UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549-1004
                           ---------------------------

                                    FORM 10-Q
 (Mark One)
     [X]        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


                  For the Quarterly Period Ended June 30, 2005
                                                 -------------

                                       OR

     [ ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

     For the Transition Period from __________________ to __________________

     Commission File Number          0-13084
                             ---------------------------------------------------

                             WARRANTECH CORPORATION
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                      Nevada                                13-3178732
--------------------------------------------------------------------------------
         (State or other jurisdiction of                 (I.R.S. Employer
          incorporation or organization)                Identification No.)

        2200 Highway 121, Suite 100, Bedford, Texas                  76021
--------------------------------------------------------------------------------
         (Address of principal executive offices)                 (Zip Code)

        Registrant's telephone number, including area code    (800) 544-9510
                                                           ---------------------

--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last year)

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

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act.) Yes [ ] No [X]

         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

               Class                               Outstanding at July 29, 2005
---------------------------------------            ----------------------------
Common stock, par value $.007 per share                 15,398,674 shares
<PAGE>

                     WARRANTECH CORPORATION AND SUBSIDIARIES


                                    I N D E X
                                    ---------


                                                                        Page No.
                                                                        --------
                         PART I - Financial Information


Item 1:  Financial Statements

    Condensed Consolidated Statements of Operations -
           For the Three Months Ended June 30, 2005 and 2004 (Unaudited).....2

    Condensed Consolidated Balance Sheets at June 30, 2005
           (Unaudited) and March 31, 2005....................................3

    Condensed Consolidated Statements of Cash Flows
           For the Three Months Ended June 30, 2005
           and 2004 (Unaudited)..............................................5

    Notes to Condensed Consolidated Financial Statements.....................6

Item 2:  Management's Discussion and Analysis of
           Financial Condition and Results of Operations ...................12

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.........18

Item 4.  Controls and Procedures............................................18



                           PART II - Other Information


Item 1:  Legal Proceedings..................................................19

Item 2:  Changes in Securities..............................................20

Item 3:  Defaults Upon Senior Securities....................................20

Item 4:  Submission of Matters to a Vote of Security Holders................20

Item 5:  Other Information..................................................20

Item 6:  Exhibits and Reports on Form 8-K...................................20

Signature ..................................................................21

                                       1
<PAGE>

PART I  -  Financial Information


           Item 1:  Financial Statements

                     WARRANTECH CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                       For the Three Months Ended
                                                                June 30,
                                                      ----------------------------
                                                          2005            2004
                                                      ------------    ------------
<S>                                                   <C>             <C>
Gross revenues                                        $ 31,619,839    $ 32,994,936
Net (increase) decrease in deferred revenues            (4,760,494)     (9,133,445)
                                                      ------------    ------------
Net revenues                                            26,859,345      23,861,491

Direct costs                                            20,639,176      17,400,074
                                                      ------------    ------------
Gross Profit                                          $  6,220,169    $  6,461,417
Operating expenses
   Service, selling, and general and administrative      6,333,035       6,965,207
   Provision for bad debt expense                               --         131,279
   Depreciation and amortization                           532,147         728,489
                                                      ------------    ------------
Total costs and expenses                                 6,865,182       7,824,975
                                                      ------------    ------------

Income (loss) from operations                             (645,013)     (1,363,558)
Other income                                               138,379         178,641
                                                      ------------    ------------

Income (loss) before provision for income taxes           (506,634)     (1,184,917)
Provision (benefit) for income taxes                        29,424        (425,378)
                                                      ------------    ------------

Net income (loss)                                     $   (536,058)   $   (759,539)
                                                      ============    ============

Earnings (loss) per share:
   Basic                                              ($      0.03)   ($      0.05)
                                                      ============    ============
   Diluted                                            ($      0.03)   ($      0.05)
                                                      ============    ============

Weighted average number of shares outstanding:
   Basic                                                15,398,677      15,398,677
                                                      ============    ============
   Diluted                                              15,398,677      15,398,677
                                                      ============    ============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       2
<PAGE>

                     WARRANTECH CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                          June 30,       March 31,
                                                            2005           2005
                                                        (Unaudited)
                                                        ------------   ------------
A S S E T S
-----------
<S>                                                     <C>            <C>
Current assets:
   Cash and cash equivalents                            $  5,643,220   $  4,591,746
   Investments in marketable securities                    1,662,276      1,438,346
   Accounts receivable, (net of allowances of
       $577,746 and $576,832, respectively)               20,408,994     20,297,743
   Other receivables, (net of allowances of
       $3,718,954, respectively)                           6,937,605      6,211,793
   Prepaid Taxes                                              50,823         41,530
   Deferred income taxes                                   5,786,881      5,786,881
   Employee receivables                                       50,346         42,912
   Prepaid expenses and other current assets                 812,657        945,786
                                                        ------------   ------------
      Total current assets                                41,352,802     39,356,737
                                                        ------------   ------------

Property and equipment, net                                4,111,996      4,356,537
                                                        ------------   ------------

Other assets:
   Excess of cost over fair value of assets acquired
      (net of accumulated amortization of $5,825,405)      1,637,290      1,637,290
   Deferred income taxes                                  17,735,592     17,639,485
   Deferred direct costs                                 202,816,694    198,333,403
   Investments in marketable securities                      369,588        605,412
   Restricted cash                                           800,000        800,000
   Split dollar life insurance policies                      900,145        900,145
   Other assets                                               36,456         34,830
                                                        ------------   ------------
          Total other assets                             224,295,765    219,950,565
                                                        ------------   ------------
                    Total Assets                        $269,760,563   $263,663,839
                                                        ============   ============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

                     WARRANTECH CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                            June 30,         March 31,
                                                                              2005              2005
                                                                           (Unaudited)
                                                                          -------------    -------------
LIABILITIES AND STOCKHOLDERS' CAPITAL DEFICIENCY
------------------------------------------------
<S>                                                                       <C>              <C>
Current liabilities:
     Current maturities of long-term debt and capital lease obligations   $     507,882    $     541,626
     Insurance premiums payable                                              40,346,641       38,721,325
     Accounts and commissions payable                                         8,046,201        7,952,621
     Claims Liability - Reliance                                              2,479,760        2,930,559
     Accrued expenses and other current liabilities                           5,107,585        3,776,199
                                                                          -------------    -------------
          Total current liabilities                                          56,488,069       54,487,885
                                                                          -------------    -------------

Deferred revenues                                                           240,349,294      235,588,801
Claims Liability - Reliance                                                   1,725,697        1,833,385
Long-term debt and capital lease obligations                                    973,429          923,984
Deferred rent payable                                                           444,328          469,468
                                                                          -------------    -------------
      Total liabilities                                                     299,980,817      293,273,523
                                                                          -------------    -------------

Commitments and contingencies                                                        --               --

