3,321,713
  Impairment of notes receivable                          81,000                        0                    81,000
  Departmental                                           382,683                        0                   382,683
  Depreciation and amortization                          788,259                (404,685)    (4)            383,574
                                            ---------------------      -------------------          ----------------

     Total operating expenses                         11,480,668              (1,867,366)                 9,613,302

OPERATING LOSS                                       (3,665,244)              (1,573,228)               (5,238,472)

OTHER (EXPENSE) INCOME:
  Interest income                                         78,660                        0                    78,660
  Interest expense                                     (144,173)                   37,543    (5)          (106,630)
  Gain on sale of DCAP stores                             32,319                  756,043    (3)            788,362
                                            ---------------------      -------------------          ----------------

                                                        (33,194)                  793,586                   760,392
LOSS BEFORE INCOME TAXES
  AND MINORITY INTEREST                              (3,698,438)                (779,642)               (4,478,080)

INCOME TAXES                                              25,000                        0                    25,000
                                            ---------------------      -------------------          ----------------

LOSS BEFORE MINORITY INTEREST                        (3,723,438)                (779,642)               (4,503,080)

MINORITY INTEREST                                          5,141                        0                     5,141
                                            ---------------------      -------------------          ----------------

NET LOSS                                    $        (3,718,297)       $        (779,642)           $    (4,497,939)
                                            =====================      ===================          ================

NET LOSS PER COMMON SHARE
     Basic                                  $             (0.25)                                    $        (0.30)
                                            =====================                                   ================
     Diluted                                $             (0.25)                                    $        (0.30)
                                            =====================                                   ================

WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
     Basic                                            14,751,832                                         14,751,832
                                            =====================                                   ================
     Diluted                                          14,751,832                                         14,751,832
                                            =====================                                   ================

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

                        DCAP GROUP, INC. AND SUBSIDIARIES

                     NOTES TO UNAUDITED PRO FORMA CONDENSED
                      CONSOLIDATED STATEMENT OF OPERATIONS

                          YEAR ENDED DECEMBER 31, 2000

1.   To eliminate  commissions and fees earned by wholly-owned and joint venture
     offices that were sold and agreed to be sold.

2.   To eliminate the general and administrative costs generated by wholly-owned
     and joint venture offices that were sold and agreed to be sold.

3.   To reflect the gain on the sale of  wholly-owned  offices sold in the first
     quarter  of 2001 and  agreed to be sold and give  effect to the sale of the
     offices as of January 1, 2000. In addition,  the goodwill  related to these
     offices is deemed to be impaired.

4.   To eliminate the  amortization of goodwill and depreciation of property and
     equipment  related to the  wholly-owned and joint venture offices that were
     sold and agreed to be sold.

5.   To  eliminate  the  interest  expense  on  capital  leases  assumed  by the
     purchasers of the wholly-owned and joint venture offices.

     Recommendation and Required Vote

     The affirmative vote of the holders of a majority of our outstanding common
shares is  required  for  approval  of this  proposal.  Our  Board of  Directors
recommends a vote FOR approval of the sale of assets.

                 PROPOSAL 3: AMENDMENT TO 1998 STOCK OPTION PLAN
                     TO INCREASE NUMBER OF AUTHORIZED SHARES

     The Board of Directors recommends that stockholders approve an amendment to
our 1998 Stock Option Plan to increase the number of common shares authorized to
be issued from 2,000,000 to 3,000,000.  As of May 31, 2001, there were 1,750,000
common shares issuable  pursuant to the exercise of outstanding  options granted
under the plan.  The plan plays an important  role in our efforts to attract and
retain employees of outstanding  ability and to align the interests of employees
with those of the stockholders  through  increased stock ownership.  In order to
continue to provide  appropriate  equity  incentives to employees in the future,
the Board has approved an increase in the number of reserved  shares  subject to
stockholder  approval.  As discussed below, the plan is also designed to provide
incentives to non-employee directors of, and consultants and advisors to, us and
our subsidiaries.

     The following  statements  include  summaries of certain  provisions of the
plan.  The  statements  do not purport to be complete and are qualified in their
entirety  by  reference  to the  provisions  of the  plan,  a copy of  which  is
available at our offices.

