UNITED STATES
                        SECURITIES AND EXCHANGE COMMISSION

                               Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)
                  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
     (X)              OF THE SECURITIES EXCHANGE ACT OF 1934


                 For the Quarterly Period Ended December 31, 1998 

                                        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)

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

      300 Atlantic Street, Stamford, CT                 06901          
  (Address of principal executive offices)            (Zip Code)

Registrant's telephone number, including area code   (203) 975-1100  

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

             Class                          Outstanding at February 1, 1999
Common stock, par value $.007 per share            15,473,033 shares


                         1

<PAGE>

                    WARRANTECH CORPORATION AND SUBSIDIARIES


                                  I N D E X

                                                                    Page No.
PART I  -  Financial Information:


           Item 1.  Financial Statements:

           Condensed Consolidated Balance Sheet at December 31, 1998
           (Unaudited) and March 31, 1998...................            3


           Condensed Consolidated Statement of Operations
            For the Three and Nine Months Ended December 31, 1998
            and 1997 (Unaudited) ............................           4


           Condensed Consolidated Statement of Cash Flows
            For the Nine Months Ended December 31, 1998
            and 1997 (Unaudited) ............................           5


           Notes to Condensed Consolidated Financial Statements
            (Unaudited) ............................                    6


            Item 2.  Management's Discussion and Analysis of
                     Financial Condition and Results of Operations      9


PART II  - Other Information                                           16

Signatures ..............................................              17


                                   2

<PAGE>


<TABLE>
                        WARRANTECH CORPORATION AND SUBSIDIARIES
                            CONDENSED CONSOLIDATED BALANCE SHEET

A S S E T S
                                                      (Unaudited)
                                                     December 31,        March 31,
                                                    ------------------------------- 
                                                          1998             1998
                                                    -------------    -------------- 
                                                     
<S>                                                 <C>             <C>
Current Assets:
Cash and cash equivalents                           $   3,832,973    $  24,062,052

Investments in marketable securities                    2,012,841          537,924
                                                    

Accounts receivable, (net of allowances of $894,041
and $1,223,173, respectively)                          51,626,784       27,878,335
   

Other receivables, net                                  4,849,038        2,197,405
Prepaid expenses and other current assets               2,051,588        1,775,316
                                                     ---------------    --------------
   Total Current Assets                                64,373,224       56,451,032
                                                      -------------    --------------


Property and Equipment,  net                           15,620,829       13,639,921
                                                      -------------    --------------

Other Assets:
Excess of cost over fair value of assets acquired
   (net of accumulated amortization of
    $4,714,796 and $4,212,956, respectively)             3,443,737       3,945,577
Deferred income taxes                                    3,612,845       3,085,311
Investments in marketable securities                     2,166,384       1,967,817
Restricted cash                                            800,000         800,000
Split dollar life insurance policies                     1,352,109       1,054,045
Notes receivable                                           543,849         654,068
Collateral security fund                                   199,389         199,389
Other assets                                               138,116         120,128
                                                      -------------    --------------
                                           
          Total Other Assets                            12,256,429      11,826,335
                                                      -------------    --------------
 
                Total Assets                          $ 92,250,482     $81,917,288
                                                      =============    ==============  

LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
                                                      (Unaudited)
                                                      December 31,     March 31,
                                                    ------------------------------- 
                                                          1998             1998
                                                    -------------    -------------- 

Current Liabilities:
Current maturities of long-term debt and capital 
  lease obligations                                   $  1,983,832     $  2,371,662
Insurance premiums payable                              31,819,483       22,269,589
Income taxes payable                                     1,096,235        1,850,999
Accounts and commissions payable                         8,526,580        7,698,948
Accrued expenses and other current liabilities           6,555,114        6,211,572
                                                     ---------------    --------------
   Total current liabilities                            49,981,244       40,402,770
                                                     ---------------    --------------

Deferred revenues                                        8,851,241        6,987,541

Long-term debt and capital lease obligations             2,050,036        2,153,286
                                                     
Deferred rent payable                                      515,257          608,736
                                                     ---------------    --------------
Total liabilities                                       61,397,778       50,152,333
                                                     ---------------    --------------