Stockholders' Capital Deficiency:
   Preferred stock - $.0007 par value authorized - 15,000,000 Shares
        issued  - none at June 30, 2005 and March 31, 2005                           --               --
   Common stock - $.007 par value authorized - 30,000,000 Shares
        issued  - 16,586,283 shares at June 30, 2005 and March 31, 2005
                                                                                116,106          116,106
   Additional paid-in capital                                                23,800,228       23,800,228
   Loans to directors and officers                                          (11,103,018)     (11,032,065)
   Accumulated other comprehensive income, net of taxes                         228,898          232,456
   Deficit                                                                  (39,074,910)     (38,538,852)
                                                                          -------------    -------------
                                                                            (26,032,696)     (25,422,127)
Treasury stock - at cost, 1,187,606 shares at June 30, 2005 and
   March 31, 2005                                                            (4,187,558)      (4,187,558)
                                                                          -------------    -------------
        Total Stockholders' Capital Deficiency                              (30,220,254)     (29,609,685)
                                                                          -------------    -------------

                                                                          -------------    -------------
           Total Liabilities and Stockholders' Capital Deficiency         $ 269,760,563    $ 263,663,839
                                                                          =============    =============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

                     WARRANTECH CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                 For the Three Months
                                                                    Ended June 30,
                                                             ----------------------------
                                                                 2005            2004
                                                             ------------    ------------
<S>                                                          <C>             <C>
Cash flows from operating activities:
  Net income (loss)                                          $   (536,058)   $   (759,539)
  Total adjustments to reconcile net loss to net cash
     provided by operating activities:                          1,864,437       1,868,979
                                                             ------------    ------------
Net cash flows provided by operating activities                 1,328,379       1,109,440

Cash flows from investing activities:
  Property and equipment purchased                               (100,664)        (45,392)
  Purchase of marketable securities                               (25,000)       (525,000)
  Proceeds from sales of marketable securities                     20,000         500,000
                                                             ------------    ------------
Net cash used by investing activities                            (105,664)        (70,392)
                                                             ------------    ------------

Cash flows used in financing activities:
    Repayments, notes and capital leases                         (171,241)       (175,800)
                                                             ------------    ------------

Net increase in cash and cash equivalents                       1,051,474         863,248

Cash and cash equivalents at beginning of period                4,591,746       5,229,773
                                                             ------------    ------------
Cash and cash equivalents at end of period                   $  5,643,220    $  6,093,021
                                                             ------------    ------------

Supplemental Cash Flow Information:
Cash payments for:
   Interest                                                  $     43,845    $     38,950
                                                             ------------    ------------
   Income taxes                                              $    131,651    $     48,650
                                                             ------------    ------------

Non-Cash investing and financing activities:
    Property and equipment financed through capital leases   $    186,942    $    187,820
                                                             ------------    ------------
    Increase in loans to officers and directors              $    (70,953)   $    (70,953)
                                                             ------------    ------------
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>

                     WARRANTECH CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2005
                                   (Unaudited)

1.  THE COMPANY
    -----------

    Warrantech, through its wholly owned subsidiaries, designs, develops,
    markets and acts as a third party administrator for programs ("Programs")
    for service contracts, limited warranties and replacement plans
    (collectively, "Plans"). The Company provides these services to a variety of
    clients in selected industries. On a Program by Program basis in the
    Automotive Consumer Products and Direct segments, the Company contracts with
    highly rated independent insurance companies or risk retention groups to
    provide coverage for the Plans to be sold or issued under the Programs. This
    coverage obligates the insurer to pay the cost of repairs or replacements of
    the products covered by the Plans. In the Home segment, the Company is self
    insured.

    Plans issued under the Company's Programs provide consumers with expanded
    and/or extended product breakdown coverage for a specified period of time
    (and/or mileage in the case of automobiles and recreational vehicles),
    similar to that provided by manufacturers under the terms of their product
    warranties. Coverage generally provides for the repair or replacement of the
    product, or a component thereof, in the event of its failure. The Company's
    Programs provide clients with the opportunity for increased revenue and
    income without incurring the costs and responsibilities of operating their
    own programs.

    The Plans for the Automotive, Consumer Products and Direct segments
    generally have terms extending up to one hundred twenty (120) months or, in
    the case of mileage based Plans, up to one hundred fifty thousand (150,000)
    miles. All repairs and/or replacements required under these Plans are
    performed by independent third party repair facilities or dealers. The cost
    of any repair or replacement under these plans is generally paid by the
    insurance company or retention group with which the Company has contracted
    to provide coverage for the Plan. Plans for the Home segment are generally
    for twelve months. The cost of any repair or replacement for plans in the
    Home segment is paid for by the Company.

2.  BASIS OF PRESENTATION
    ---------------------

    The accompanying consolidated financial statements have been prepared in
    accordance with accounting principles generally accepted in the United
    States of America ("GAAP"). These consolidated financial statements include
    the accounts of Warrantech Corporation, its subsidiaries, all of which are
    wholly owned, and certain transactions involving Butler Financial Solutions,
    LLC ("Butler") due to its related interest with the Company. All
    intercompany accounts and transactions have been eliminated in
    consolidation. In the opinion of management, all adjustments (consisting of
    normal recurring accruals) considered necessary for a fair presentation of
    the financial position and operating results of the Company for the interim
    period have been included. Operating results for the three months ended June
    30, 2005 are not necessarily indicative of the results that may be expected
    for the fiscal year ending March 31, 2006. For further information, refer to
    the consolidated financial statements and footnotes thereto included in the
    Company's Annual Report on Form 10-K for the year ended March 31, 2005.

3.  ACCOUNTS RECEIVABLE
    -------------------

    Significant Customer In Bankruptcy - On January 11, 2005, Ultimate
    Electronics, Inc. and six of its subsidiaries ("Ultimate") filed individual
    voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in
    the United States Bankruptcy Court for the District of Delaware. Sales to
    Ultimate represent 10% and 32% of the Company's and its Consumer Products
    segment's total gross revenues during fiscal 2005, making it the Company's
    and Consumer Products segment's largest customer. Pursuant to the provisions

                                       6
<PAGE>

    of Chapter 11, Warrantech was obligated to honor its existing contact with
    Ultimate and Ultimate continued to sell service contracts during this period
    of reorganization. At present, Ultimate is current in its payments to
    Warrantech with respect to sales subsequent to January 11, 2005 "
    post-petition sales ". At the time of filing, however, Warrantech believes
    that Ultimate owed it approximately $3.27 million for sales up to January
    11, 2005 " pre-petition sales" and Warrantech has filed a "proof of claim"
    in this amount with the Court. At this time, it is impossible to estimate
    what Warrantech will recover on its claim. Final Bankruptcy Court
    settlements are expected to take place during the third fiscal 2006 quarter.