     Purpose

     The  purpose of the plan is to advance  the  interests  of DCAP by inducing
persons or entities of  outstanding  ability  and  potential  to join and remain
with, or provide  consulting or advisory services to, us and our subsidiaries by
encouraging and enabling eligible employees, non-employee directors, consultants
and advisors to acquire proprietary interests,  and by providing such employees,
non-employee directors, consultants and advisors with an additional incentive to
promote success of DCAP.

     Administration

     The plan  provides  for its  administration  by the Board or by a committee
consisting  of at  least  one  person  chosen  by the  Board.  The  Board or the
committee has  authority  (subject to certain  restrictions)  to select from the
group of eligible employees,  non-employee  directors,  consultants and advisors
the  individuals  or entities to whom options will be granted,  and to determine
the times at which and the exercise price for which options will be granted. The
Board  or  the   committee  is   authorized   to  interpret  the  plan  and  the
interpretation  and  construction by the Board or the committee of any provision
of the plan or of any option granted  thereunder  shall be final and conclusive.
The receipt of options by  directors or any members of the  committee  shall not
preclude  their vote on any matters in  connection  with the  administration  or
interpretation of the plan.

     Nature of Options

     The Board or committee  may grant options under the plan which are intended
to either qualify as "incentive stock options" within the meaning of Section 422
of the Internal Revenue Code (we refer to this as the "Code") or not so qualify.
We refer to options that do not so qualify as "nonstatutory  stock options." The
Federal income tax consequences  relating to the grant and exercise of incentive
stock options and nonstatutory  stock options are described below under "Federal
Income Tax Consequences."

     Eligibility

     Subject  to  certain  limitations  as set  forth in the  plan,  options  to
purchase  shares may be granted  thereunder  to persons or entities  who, in the
case of incentive  stock options,  are employees or, in the case of nonstatutory
stock  options,   are  employees  or  non-employee   directors  of,  or  certain
consultants  or  advisors  to,  us  or  our  subsidiaries.   At  May  31,  2001,
approximately  13 employees and three  non-employee  directors  were eligible to
receive options under the plan.

     Option Price

     The option price of the shares subject to an incentive stock option may not
be less than the fair market  value (as such term is defined in the plan) of the
common shares on the date upon which such option is granted. In addition, in the
case of a recipient of an incentive  stock option who, at the time the option is
granted, owns more than 10% of the total combined voting power of all classes of
our stock or of a parent or of any of our subsidiaries,  the option price of the
shares  subject to such option must be at least 110% of the fair market value of
the common shares on the date upon which such option is granted.

     The option price of shares subject to a  nonstatutory  stock option will be
determined  by the Board of Directors or the  committee at the time of grant and
need not be equal to or greater than the fair market value of our common shares.

     On  _____________,  2001, the closing bid price for our common  shares,  as
reported by the Bulletin Board, was $_______ per share.

     Exercise of Options

         An option granted under the plan shall be exercised by the delivery by
the holder to our Secretary at our principal office of a written notice of the
number of shares with respect to which the option is being exercised. The notice
must be accompanied, or followed within ten days, by payment of the full option
price of such shares which must be made by the holder's delivery of (i) a check
in such amount or (ii) previously acquired common shares, the fair market value
of which shall be determined as of the date of exercise, or a combination of (i)
and (ii).

     Duration of Options

     No incentive stock option granted under the plan shall be exercisable after
the expiration of ten years from the date of its grant. However, if an incentive
stock  option  is  granted  to a  10%  stockholder,  the  option  shall  not  be
exercisable after the expiration of five years from the date of its grant.

     Nonstatutory  stock options  granted under the plan may be of such duration
as shall be determined by the Board or the committee.

     Non-Transferability

     Options granted under the plan are not transferable  otherwise than by will
or the laws of descent and distribution and such options are exercisable, during
a holder's lifetime, only by the optionee.

     Death, Disability or Termination of Employment

     Subject  to the  terms of the  stock  option  agreement  pursuant  to which
options are  granted,  if the  employment  of an  employee or the  services of a
non-employee  director,  consultant or advisor shall be terminated for cause, or
such employment or services shall be terminated voluntarily, any options held by
such  persons or  entities  shall  expire  immediately.  If such  employment  or
services  shall   terminate  other  than  by  reason  of  death  or  disability,
voluntarily by the employee, non-employee director, consultant or advisor or for
cause,  then,  subject to the terms of the stock  option  agreement  pursuant to
which options are granted, such option may be exercised at any time within three
months  after such  termination,  but in no event  after the  expiration  of the
option.  For  purposes  of the plan,  the  retirement  of an  individual  either
pursuant  to a  pension  or  retirement  plan  adopted  by us or at  the  normal
retirement  date  prescribed  from  time to time by us shall be  deemed  to be a
termination  of such  individual's  employment  other  than  voluntarily  by the
employee or for cause.