    In separate orders dated April 19, 2005, the Court approved the following
    two actions. Thirty (30) of Ultimate's stores were scheduled for closing and
    a liquidator was retained to dispose of existing inventory. The liquidator
    was authorized by the Court to sell Warrantech service contracts during the
    liquidation period in accordance with the terms of the existing Ultimate
    contract. At this time, the liquidation has been substantially completed.
    The remaining stores were purchased by Mark Wattles, the principal
    shareholder of Ultimate, through an entity named Ultimate Acquisition
    Partners, L.P. ("Acquisition"). As part of the Purchase Agreement,
    Acquisition was given until August 31, 2005, to decide if it wants to assume
    Ultimate's contract with Warrantech. If it chooses to assume the contract,
    it must reach an agreement with Warrantech with respect to satisfaction of
    Warrantech's pre-petition claim. Until such decision is made, Acquisition
    can continue to sell Warrantech service contracts in accordance with the
    terms of the Ultimate contract. If Acquisition elects not to assume the
    existing Ultimate contract, it can negotiate a new agreement with Warrantech
    (in which no cure payment would be legally required) or it can select a new
    service contract provider. The parties are currently contesting a number of
    procedural issues. At this time, no such decision has been made.

    At June 30, 2005, the Company was owed $3.7 million by Ultimate. The Company
    has filed a proof of claim for $3.27 million with the bankruptcy court. No
    provision for bad debts has been recorded as of June 30, 2005.

4.  OTHER RECEIVABLES
    -----------------

    The nature and amounts of Other Receivables as of June 30, 2005 and March
    31, 2005 are as follows:

<TABLE>
<CAPTION>
                                                                       ----------------------------
                                                                         June 30,        March 31,
                                                                           2005            2005
                                                                       ------------    ------------
<S>                                                                    <C>             <C>
       Other receivables, net
          Due from insurance companies                                 $  5,639,715    $  5,334,621
          Due from insurance companies - reimbursement of legal fees      3,718,954       3,718,954
          Due from insurance companies - profit sharing                      41,920          41,920
          Due from dealers                                                  355,992         384,304
                                                                       ------------    ------------
               Due from insurance companies/dealers                       9,756,581       9,478,799
          Agent advances                                                     65,391          61,787
          Other                                                             834,587         389,161
                                                                       ------------    ------------
                                                                         10,656,559       9,930,747
       Allowance for doubtful accounts                                   (3,718,954)     (3,718,954)
                                                                       ------------    ------------
       Total other receivables, net                                    $  6,937,605    $  6,211,793
                                                                       ============    ============
</TABLE>

         The following table sets forth the carrying amounts and fair values of
the Company's other receivables at June 30, 2005.

<TABLE>
<CAPTION>
                                                  Expected Maturity Date
                         ----------------------------------------------------------------------------
                            2005         2006         2007         2008         2009       Thereafter    Total      Fair Value
                         ----------   ----------   ----------   ----------   ----------    ----------  ----------   ----------
<S>                      <C>                  <C>          <C>          <C>          <C>          <C>  <C>          <C>
Other receivables, net   $6,937,605           --           --           --           --           --   $6,937,605   $6,937,605
</TABLE>

                                       7
<PAGE>

5.  COMPREHENSIVE INCOME (LOSS)
    ---------------------------

         The components of comprehensive income (loss) are as follows:

<TABLE>
<CAPTION>
                                                          For the Three Months Ended
                                                                    June 30,
                                                         ----------------------------
                                                             2005            2004
                                                         ------------    ------------
<S>                                                      <C>             <C>
         Net income (loss)                               ($   536,058)   ($   759,539)
         Other comprehensive income (loss), net of tax
            Unrealized gain (loss) on investments               2,108         (11,123)
            Foreign currency translation adjustments           (5,666)        (53,256)
                                                         ------------    ------------
         Comprehensive income (loss)                     ($   539,616)   ($   823,918)
                                                         ============    ============

         Comprehensive income (loss) per share:          ($      0.04)   ($      0.05)
                                                         ============    ============

         The components of accumulated comprehensive income are as follows:

                                                           June 30,        March 31,
                                                             2005            2005
                                                         ------------    ------------
         Unrealized gain/(loss) on investments           ($     2,183)   $     (4,291)
         Accumulated translation adjustments                  231,081         236,747
                                                         ------------    ------------
         Accumulated other comprehensive income          $    228,898    $    232,456
                                                         ============    ============
</TABLE>

6.  EARNINGS PER SHARE
    ------------------

    The following table sets forth the calculation of earnings per share for the
    three months ended June 30, 2005 and 2004.

<TABLE>
<CAPTION>
                                                             For the Three Months Ended
                                                                      June 30,
                                                            ----------------------------
                                                                2005            2004
                                                            ------------    ------------
<S>                                                         <C>             <C>
         Numerator:
            Net income (loss ) applicable to common stock   ($   536,058)   ($   759,539)
                                                            ============    ============
         Denominator:
             Average outstanding shares used in the
                   computation of per share earnings:
              Common stock issued - Basic shares              15,398,677      15,398,677
                                                            ============    ============
                                  - Diluted shares            15,398,677      15,398,677
                                                            ============    ============
         Earnings (loss) per common share:
            Basic                                           ($      0.03)   ($      0.05)
                                                            ============    ============
            Diluted                                         ($      0.03)   ($      0.05)
                                                            ============    ============
</TABLE>
                                       8
<PAGE>

7.  STOCK OPTION PLAN
    -----------------

    As the exercise price of all options granted under the plan was equal to or
    above the market price of the underlying common stock on the grant date, no
    stock-based employee compensation is charged to operations. The following
    table illustrates the effect on net income and earnings per share if the
    company had applied the fair value recognition provisions of SFAS No. 123,
    as amended, to options granted under the stock option plans and rights to
    acquire stock granted under the company's Stock Participation Plan,
    collectively called "options." For purposes of this pro-forma disclosure,
    the value of the options is estimated using a Black-Scholes option pricing
    model and amortized ratably to expense over the options' vesting periods.
    Because the estimated value is determined as of the date of grant, the
    actual value ultimately realized by the employee may be significantly
    different.

                                                    For the Three Months Ended
                                                             June 30,
                                                   ----------------------------
                                                       2005            2004
                                                   ------------    ------------

Net income (loss) as reported                      ($   536,058)   ($   759,539)
Net income (loss) pro forma                        ($   561,511)   ($   782,286)
Shares - Basic                                       15,398,677      15,398,677
Basic earnings (loss) per share as reported        ($      0.03)   ($      0.05)
Basic earnings (loss) per share pro forma          ($      0.03)   ($      0.05)


    The fair value of Warrantech stock options used to compute pro forma net
    income and earnings per share disclosures is the estimated value at grant
    date using the Black-Scholes option-pricing model with the following
    weighted average assumptions for the three months ended June 30, 2005 and
    2004, respectively: expected dividend yield of 0%; expected volatility of
    30% - 50%; a risk free interest rate of 4.0% - 5.0%; and expected option
    life of 3 to 10 years.