     Subject  to the  terms of the  stock  option  agreement  pursuant  to which
options are granted,  if an option holder under the plan (i) dies while employed
by us or any of our subsidiaries or while serving as a non-employee director of,
or consultant or advisor to, us or any of our subsidiaries,  or (ii) dies within
three months after the  termination  of his  employment  or services  other than
voluntarily or for cause, then such option may be exercised by the estate of the
employee,  non-employee  director,  consultant  or  advisor,  or by a person who
acquired such option by bequest or inheritance  from the deceased option holder,
at any time  within one year after his death.  Subject to the terms of the stock
option  agreement  pursuant to which  options are  granted,  if the holder of an
option under the plan ceases  employment  or services  because of permanent  and
total  disability  (within  the  meaning of Section  22(e)(3) of the Code) while
employed by, or while  serving as a  non-employee  director of, or consultant or
advisor to, us or any of our subsidiaries,  then such option may be exercised at
any time within one year after his  termination  of  employment,  termination of
directorship,  or termination of consulting or advisory arrangement or agreement
due to the disability.

     Amendment and Termination

     The plan (but not options previously granted thereunder) shall terminate on
November  2,  2008,  ten years  from the date that it was  adopted by the Board.
Subject to certain limitations, the plan may be amended or modified from time to
time or terminated at an earlier date by the Board or by the stockholders.

     Plan Benefits

     To date, we have granted options under the plan as follows:

                                                                     Common Shares            Average Weighted
                                                                      Underlying               Exercise Price
                      Name and Position                             Options Granted               Per Share

Barry Goldstein, President, Chairman of the Board, Chief              1,000,000                       $.25
Executive Officer, Chief Financial Officer and Treasurer

Morton L. Certilman, formerly Chairman of the                           225,000                      $2.69
  Board; currently Secretary

Jay M. Haft, formerly Vice Chairman of the                              225,000                      $2.69
  Board

Kevin Lang, formerly President; currently                               200,000                      $2.69
  President of DCAP Management

Abraham Weinzimer, formerly Executive Vice                              200,000(1)                   $2.69
  President

Richard Maikis, Consultant                                              100,000                      $1.00

All current executive officers as a group                             1,200,000                       $.66
(2 persons)

All current directors who are not executive officers as a               450,000                      $2.69
group (3 persons)

All employees, including all current officers who are not                     -                          -
executive officers, as a group

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

(1) Expired.

     Federal Income Tax Consequences

     Nonstatutory Stock Options

     Under the Code and the  Treasury  Department  Regulations,  a  nonstatutory
stock  option  does not  ordinarily  have a "readily  ascertainable  fair market
value"  when it is  granted.  This rule will apply to our grant of  nonstatutory
stock  options.  Consequently,  the grant of a  nonstatutory  stock option to an
optionee  will result in neither  income to him nor a deduction to us.  Instead,
the optionee  will  recognize  compensation  income at the time he exercises the
nonstatutory  stock option in an amount equal to the excess, if any, of the then
fair  market  value of the  shares  transferred  to him over the  option  price.
Subject to the applicable  provisions of the Code and the Regulations  regarding
withholding  of tax, a deduction will be allowable to us in the year of exercise
in the same amount as is includable in the optionee's income.

     For  purposes of  determining  the  optionee's  gain or loss on the sale or
other  disposition  of  the  shares  transferred  to  him  upon  exercise  of  a
nonstatutory  stock option,  the optionee's basis in such shares will be the sum
of his option price plus the amount of compensation  income recognized by him on
exercise.  Such gain or loss will be capital  gain or loss and will be long-term
or short-term  depending upon whether the optionee held the shares for more than
one year or one year or less.  No part of any such  gain will be an "item of tax
preference" for purposes of the "alternative minimum tax."