    In December 2004, the FASB issued Statement 123R, "Share-Based Payment," to
    be effective for interim or annual periods beginning after June 15, 2005;
    thereby, becoming effective for Warrantech in the first quarter of fiscal
    2006. Statement 123R requires all share-based payments to employees,
    including grants of employee stock options, to be recognized as an operating
    expense in the income statement. The cost is recognized over the requisite
    service period based on fair values measured on grant dates. The new
    standard may be adopted using either the modified prospective transition
    method or the modified retrospective method. The Company is currently
    evaluating its share-based employee compensation programs, the potential
    impact of this statement on the consolidated financial position and results
    of operations, and the alternative adoption methods.

    Presented below is a summary of the status of the stock options in the plan
    and the related transactions for the three months ended June 30, 2005 and
    2004.

<TABLE>
<CAPTION>
                                                            2005                          2004
                                                 ---------------------------------------------------------
                                                                 Weighted                      Weighted
                                                                 Average                       Average
                                                                 Exercise                      Exercise
                                                      Shares       Price            Shares       Price
                                                 ---------------------------------------------------------
<S>                                                 <C>         <C>               <C>         <C>
Options outstanding at beginning of the period      1,514,803   $       1.16      1,332,789   $       1.35
Granted                                                    --             --             --             --
Canceled/Surrendered                                    4,000   $     1.3125             --             --
Exercised                                                  --             --             --             --
Forfeited                                                  --             --             --             --
                                                 ---------------------------------------------------------
Options outstanding at end of period                1,510,803   $       1.16      1,332,789   $       1.35
                                                 =========================================================

                                                 ---------------------------------------------------------
Options exercisable at end of period                  899,096   $       0.78        764,604   $       1.35
                                                 =========================================================
</TABLE>

                                       9
<PAGE>

    The weighted average fair value of stock options at date of grant,
    calculated using the Black-Scholes option-pricing model, granted during the
    three months ended June 30, 2005 and 2004 was is $0.00 and $0.54,
    respectively.

    Other Stock Options - The Company may issue options to purchase the
    Company's common stock to officers, non-employees, non-employee directors or
    others as part of settlements in disputes and/or incentives to perform
    services for the Company. The Company accounts for stock options issued to
    vendors and non-employees of the Company under SFAS No. 123 "Accounting for
    Stock-based Compensation." The fair value of each option grant is estimated
    on the date of grant, using the Black-Scholes option-pricing model, is
    charged to operations utilizing weighted average assumptions identical to
    those used for options granted to employees.

    The following table summarizes the status of all Warrantech's stock options
    outstanding and exercisable at June 30, 2005.

<TABLE>
<CAPTION>
                                                  Stock Options                 Stock Options
                                                  Outstanding                    Exercisable
                                         -----------------------------   --------------------------
                                                            Weighted                      Weighted
                                                            Average                       Average
                                                            Exercise                      Exercise
        Range Of Exercise Prices            Shares           Price          Shares         Price
        ------------------------------   ------------     -----------    -----------    -----------
<S>                                         <C>           <C>              <C>          <C>
        $0.42 to $0.94                        828,016     $      0.76        548,015    $      0.80
        $1.00 to $1.02                      1,728,432     $      1.00      1,659,804    $      1.00
        $1.26 to $1.595                       578,065     $      1.41        518,065    $      1.39
        $3.25 to $3.375                       101,290     $      3.26        101,290    $      3.26
                                         ------------     -----------    -----------    -----------
        Total at June 30, 2005              3,235,803     $      1.08      2,827,174    $      1.11
                                         ============     ===========    ===========    ===========
</TABLE>

8.  SEGMENTS
    --------

    The Company operates in four major business segments: Automotive, Consumer
    Products, Direct and International. The Automotive segment markets and
    administers extended warranties on automobiles, light trucks, motorcycles,
    recreational vehicles and automotive components, which are sold principally
    by franchised and independent automobile and motorcycle dealers, leasing
    companies, repair facilities, retail stores, financial institutions and
    other specialty marketers. The Consumer Products segment develops, markets
    and administers extended warranties and product replacement plans on
    household appliances, consumer electronics, televisions, computers, home
    office equipment and homes which are sold principally through retailers,
    distributors, manufacturers, utility companies, financial institutions and
    other specialty marketers. The Direct segment markets Automotive and
    Consumer Products warranties and plans directly to the ultimate consumer on
    behalf of the retailer/dealer and/or the manufacturer through telemarketing
    and direct mail campaigns. The International segment markets and administers
    outside the United States and Canada predominately the same products and
    services of the other business segments. The International segment is
    currently operating in Central and South America, Puerto Rico and the
    Caribbean. Other includes intersegment eliminations of revenues and
    receivables and net unallocated Corporate expenses and Butler.

                                       10
<PAGE>

<TABLE>
<CAPTION>
                                         Consumer                                       Reportable
Three Months Ended      Automotive       Products*        Direct*      International     Segments         Other           Total
June 30, 2005          ------------    ------------    ------------    -------------   ------------    ------------    ------------
-------------
<S>                     <C>              <C>              <C>            <C>            <C>               <C>           <C>
Revenues                 19,079,502       8,330,260       3,024,645       1,185,432      31,619,839              --      31,619,839
Intercompany revenues       896,798         442,212          11,016         100,917       1,450,943      (1,450,943)             --
Profit (loss) from
  operations                209,004         853,343         357,435        (300,915)      1,118,867      (1,763,880)       (645,013)
Pretax income (loss)       (691,153)        207,025           9,208        (287,666)       (762,586)        255,952        (506,634)
Net interest income
  (expense)                 (85,372)        (40,836)                         12,752        (113,456)         80,337         (33,119)
Depreciation/
  amortization               66,467         119,525          19,117          19,398         224,507         307,640         532,147
Total assets            187,487,054      66,902,595       3,881,790      10,052,782     268,324,221       1,436,342     269,760,563

June 30, 2004
-------------
Revenues                 21,828,089       7,668,774       1,687,719       1,823,554      32,994,936              --      32,994,936
Intercompany revenues            --          13,199              --         258,789         271,988        (271,988)             --
Profit (loss) from
  operations               (262,236)        371,494         110.951          96,792         317,001      (1,680,559)     (1,363,558)
Pretax income (loss)     (1,114,110)        (47,981)       (421.652)         95,973      (1,487,770)        302,853      (1,184,917)
Net interest income
  (expense)                 (14,508)        (16,804)             --              25         (31,287)         88,962          57,675
Depreciation/
  amortization               81,839         232,690          14.068          19,931         348,528         379,961         728,489
Total assets            189,604,825      62,292,699       5,267,960       4,704,522     261,870,006      6,341,3235     268,211,241
</TABLE>

* Prior year reclassified for comparability.