     Incentive Stock Options

     Options  granted  under the plan which  qualify as incentive  stock options
under Section 422 of the Code will be treated as follows:

     Except to the extent that the alternative  minimum tax rule described below
applies, no tax consequences will result to the optionee or us from the grant of
an incentive  stock option to, or the exercise of an incentive  stock option by,
the optionee. Instead, the optionee will recognize gain or loss when he sells or
disposes of the shares  transferred to him upon exercise of the incentive  stock
option.  For purposes of determining  such gain or loss, the optionee's basis in
such shares will be his option price. If the date of sale or disposition of such
shares is at least two years after the date of the grant of the incentive  stock
option,  and at least one year  after  the  transfer  of the  shares to him upon
exercise of the  incentive  stock option,  the optionee  will realize  long-term
capital gain treatment upon their sale or disposition.

     Generally,  we will not be allowed a deduction with respect to an incentive
stock option. However, if an optionee fails to meet the foregoing holding period
requirements (a so-called disqualifying disposition), any gain recognized by the
optionee  upon the sale or  disposition  of the shares  transferred  to him upon
exercise of an  incentive  stock option will be treated in the year of such sale
or  disposition as ordinary  income,  rather than capital gain, to the extent of
the  excess,  if any,  of the fair  market  value of the  shares  at the time of
exercise  (or,  if less,  in certain  cases the amount  realized on such sale or
disposition)  over  their  option  price,  and in that case we will be allowed a
corresponding  deduction.

     For purposes of the alternative  minimum tax, the amount,  if any, by which
the fair  market  value of the  shares  transferred  to the  optionee  upon such
exercise exceeds the option price will be included in determining the optionee's
alternative  minimum taxable income. In addition,  for purposes of such tax, the
basis of such shares will include such excess.

     To the extent that the aggregate fair market value  (determined at the time
the option is  granted)  of the stock  with  respect  to which  incentive  stock
options are  exercisable  for the first time by the optionee during any calendar
year exceeds $100,000, such options will not be incentive stock options. In this
regard, upon the exercise of an option which is deemed, under the rule described
in the preceding sentence, to be in part an incentive stock option and in part a
nonstatutory stock option,  under existing Internal Revenue Service  guidelines,
we may designate which shares issued upon exercise of such options are incentive
stock options and which shares are nonstatutory stock options. In the absence of
such  designation,  a pro rata  portion of each share issued is to be treated as
issued  pursuant to the exercise of an incentive stock option and the balance of
each share treated as issued  pursuant to the exercise of a  nonstatutory  stock
option.

     Recommendation and Required Vote

     The affirmative vote of the holders of a majority of our outstanding common
shares present at the meeting,  in person or by proxy,  is required for approval
of this  proposal.  Our Board of Directors  recommends a vote FOR this  proposed
amendment to the 1998 Stock Option Plan.

              PROPOSAL 4: AMENDMENT TO CERTIFICATE OF INCORPORATION
                 TO INCREASE NUMBER OF AUTHORIZED COMMON SHARES

     Our Board of Directors has adopted resolutions  approving and submitting to
a vote of the  stockholders an amendment to Article FOURTH of our Certificate of
Incorporation to increase the number of authorized common shares from 25,000,000
to 40,000,000.  Our Board believes that the increase in authorized  shares is in
our  best  interest  so  as to  make  additional  common  shares  available  for
acquisitions, financings, present and future employee benefit programs and other
corporate purposes.

     The additional common shares resulting from the stockholder approval of the
authorized  share  increase  may be  issued  from  time to time as our  Board of
Directors may determine without further action of our stockholders. Although our
Board  has  no  current  plans  to  utilize  such  shares  to  entrench  present
management,  it may, in the future,  be able to use the additional common shares
as a defensive tactic against hostile takeover  attempts.  The  authorization of
such  additional  common shares will have no current  anti-takeover  effect.  No
hostile  takeover  attempts  are,  to  our  management's  knowledge,   currently
threatened.  There are no  provisions in our  Certificate  of  Incorporation  or
By-Laws or other material  agreements to which we are a party that would, in our
management's judgment,  have an anti-takeover effect;  however,  pursuant to our
Certificate of Incorporation, if our stockholders wish to take action by written
consent  in lieu  of a  meeting,  then  the  unanimous  written  consent  of our
stockholders  is  required to take the action

(rather  than a majority  as would  otherwise  be the case) if the action is not
supported by our Board of Directors.