                                       11
<PAGE>

                     WARRANTECH CORPORATION AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        -----------------------------------------------------------------------
of Operations
-------------

Except for the historical information contained herein, the matters discussed
below or elsewhere in this Quarterly Report on Form 10-K may contain
forward-looking statements that involve risks and uncertainties that could cause
actual results to differ materially from those contemplated by the
forward-looking statements. The Company makes such forward-looking statements
under the provisions of the "safe harbor" section of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements reflect the Company's
views and assumptions, based on information currently available to management,
including, among other things, the Company's operating and financial performance
over recent years and its expectations about its business for the current and
future fiscal years. When used in this Quarterly Report on Form 10-Q, the words
"believes," "estimates," "plans," "expects," and "anticipates" and similar
expressions as they relate to the Company or its management are intended to
identify forward-looking statements.

Although the Company believes that the expectations reflected in the
forward-looking statements are reasonable, it can give no assurance that its
expectations will prove to be correct. These statements are subject to certain
risks, uncertainties and assumptions, including, but not limited to,

    o   prevailing economic conditions which may significantly deteriorate,
        thereby reducing the demand for the Company's products and services,
    o   availability of technical support personnel or increases in the rate of
        turnover of such personnel, resulting from increased demand for such
        qualified personnel,
    o   changes in the terms or availability of insurance coverage for the
        Company's programs,
    o   regulatory or legal changes affecting the Company's business,
    o   loss of business from, or significant change in relationships with, any
        major customer,
    o   the Company's ability to replace lost revenues in its Automotive
        segment,
    o   the ability to successfully identify and contract new business
        opportunities, both domestically and internationally,
    o   the ability to secure necessary capital for general operating or
        expansion purposes,
    o   the adverse outcomes of litigation,
    o   the outcome of the bankruptcy proceedings involving Ultimate
        Electronics, Inc. (discussed below),
    o   the non-payment of notes due from an officer and two directors of the
        Company in 2007, which would result in a charge against earnings in the
        period in which the event occurred,
    o   the inability of any of the insurance companies which insure the service
        contracts marketed and administered by the Company to pay claims under
        the service contracts,
    o   the termination of extended credit terms being provided by the Company's
        current insurance company, and
    o   the illiquidity of the Company's stock.

Should one or more of these or any other risks or uncertainties materialize or
develop in a manner adverse to the Company, or should the Company's underlying
assumptions prove incorrect, actual results of operations, cash flows and/or the
Company's financial condition may vary materially from those anticipated,
estimated or expected.

                                       12
<PAGE>

Significant Customer In Bankruptcy
----------------------------------

         On January 11, 2005, Ultimate Electronics, Inc. and six of its
subsidiaries ("Ultimate") filed individual voluntary petitions for relief under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the
District of Delaware. Sales to Ultimate represent 10% and 32% of the Company's
and its Consumer Products segment's total gross revenues during fiscal 2005,
making it the Company's and Consumer Products segment's largest customer.
Pursuant to the provisions of Chapter 11, Warrantech was obligated to honor its
existing contact with Ultimate and Ultimate continued to sell service contracts
during this period of reorganization. At present, Ultimate is current in its
payments to Warrantech with respect to sales subsequent to January 11, 2005 "
post-petition sales " . At the time of filing, however, Warrantech believes that
Ultimate owed it approximately $3.27 million for sales up to January 11, 2005 "
pre-petition sales" and Warrantech has filed a "proof of claim" in this amount
with the Court. At this time, it is impossible to estimate what Warrantech will
recover on its claim. Final Bankruptcy Court settlements are expected to take
place during the third fiscal 2006 quarter.

         In separate orders dated April 19, 2005, the Court approved the
following two actions. Thirty (30) of Ultimate's stores were scheduled for
closing and a liquidator was retained to dispose of existing inventory. The
liquidator was authorized by the Court to sell Warrantech service contracts
during the liquidation period in accordance with the terms of the existing
Ultimate contract. At this time, the liquidation has been substantially
completed. The remaining stores were purchased by Mark Wattles, the principal
shareholder of Ultimate, through an entity named Ultimate Acquisition Partners,
L.P. ("Acquisition"). As part of the Purchase Agreement, Acquisition was given
until August 31, 2005, to decide if it wants to assume Ultimate's contract with
Warrantech. If it chooses to assume the contract, it must reach an agreement
with Warrantech with respect to satisfaction of Warrantech's pre-petition claim.
Until such decision is made, Acquisition can continue to sell Warrantech service
contracts in accordance with the terms of the Ultimate contract. If Acquisition
elects not to assume the existing Ultimate contract, it can negotiate a new
agreement with Warrantech (in which no cure payment would be legally required)
or it can select a new service contract provider. At this time, no such decision
has been made.

         At June 30, 2005, the Company was owed $3.7 million by Ultimate, in
which the Company has filed a proof of claim for $3.27 million with the
bankruptcy court. The remaining balance has subsequently been paid. No provision
for bad debts has been recorded as of the fiscal year ended March 31, 2005.

Results of Operations
---------------------

                                 Gross Revenues
                                           For the Three Months June 30,
                                           -----------------------------
                                               2005             2004
                                           ------------     ------------

          Automotive segment               $ 19,079,502     $ 21,828,089
          Consumer Products segment           8,330,260        7,668,774
          Direct                              3,024,645        1,687,719
          International segment               1,185,432        1,823,554
                                           ------------     ------------
             Total gross revenues          $ 31,619,839     $ 32,994,936
                                           ============     ============

Gross revenues for the period ended June 30, 2005 decreased $1,375,097, or 4%,
over the same period in 2004. The Consumer Products segment reported increased
gross revenues of $661,486 or 9% in the period ended June 30, 2005 over 2004,
primarily due to the increased sales from existing customers. The Direct segment
increased $1,336,926 due to the commencement of direct marketing for automotive
contracts. The Automotive and International segments reported a $2,748,587 or
13% and $638,122 or 35% decrease in gross revenues, respectively, during the
period ended June 30, 2005 compared to the same period in 2004, primarily due to
a loss of customers.

                                       13
<PAGE>

                                  Gross Profit

                                           For the Three Months June 30,
                                           -----------------------------
                                               2005             2004
                                           ------------     ------------

          Automotive segment               $  1,775,529     $  1,787,342
          Consumer Products segment           2,549,929        2,312,707
          Direct                              1,342,204        1,019,628
          International segment                 412,122        1,182,520
          Other                                 140,385          159,220
                                           ------------     ------------
             Total gross profit            $  6,220,169     $  6,461,417
                                           ============     ============

Gross Profit for the quarter ended June 30, 2005 decreased $241,248 or 4% over
the same period in 2004. The Automotive segment gross profit increased $11,813
during the fiscal period ended June 30, 2005 compared to 2004. The Consumer
Products segment gross profit increased $ $237,222 or 10% during the fiscal
period ended June 30, 2005 compared to the same period in 2004. The Direct
segment increased $322,576 or 32% during the fiscal period ended June 30, 2005
compared to the same period in 2004. The International segment gross profit
decreased $770,398, or 65%, during period ended June 30, 2005 compared to the
same period in 2004.