     The  relative  rights and  limitations  of the common  shares  would remain
unchanged under the amendment.  Our stockholders do not currently  possess,  nor
upon the approval of the proposed  authorized  share increase will they acquire,
preemptive  rights,  that would entitle such persons,  as a matter of right,  to
subscribe for the purchase of any shares,  rights,  warrants or other securities
or obligations convertible into, or exchangeable for, our securities. Therefore,
the proposed  increase in authorized  shares could result in the dilution of the
ownership interest of existing stockholders.

     Recommendation and Required Vote

     The affirmative vote of the holders of a majority of our outstanding common
shares is  required  for  approval  of this  proposal.  The  Board of  Directors
recommends a vote FOR approval of the proposed  amendment to the  Certificate of
Incorporation.

              PROPOSAL 5: AMENDMENT TO CERTIFICATE OF INCORPORATION
               TO PROVIDE FOR AUTHORITY TO ISSUE PREFERRED SHARES

     Our Board of Directors has  recommended an amendment to our  Certificate of
Incorporation  to provide for the  authority to issue up to 1,000,000  preferred
shares,  $.01  par  value,  in one or more  classes  or  series,  and to fix the
relative rights and preferences of the shares, including voting powers, dividend
rights, liquidation preferences, redemption rights and conversion privileges.

     The preferred  shares,  if approved and  authorized,  would be utilized for
various corporate  purposes including as consideration in connection with future
corporate acquisitions and to raise additional capital. Our Board believes it is
desirable to have our authorized  capital  sufficiently  flexible so that future
business  needs and  corporate  opportunities  may be dealt with by our Board of
Directors   without   undue  delay  or  the   necessity  of  holding  a  special
stockholders' meeting.

     The additional  preferred shares resulting from the stockholder approval of
the  proposal  may be issued  from time to time as our  Board of  Directors  may
determine without further action of our stockholders.  Although our Board has no
current plans to utilize such shares to entrench present management,  it may, in
the future,  be able to use the shares as a  defensive  tactic  against  hostile
takeover  attempts.  The  authorization  of such  shares  will  have no  current
anti-takeover  effect.  No hostile  takeover  attempts are, to our  management's
knowledge,  currently threatened.  There are no provisions in our Certificate of
Incorporation  or By-Laws or other  material  agreements to which we are a party
that would, in our management's judgment, have an anti-takeover effect; however,
pursuant to our Certificate of  Incorporation,  if our stockholders wish to take
action by  written  consent  in lieu of a meeting,  then the  unanimous  written
consent  of our  stockholders  is  required  to take the action  (rather  than a
majority as would  otherwise be the case) if the action is not  supported by our
Board of Directors.

     The proposed preferred shares could result in the dilution of the ownership
interest of existing stockholders.  In addition, because of its broad discretion
with  respect  to  the  creation  and  issuance  of  preferred   shares  without
stockholder  approval,  our Board of Directors could adversely affect the voting
power of the holders of common shares.

     The  authority  to be  given  to our  Board of  Directors  pursuant  to the
proposed amendment is attached as Appendix A to this proxy statement.

     Recommendation and Required Vote

     The affirmative vote of the holders of a majority of our outstanding common
shares is required for approval of this  proposal.  The Board  recommends a vote
FOR adoption of this proposed amendment to the Certificate of Incorporation.

              PROPOSAL 6: AMENDMENT TO CERTIFICATE OF INCORPORATION
                         TO BROADEN CORPORATE PURPOSES

     Our Board of Directors has recommended an amendment to Article THIRD of our
Certificate of  Incorporation  to broaden the corporate  purposes to include any
lawful act or activity for which  corporations  may be organized  under Delaware
Law.

     The current purpose and powers clause of our Certificate of  Incorporation,
which has not been amended since the original  Certificate of Incorporation  was
filed in 1961, contains thirteen  subparagraphs.  Since 1961, custom,  usage and
the laws of the State of Delaware have changed. Under current Delaware law, this
specific  enumeration of business functions is no longer necessary,  and a brief
statement of business purposes suffices. The amendment would permit us to engage
in any kind of lawful corporate activity.

     Article  THIRD of our  Certificate  of  Incorporation,  as  proposed  to be
amended, is attached as Appendix B to this proxy statement.

     Recommendation and Required Vote

     The affirmative vote of the holders of a majority of our outstanding common
shares is required for approval of this  proposal.  The Board  recommends a vote
FOR adoption of this proposed amendment to the Certificate of Incorporation.

                         INDEPENDENT PUBLIC ACCOUNTANTS

     Holtz  Rubenstein & Co., LLP has served as our auditors  since 1990 and was
selected as our independent  public  accountants with respect to the fiscal year
ended December 31, 2000.