                                      SG&A

                                                 For the Three Months June 30,
                                                 -----------------------------
                                                     2005             2004
                                                 ------------     ------------

   Service, selling and general administrative   $  6,333,035     $  6,965,207
                                                 ============     ============

Service, selling and general and administrative ("SG&A") for the quarter ended
June 30, 2005 decreased $632,172, or 9%, compared to the same quarter in the
prior year. Legal and consulting expenses decreased $431,200 for the period
ended June 30, 2005 compared to the 2004 period, primarily because of the
reduced legal advise required in 2005 on SEC matters that were resolved in 2004
and a legal recovery of $141,590 in 2005. Employee costs were lower at
$4,075,823 during the period ended June 30, 2005, compared to $4,299,729 in the
period ended June 30, 2004, primarily due to the Company's further use of
technology.

                          Depreciation and amortization

                                          For the Three Months June 30,
                                          -----------------------------
                                              2005             2004
                                          ------------     ------------

          Depreciation and amortization   $    532,147     $    728,489
                                          ============     ============

Depreciation and amortization expenses were reduced by $196,342, or 27%, during
period ended June 30, 2005 compared to the same period for 2004. This decrease
is the result of the Company's efficient use of its assets maturing and a
reduced requirement for capital expenditures for the past few years.

                             Provision for bad debts

                                    For the Three Months June 30,
                                    -----------------------------
                                        2005             2004
                                    ------------     ------------

                 Bad Debt Expense   $         --     $    131,279
                                    ============     ============


Provision for bad debts decreased $131,279, during period ended June 30, 2005
compared to the same period for 2004, as a result of the Company being
adequately reserved for anticipated future bad debts.

                                  Other Income

                                         For the Three Months June 30,
                                         -----------------------------
                                             2005             2004
                                         ------------     ------------

         Interest and dividend income    $    151,612     $    150,637

         Interest expense                    (184,731)         (92,962)

         Gain (loss) on sale of assets             --            1,100
         Credit card usage rebate             171,000          120,000
         Miscellaneous income                     497             (134)
                                         ------------     ------------
               Total other income        $    138,379     $    178,641
                                         ============     ============

                                       14
<PAGE>

Other income for quarter ended June 30, 2005 decreased $40,262 compared to the
quarter ended June 30, 2004 due to a $91,769 increase in interest expense, which
was partially offset by a $51,000 increase in credit card usage rebate income.

                          Income Tax Expense (Benefit)

                                          For the Three Months June 30,
                                          -----------------------------
                                              2005             2004
                                          ------------     ------------

         Income taxes expense (benefit)   $     29,424     ($   425,378)
                                          ============     ============

For the period ended June 30, 2005, income taxes were an expense of $29,424
compared to a benefit of $425,378 in the period ended June 30, 2004, due
primarily from the effect of the difference in the effective rate of tax on
international income (loss) compared to the United States statutory rate which
was applied to the international loss in the current period versus the rate
applied to international segments income in the prior year period. Additionally,
the amount of tax withheld on foreign distribution remunerated to the United
States increase $96,126 over the prior year period.

Liquidity and Financial Resources
---------------------------------

During the three months ended June 30, 2005, the Company had a net increase in
cash and cash equivalents of $1,051,474, which was primarily generated by
operating activities to fund working capital. Working capital was a negative
$15.1 million at June 30, 2005 compared to a negative $8.8 million at June 30,
2004, primarily due to the payments made on the Reliance claims reserve and the
provision for uncollectability of $3.7 in other receivables in 2005.

The Company believes that internally generated funds and extended terms,
combined with the $3 million line of credit from GAIC ("Great American Insurance
Company"), will be sufficient to finance its current operations for at least the
next twelve months. The Company is actively seeking additional lines of credit
to fund working capital to supplement or replace the line of credit offered from
GAIC. The Company is aggressively pursuing new business both domestically and
internationally to fund future working capital. The Company plans to continue to
contain its SG&A costs and utilize technologies for operational efficiencies to
further enhance both its operating income and cash flows from operating
activities.

The effect of inflation has not been significant to the Company.

Commitments
-----------

The Company has ongoing relationships with equipment financing companies and
intends to continue financing certain future equipment needs through
lease/purchase transactions. The total amount financed through these
transactions during the three months ended June 30, 2005 amounted to $186,942
compared to $187,820 during the three months ended June 30, 2004.

Set forth below is information about the Company's commitments outstanding at
June 30, 2005.

<TABLE>
<CAPTION>
                                                     Payments due by period
                            ------------------------------------------------------------------------
                                             Less than       1 - 3          3 - 5        More than
     Commitment Type           Total          1 year         Years          Years         5 years
-------------------------   ------------   ------------   ------------   ------------   ------------
<S>                         <C>            <C>            <C>            <C>            <C>
Capital lease obligations   $  1,950,868   $    708,073   $  1,151,968   $     90,827   $         --
Operating leases               9,755,070      1,252,959      2,489,535      2,576,818      3,435,758
Employment agreements          6,726,723      2,697,437      3,815,536        213,750             --
Claims loss liability          4,205,457      2,479,760      1,695,603         27,080          3,014
                            ------------   ------------   ------------   ------------   ------------
   Total commitments        $ 22,638,118   $  7,138,229   $  9,152,642   $  2,908,475   $  3,438,772
                            ============   ============   ============   ============   ============
</TABLE>
                                       15
<PAGE>

Critical Accounting Policies
----------------------------

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the dates
of the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Note 1 to the Company's Consolidated Financial
Statements set forth in the "Item 8. - Financial Statements and Supplementary
Data," in the Company's Annual Report on Form 10-K for the year ended March 31,
2005, describes the significant accounting policies and methods used in the
preparation of the Consolidated Financial Statements. The following lists some
of the Company's critical accounting policies affected by judgments, assumptions
and estimates.


Revenue Recognition Policy

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the dates of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Note 1 to the Company's Consolidated
Financial Statements set forth in the "Item 8. - Financial Statements and
Supplementary Data," describes the significant accounting policies and methods
used in the preparation of the Consolidated Financial Statements. The following
lists some of the Company's critical accounting policies affected by judgments,
assumptions and estimates.

     Revenue from administrator-obligor contracts is recognized in accordance
with Financial Accounting Standards Board Technical Bulletin 90-1, Accounting
for Separately Priced Extended Warranty and Product Maintenance Contracts, ("TB
90-1"). The Company recognizes such revenue over the life of the contract on a
straight-line basis. In addition the Company charges the costs of contracts to
operations over the life of the contracts on a straight-line basis.

     Historically, through June 30, 2003, the Company recognized revenues from
dealer-obligor service contracts, in which the retailer/dealer or a third party
is designated as the obligor, in direct proportion to the costs incurred in
providing the service contract programs to the Company's clients. Revenues in
amounts sufficient to meet future administrative costs and a reasonable gross
profit were deferred. With the issuance of EITF Abstracts Issue No. 00-21 (EITF
No. 00-21), "Revenue Arrangements with Multiple Deliverables", as of July 1,
2003, the Company recognizes revenue from these dealer-obligor contracts on a
straight-line basis over the life of the service contract, pursuant to Staff
Accounting Bulletin 101.