     It is not expected that a  representative  of Holtz  Rubenstein will attend
the meeting.

     Audit Fees

     The aggregate  fees billed by Holtz  Rubenstein for  professional  services
rendered for the audit of our annual  financial  statements  for the 2000 fiscal
year and the review of the financial statements included in our Forms 10-QSB for
that fiscal year were approximately $71,000.

     Financial Information Systems Design and Implementation Fees

     During  fiscal  2000,  Holtz  Rubenstein  did not  render  to us any of the
professional  services with regard to financial  information  systems design and
implementation described in paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X.

     All Other Fees

     The aggregate  fees billed for services  rendered by Holtz  Rubenstein  for
fiscal 2000,  other than the services  described above under "Audit Fees",  were
approximately $2,000.

     The Audit  Committee  has  determined  that the  provision  of the services
covered in "All Other Fees" is compatible with  maintaining  Holtz  Rubenstein's
independence.

                              STOCKHOLDER PROPOSALS

     Stockholder  proposals  intended to be presented at our next annual meeting
of  stockholders  pursuant to the provisions of Rule 14a-8 of the Securities and
Exchange Commission, promulgated under the Exchange Act, must be received at our
offices in East Meadow,  New York by _________,  2002 for inclusion in our proxy
statement and form of proxy relating to such meeting.

     The  following  requirements  with  respect to  stockholder  proposals  and
stockholder nominees to our Board of Directors are included in our By-Laws.

     1. Stockholder Proposals.  In order for a stockholder to make a proposal at
an annual  meeting of  stockholders,  under our By-Laws,  timely  notice must be
received by us in advance of the meeting.  To be timely,  the  proposal  must be
received by our Secretary at our principal executive offices (as provided below)
on a date which is not less than 60 days nor more than 90 days prior to the date
which is one year from the date of the  mailing of the proxy  statement  for the
prior year's annual meeting of stockholders. If during the prior year we did not
hold an annual  meeting,  or if the date of the meeting for which a  stockholder
intends to submit a proposal  has changed more than 30 days from the date of the
meeting in the prior year,  then the notice must be received a  reasonable  time
before we mail the proxy statement for the current year. A stockholder's  notice
must set forth as to each matter the  stockholder  proposes to bring  before the
annual  meeting  certain  information  regarding  the  proposal,  including  the
following:

          a brief  description of the business  desired to be brought before the
          meeting and the reasons for conducting such business at such meeting;

          the name and address of the stockholder proposing such business;

          the class and number of our shares of which are beneficially  owned by
          such stockholder; and

          any material interest of such stockholder in such business.

     2. Stockholder Nominees. In order for a stockholder to nominate a candidate
for  director,  under  our  By-Laws,  timely  notice of the  nomination  must be
received  by us in advance of the  meeting.  To be  timely,  the notice  must be
received at our principal executive offices (as provided below) not less than 60
days nor more than 90 days prior to the meeting;  however, if less than 70 days'
notice of the date of the meeting is given to stockholders and public disclosure
of the meeting date,  pursuant to a press release,  is either not made at all or
is made less than 70 days prior to the meeting date,  notice by a stockholder to
be timely  made must be so  received  no later than the close of business on the
tenth day following the earlier of the following:

          the day on which the notice of the date of the  meeting  was mailed to
          stockholders, or

          the day on which such public disclosure of the meeting date was made.

     The  stockholder  sending the notice of nomination  must  describe  various
matters, including such information as:

          the  name,  age,  business  and  residence  addresses,  occupation  or
          employment and shares held by the nominee;

          any  other  information  relating  to  such  nominee  required  to  be
          disclosed in a proxy statement; and

          the name, address and number of shares held by the stockholder.

     These  requirements are separate from and in addition to the requirements a
stockholder must meet to have a proposal included in our proxy statement.

     Any notice given pursuant to the foregoing requirements must be sent to our
Secretary at 2545 Hempstead Turnpike, East Meadow, New York 11554. The foregoing
is only a summary of the  provisions  of our By-Laws that relate to  stockholder
proposals and stockholder  nominations for director.  Any stockholder desiring a
copy of our  By-Laws  will be  furnished  one without  charge upon  receipt of a
written request therefor.

                                 OTHER BUSINESS

     While the  accompanying  Notice of Annual Meeting of Stockholders  provides
for the  transaction  of such other  business  as may  properly  come before the
meeting,  we have no  knowledge  of any matters to be  presented  at the meeting
other than those  listed as  Proposals 1 through 6 in the notice.  However,  the
enclosed proxy gives discretionary authority in the event that any other matters
should be presented.

                INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

     This proxy  statement is  accompanied by a copy of our 2000 Form 10-KSB and
our Form 10-QSB for the quarter ended March 31, 2001.

     The following  information from our 2000 Form 10-KSB (File No. 0-1665),  as
filed  with the SEC  pursuant  to Section 13 or 15(d) of the  Exchange  Act,  is
hereby incorporated by reference into this proxy statement:

          "Description of Business," included in Item 1 thereof;

          "Description of Property," included in Item 2 thereof;

          "Legal Proceedings," included in Item 3 thereof;

          "Management's  Discussion and Analysis or Plan of Operation," included
          in Item 6 thereof;

          our consolidated  financial statements as of December 31, 2000 and for
          the  years  ended  December  31,  1999 and  2000,  included  in Item 7
          thereof; and

          "Changes in and Disagreements  with  Accountants,"  included in Item 8
          thereof.

     The following  information from our Form 10-QSB for the quarter ended March
31,  2001 (File No.  0-1665),  as filed with the SEC  pursuant  to Section 13 or
15(d) of the Exchange Act, is hereby  incorporated  by reference into this proxy
statement:

          Our consolidated financial statements as of March 31, 2001 and for the
          three months ended March 31, 2001 and 2000, included in Part I, Item 1
          thereof; and

          "Management's  Discussion and Analysis or Plan of Operation," included
          in Part I, Item 2 thereof.

     Any  statement  contained  in a document  incorporated  herein by reference
shall be  deemed  to be  modified  or  superseded  for  purposes  of this  proxy
statement to the extent that a statement contained herein modifies or supersedes
such  statement.  Any statement so modified or

superseded  shall  not be  deemed,  except  as so  modified  or  superseded,  to
constitute a part of this proxy statement.

                                               Barry Goldstein
                                               Chief Executive Officer

East Meadow, New York
_____________, 2001

                                                                      Appendix A

     The Board of Directors  hereby is vested with the  authority to provide for
the issuance of the Preferred  Stock,  at any time and from time to time, in one
or more series,  each of such series to have such voting  powers,  designations,
preferences and relative participating,  optional,  conversion and other rights,
and such  qualifications,  limitations  or  restrictions  thereon  as  expressly
provided in the resolution or resolutions duly adopted by the Board of Directors
providing for the issuance of such shares or series thereof. The authority which
hereby is vested in the Board of Directors shall include, but not be limited to,
the  authority to provide for the following  matters  relating to each series of
the Preferred Stock:

     (i)  The designation of any series.

     (ii) The number of shares initially constituting any such series.

     (iii)The increase, and the decrease to a number not less than the number of
          the  outstanding  shares of any such  series,  of the number of shares
          constituting such series theretofore fixed.

     (iv) The rate or rates and the times at which  dividends  on the  shares of
          Preferred  Stock or any series  thereof shall be paid,  and whether or
          not such dividends  shall be cumulative,  and, if such dividends shall
          be  cumulative,  the date or dates  from and after  which  they  shall
          accumulate.

     (v)  Whether or not the shares of Preferred  Stock or series  thereof shall
          be redeemable,  and, if such shares shall be redeemable, the terms and
          conditions of such redemption, including, but not limited to, the date
          or dates upon or after which such shares shall be  redeemable  and the
          amount per share which shall be payable  upon such  redemption,  which
          amount may vary under different conditions and at different redemption
          dates.

     (vi) The amount payable on the shares of Preferred  Stock or series thereof
          in the event of the voluntary or involuntary liquidation,  dissolution
          or winding up of the Corporation;  provided, however, that the holders
          of shares ranking senior to other shares shall be entitled to be paid,
          or to have set apart for payment,  not less than the liquidation value
          of such shares before the holders of shares of the Common Stock or the
          holders of any other series of Preferred  Stock ranking junior to such
          shares.

     (vii)Whether or not the shares of Preferred  Stock or series  thereof shall
          have voting rights,  in addition to the voting rights provided by law,
          and,  if such  shares  shall have such  voting  rights,  the terms and
          conditions  thereof,  including  but not  limited  to the right of the
          holders of such  shares to vote as a separate  class  either  alone or
          with the  holders  of shares of one or more  other  class or series of
          Preferred Stock and the right to have more than one vote per share.