     Since Butler has been determined to be a nominally capitalized entity, all
transactions concerning Butler obligor-contracts are treated in a manner similar
to the accounting principles discussed in Financial Accounting Standards Board
Emerging Issues Task Force Topic No. D-14, "Transactions Involving
Special-Purpose Entities." The Company treats the Butler-obligor contracts as if
they were administrator-obligor contracts and recognizes revenues under such
contracts pursuant to TB 90-1. Additionally, because the Company is treating the
Butler-obligor contracts as Warrantech-obligor contracts for financial reporting
purposes only, the Company eliminated the transactions between Warrantech and
Butler from its financial statements.

     Reflecting these transactions for financial reporting purposes does not
alter the legal obligations under the applicable agreements in which the Company
is not responsible for, and has not assumed the obligations of Butler. Butler
remains legally obligated under such agreements and the service contracts in
which it is the named obligor. Butler is not deemed a "consolidated subsidiary"
of the Company, as that term is used in this Report, including, but not limited
to, the Certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley
Act of 2002 which are annexed to this Report. Butler's income, expenses, assets

                                       16
<PAGE>

and liabilities have not been consolidated with those of the Company. Butler is
an independent entity owned by parties unrelated to the Company and, except for
the transactions between Butler and Warrantech as described in this Report,
Warrantech does not have knowledge of, or control over, Butler's affairs or
financial reporting. Warrantech also has no knowledge of, nor has it established
or evaluated, Butler's internal controls or disclosure controls or procedures.
Any reference to "consolidated subsidiary," internal controls or disclosure
controls and procedures in this Report, including, but not limited to, the
Certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of
2002 which are annexed to this Report, do not pertain to Butler.

     Now that the Company is required to recognize revenues from all service
contracts over the life of the service contracts, the Company believes that it
is unlikely that the Company will be able to report operating profits until at
least 2008 when the Company expects that the revenues recognized from prior
periods will begin to equal the revenue being deferred to future periods.
However, there can be no assurance that the Company will be profitable at that
time. In the meantime, the revenue recognition policies adopted by the Company
do not have an impact on the Company's cash flows which are an important measure
of the Company's financial condition and are reflected in the Statements of Cash
Flows which are part of these financial statements.

Direct Costs

     Direct costs, consisting primarily of insurance premiums and commissions,
are costs directly related to the production and acquisition of service
contracts. Effective with the application of the revenue recognition policy(s)
described above on all service contracts, the Company recognizes direct costs
according to Statement of Financial Accounting Standards No. 113 ("SFAS 113"),
"Accounting and Reporting for Reinsurance of Short-Duration and Long Duration
Contracts" which requires that insurance premium costs be ratably expensed over
the life of the service contract.

Impairment of Long-Lived Assets

     The Company assesses potential impairment of its long-lived assets, which
include its property and equipment and its identifiable intangibles such as
software development costs, goodwill and deferred charges under the guidance of
SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived Assets." Once
annually, or as events or circumstances indicate that an asset may be impaired,
the Company assesses potential impairment of its long-lived assets. The Company
determines impairment by measuring the undiscounted future cash flows generated
by the assets, comparing the result to the assets' carrying value and adjusting
the assets to the lower of their carrying value or fair value and charging
current operations for any measured impairment. At December 31, 2005 and 2004,
the Company found no impairment to its property and equipment or its other
identifiable intangibles.

Income Taxes

     Deferred tax assets and liabilities are determined using enacted tax rates
for the effects of net operating losses and temporary differences between the
book and tax bases of assets and liabilities. The Company records a valuation
allowance on deferred tax assets when appropriate to reflect the expected future
tax benefits to be realized. In determining the appropriate valuation allowance,
certain judgments are made relating to recoverability of deferred tax assets,
use of tax loss carryforwards, level of expected future taxable income and
available tax planning strategies. These judgments are routinely reviewed by
management. At June 30, 2005, the Company had deferred tax assets of
$23,522,473, net of a valuation allowance of $1,297,655.

                                       17
<PAGE>

Item 3.   Quantitative and Qualitative Disclosures About Market Risk
          ----------------------------------------------------------

As of June 30, 2005, the Company did not have any derivatives, debt or hedges
outstanding. Therefore, the Company was not subject to interest rate risk. In
addition, the risk of foreign currency fluctuation was and is not material to
the Company's financial position or results of operations.

Short-term marketable securities and long-term investments are comprised of
municipal bonds which bear interest at fixed rates. Interest income from these
securities is generally affected by changes in the U.S. interest rates. The
following tables provide information about the Company's financial instruments
that are sensitive to changes in interest rates. The tables present principal
cash flows and weighted-average interest rates by expected maturity dates. All
of the investments are considered "available for sale." The resultant
differences between amortized cost and fair value, net of taxes, have been
reflected as a separate component of accumulated other comprehensive income.

Principal amounts by expected maturity as of June 30, 2005 of marketable
securities are as follows:

<TABLE>
<CAPTION>
                                        Expected Maturity Date as of June 30,
                       ---------------------------------------------------------------------------
                           2005           2006         2007        2008        2009     Thereafter   Total Cost     Fair Value
                       -----------    -----------  -----------  ----------  ----------  ----------   -----------    -----------
<S>                    <C>            <C>                   <C>         <C>         <C>              <C>            <C>
Available for sale
securities             $ 1,650,000    $   365,000           --          --          --          --   $ 2,015,000    $ 2,031,864
       Interest rate          3.72%          3.72%          --          --          --          --          3.72%
</TABLE>


Item 4. Controls and Procedures
        -----------------------

Disclosure Controls and Procedures
The Company's Chief Executive Officer (CEO) and Chief Financial Officer (CFO)
are primarily responsible for the accuracy of the financial information that is
presented in this Quarterly Report on Form 10-Q. Each of them has, within 90
days of the filing date of this Quarterly Report, evaluated the Company's
disclosure controls and procedures, as defined under the rules of the SEC, and
have determined that such controls and procedures were effective in ensuring
that material information relating to the Company and its consolidated
subsidiaries was made known to them during the period covered by this Quarterly
Report.

Internal Controls
To meet their responsibility for financial reporting, the CEO and CFO have
established internal controls and procedures which they believe are adequate to
provide reasonable assurance that the Company's assets are protected from loss.
These internal controls are reviewed by the Company's independent accountants to
support their audit work.

THERE WERE NO SIGNIFICANT CHANGES IN COMPANY'S INTERNAL CONTROLS OR IN OTHER
FACTORS THAT COULD SIGNIFICANTLY AFFECT INTERNAL CONTROLS SUBSEQUENT TO THE DATE
OF THE CEO'S AND CFO'S MOST RECENT EVALUATION.