   (viii) Whether or not a sinking  fund  shall be provided  for the  redemption
          of the shares of  Preferred  Stock or series  thereof,  and, if such a
          sinking fund shall be provided, the terms and conditions thereof.

     (ix) Whether or not a purchase  fund  shall be  provided  for the shares of
          Preferred Stock or series thereof,  and, if such a purchase fund shall
          be provided, the terms and conditions thereof.

     (x)  Whether or not the shares of Preferred  Stock or series  thereof shall
          have conversion privileges,  and, if such shares shall have conversion
          privileges, the terms and conditions of conversion,  including but not
          limited to any provision for the adjustment of the conversion  rate or
          the conversion price.

     (xi) Any other relative rights,  preferences,  qualifications,  limitations
          and restrictions.

                                                                     Appendix B

     "THIRD: The nature of the business of the Corporation,  and the objects and
purposes  proposed to be transacted,  promoted and carried on by it, shall be to
engage in any lawful act or activity  for which  corporations  may be  organized
under the General Corporation Law of Delaware."

                                DCAP GROUP, INC.

           This Proxy is Solicited on Behalf of the Board of Directors

     The undersigned hereby appoints Barry Goldstein as proxy, with the power to
appoint his  substitute,  and hereby  authorizes  him to represent  and vote, as
designated below, all the common shares of DCAP Group, Inc. (the "Company") held
of record by the  undersigned  at the close of  business on June 12, 2001 at the
Annual Meeting of  Stockholders  to be held on July 18, 2001 or any  adjournment
thereof.

1.   Election of Directors:

FOR all nominees listed below                   WITHHOLD AUTHORITY to vote
(except as marked to the contrary)              for all nominees listed below

(Instruction:  To withhold authority to vote for any individual nominee,  strike
such nominee's name from the list below.)

   Barry Goldstein    Morton L. Certilman    Jay M. Haft    Robert M. Wallach

2.   Proposal to approve and ratify the sale by the Company and its subsidiaries
     of assets that may constitute, under Delaware law, substantially all of its
     assets.

     FOR ____               AGAINST ____            ABSTAIN ____

3.   Proposal to approve an increase in the number of common  shares  authorized
     to be  issued  pursuant  to the  Company's  1998  Stock  Option  Plan  from
     2,000,000 to 3,000,000.

     FOR ____               AGAINST ____            ABSTAIN ____

4.   Proposal  to  approve  an  amendment  to  the  Company's   Certificate   of
     Incorporation  to  increase  the number of  authorized  common  shares from
     25,000,000 to 40,000,000.

     FOR ____               AGAINST ____            ABSTAIN ____

5.   Proposal  to  approve  an  amendment  to  the  Company's   Certificate   of
     Incorporation  to  provide  for the  authority  to  issue  up to  1,000,000
     preferred shares.

     FOR ____               AGAINST ____            ABSTAIN ____

6.   Proposal  to  approve  an  amendment  to  the  Company's   Certificate   of
     Incorporation  to broaden the corporate  purposes to include any lawful act
     or activity for which corporations may be organized under Delaware law.

     FOR ____               AGAINST ____            ABSTAIN ____

7.   In his discretion, the proxy is authorized to vote upon such other business
     as may properly come before the meeting.

     This proxy, when properly executed, will be voted in the manner directed by
the undersigned  stockholder.  If no direction is made, this proxy will be voted
FOR the election of the named  nominees as directors  and FOR Proposals 2, 3, 4,
5, and 6.

     PLEASE  MARK,  SIGN,  DATE AND  RETURN THE PROXY  CARD  PROMPTLY  USING THE
ENCLOSED ENVELOPE.

                                                     Please sign exactly as name
                                                     appears below. When shares
                                                     are held by joint tenants,
                                                     both should sign. When
                                                     signing as attorney,
                                                     executor, administrator,
                                                     trustee or guardian, please
                                                     give full title as such. If
                                                     a corporation, please sign
                                                     in full corporate name by
                                                     the President or other
                                                     authorized officer. If a
                                                     partnership, please sign in
                                                     partnership name by
                                                     authorized person.

                                                     Dated:_______________, 2001

                                                     Signature

                                                     Signature if held jointly