                                       18
<PAGE>

                           PART II. Other Information

Item 1.  Legal Proceedings
         -----------------

       The Company is from time to time involved in litigation incidental to the
       conduct of its business.

       Lloyd's Underwriters
       --------------------
       Certain Underwriters at Lloyd's, London and Other Reinsurers Subscribing
       to Reinsurance Agreements F96/2992/00 and No. F97/2992/00 v. Warrantech
       Corporation, Warrantech Consumer Product Services, Inc., Warrantech Help
       Desk, Inc., and Joel San Antonio, United States District Court, Northern
       District of Texas, Fort Worth Division.

       During the period that Houston General was the underwriter of certain of
       Warrantech's programs, it reinsured certain of the underwritten risks
       with one or more Lloyd's insurance syndicates. At some point thereafter,
       Houston General commenced an arbitration against the Lloyd's syndicates
       seeking to recover approximately $46,000,000 under the reinsurance
       treaties with respect to claims previously paid by Houston General on
       warranty claims submitted by customers under Warrantech programs. The
       Warrantech entities were not parties in the arbitration but were the
       subject of extensive discovery by each of Houston General and the Lloyd's
       syndicates. The arbitration concluded in August 2002 with an award of
       approximately $39,000,000 in favor of Houston General.

       The award supports the assertions of Houston General with respect to the
       validity of the claims that it paid. Warrantech was not involved in the
       selection of these re-insurers, has no contractual relationship with
       them, and has had no reporting or other obligation to them. Despite these
       facts, the Lloyd's syndicates now seek to recover some portion of the
       arbitration award from the Warrantech entities on two theories of
       liability. The first is that, at the time certain claims were presented
       to Houston General for payment, the Warrantech entities either
       fraudulently or negligently represented to Houston General that such
       claims were valid. The second is that the Warrantech entities
       intentionally failed to comply with their legal obligations to cooperate
       with the parties during the discovery process for the arbitration. The
       complaint seeks ordinary, punitive and exemplary damages although no
       specific amount is requested. On January 6, 2004, the plaintiff filed an
       amended complaint that added Joel San Antonio, Chairman and Chief
       Executive Officer of Warrantech Corporation, as a party defendant in his
       individual capacity.

       Warrantech has filed a counterclaim against Lloyd's arising out of the
       same set of facts that underlie the original litigation. Warrantech
       alleges fraud, unfair claim settlement practices and bad faith and is
       seeking damages of approximately $46 million. Warrantech is also asking
       that treble damages for $138 million be awarded as permitted under
       applicable Texas law.

       This case was originally brought in the District Court of Tarrant County,
       Texas, 17th Judicial District. On March 19, 2004, Defendant San Antonio
       filed a notice of removal to the United States District Court which
       motion was joined by all other defendants. Following removal, Lloyd's
       filed a motion to remand the case to state court. Upon consideration of
       the arguments and authorities submitted by all parties, Judge McBryde
       denied Lloyd's motion with the result that the case will be tried in
       United States District Court. At present, the parties are complying with
       certain orders issued by Judge McBryde and are continuing their discovery
       efforts. A number of motions are pending in both state and federal court
       with oral arguments scheduled for July and August.

       Management continues to believe that Lloyd's case is without merit. At
       this time, however, it is not able to predict the outcome of the
       litigation. For this reason, the Company is unable to determine its
       potential liability, if any, and as such, the accompanying financial
       statements do not reflect any estimate for losses.

                                       19
<PAGE>

       Universal Insurance Company
       ---------------------------
       In the Matter of Arbitration between Universal Insurance Company and
       Warrantech Consumer Product Services, Inc.; Jane Doe; and ABC Corporation

       Universal Insurance Company ("Universal") provided insurance for the
       vehicle service contracts marketed and administered by Warrantech
       International in Puerto Rico pursuant to an Administrative Agreement that
       was effective as of April 1, 1998. On October 16, 2003, Universal,
       claiming a material breach of the agreement by Warrantech, terminated the
       agreement and assumed responsibility for administering the applicable
       service contracts.

       Universal served Warrantech with a Demand for Arbitration, dated October
       15, 2004, seeking to recover a portion of the fees Warrantech received to
       provide administrative services under the contracts, approximating
       $2,155,000, together with interest thereon from the effective date of
       termination. Subsequent to receipt of Universal's Demand for Arbitration,
       Warrantech commenced an action against Universal in the State of
       Connecticut to recover fees owed to Warrantech pursuant to the terms of a
       certain Fee Agreement. Although it is difficult at this time to determine
       the exact amount owed to Warrantech, it is believed that the amount will
       be in excess of $1,000,000. Universal has moved in local court to have
       the Connecticut action combined with the arbitration in Puerto Rico. In
       response to that motion, Warrantech has moved to have the Connecticut
       action remanded to federal court in Connecticut. The parties are
       currently contesting a number of procedural issues. No discovery has
       taken place as yet.

       Management believes Universal's case is without merit. At this time,
       however, it is not able to predict the outcome of either the arbitration
       or the Connecticut action. For this reason, the Company is unable to
       determine its potential liability, if any, and as such, the accompanying
       financial statements do not reflect any estimate for losses.

Item 2.   Changes in Securities and Use of Proceeds
          -----------------------------------------

          Not applicable.

Item 3.   Defaults Upon Senior Securities
          -------------------------------

          Not applicable.

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

          Not applicable.

Item 5.   Other Information
          -----------------

          Not applicable.

Item 6.   Exhibits and Reports on Form 8-K
          --------------------------------

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

                    31.1     Certification by the Chief Executive Officer
                             pursuant to Rule 13a-14(a) of the Securities
                             Exchange Act of 1934, as amended.

                    31.2     Certification by the Chief Financial Officer
                             pursuant to Rule 13a-14(a) of the Securities
                             Exchange Act of 1934, as amended.

                    32.1     Statement by the Chief Executive Officer and the
                             Chief Financial Officer furnished pursuant to Rule
                             13a-14(b) of the Securities Exchange Act of 1934,
                             as amended.

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

<TABLE>
<CAPTION>
                  Date               Item Reported                             Financial Statements Filed
                  ----               -------------                             --------------------------

<S>                                  <C>                                       <C>
                  June 21, 2005      Item 5.03 -  Amendments to Articles of    None
                                     Incorporation or Bylaws; Change in
                                     Fiscal Year
</TABLE>
                                       20

                                    SIGNATURE
                                    ---------




         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




                                   WARRANTECH CORPORATION
                                   ---------------------------------------------
                                   (Registrant)



                                   /s/ RICHARD F. GAVINO
                                   ---------------------------------------------
                                   Richard F. Gavino - Executive Vice President,
                                   Chief Financial Officer, Chief Accounting
                                   Officer and Treasurer
                                   (Chief Financial Officer and Duly Authorized
                                   Officer)


Dated: August 12, 2005

                                       21