Commitments and contingencies

Stockholders' Equity:
   Common stock - $.007 par value:
     authorized   - 30,000,000 
Shares
     issued - 16,498,333 shares at Dec 31, 1998
     and 13,449,382 shares at March 31, 1998               115,488           94,146
   Additional paid-in capital                           15,226,557       14,124,700
   Accumulated other comprehensive income, 
      net of taxes                                         (24,164)          85,608
   Retained earnings                                    19,159,318       17,975,951
                                                     ---------------    --------------
                                                        34,477,199       32,280,405
Less:  Deferred compensation                                (3,933)         (21,631)
Treasury stock - at cost, 1,025,300 shares
   at December 31, 1998 and 100,000 at
   March 31, 1998                                       (3,620,562)        (493,819)
                                                     ---------------    --------------
        Total Stockholders' Equity                      30,852,704       31,764,955
                                                     ---------------    --------------

        Total Liabilities and
            Stockholders'  Equity                    $ 92,250,482       $81,917,288
                                                     ===============    ==============


        See accompanying notes to condensed consolidated financial statements.
</TABLE>
                                            3


<PAGE>

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

<TABLE>
<S>                                                <C>                  <C>                 <C>                  <C> 
                                                         For the Three Months Ended               For the Nine Months Ended
                                                                 December 31,                             December 31,

                                                  -------------------  -------------------  -------------------  -------------------
                                                         1998                 1997                 1998                 1997
                                                  -------------------  -------------------  -------------------  -------------------
Gross revenues                                           $59,578,186          $53,224,914         $170,983,832         $156,743,579
Revenues deferred to future periods                      (1,196,007)            (887,704)          (2,948,764)          (2,052,753)
Deferred revenues earned                                     409,533              259,020            1,020,712              613,474
                                                  -------------------  -------------------  -------------------  -------------------
Net revenues                                              58,791,712           52,596,230          169,055,780          155,304,300

Costs and expenses:
   Direct costs                                           40,921,039           36,595,198          122,925,796          111,362,547
   Service, selling, and general and
   administrative                                         13,756,606           13,673,500           41,169,354           35,806,136
   Depreciation and amortization                           1,336,174              935,164            3,747,815            2,436,115
                                                  -------------------  -------------------  -------------------  -------------------
Total costs and expenses                                  56,013,819           51,203,862          167,842,965          149,604,798
                                                  -------------------  -------------------  -------------------  -------------------

Income from operations                                     2,777,893            1,392,368            1,212,815            5,699,502

Other income                                                 311,217              253,855              828,438              649,766
                                                  -------------------  -------------------  -------------------  -------------------

Income before provision for income taxes                   3,089,110            1,646,223            2,041,253            6,349,268
Provision for income taxes                                 1,272,048              633,899              857,886            2,440,060
                                                  -------------------  -------------------  -------------------  -------------------

Net income                                                $1,817,062           $1,012,324           $1,183,367           $3,909,208
                                                  ===================  ===================  ===================  ===================

Earnings per share:
    Basic                                                      $0.12                $0.08                $0.08                $0.30
                                                  ===================  ===================  ===================  ===================
    Diluted                                                    $0.12                $0.06                $0.08                $0.25
                                                  ===================  ===================  ===================  ===================

Weighted average number of shares outstanding:
    Basic                                                 15,520,411           13,284,760           14,981,328           13,228,056
                                                  ===================  ===================  ===================  ===================
    Diluted                                               15,531,938           15,786,572           15,401,092           15,785,414
                                                  ===================  ===================  ===================  ===================

</TABLE>
       See accompanying notes to condensed consolidated financial statements.

                              4

<PAGE>

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


<TABLE>
<S>                                                             <C>                      <C>
                                                                   For the Nine Months Ended December 31,
                                                                ---------------------------------------------
                                                                        1998                     1997
                                                                --------------------     --------------------
Net cash provided by (used in) operating activities                   ($11,019,811)               $7,339,879
Cash flows from investing activities:
  Property and equipment purchased                                      (3,813,415)               (3,062,217)
  Business acquisition                                                   -                        (1,301,999)
  Purchase of marketable securities                                     (2,205,420)                 (447,253)
  Proceeds from sales of Marketable securities                              542,586                  383,368
                                                                --------------------     --------------------
Net cash used in investing activities                                   (5,476,249)               (4,428,101)
                                                                --------------------     --------------------
Cash flows from financing activities:
    Decrease  (increase) in notes receivable                               110,219                  (666,705)
    Proceeds from exercise of common stock options                          39,449                   840,214
    Tax benefit from exercise of common stock options                    1,083,750                  -
    Purchase treasury stock                                             (3,126,743)                 -
    Repayments, notes and capital leases                                (1,839,694)               (1,651,085)
                                                                --------------------     --------------------
    Net cash (used in) financing activities                             (3,733,019)               (1,477,576)
                                                                --------------------     --------------------

Net increase (decrease) in cash and cash equivalents                   (20,229,079)                1,434,202

Cash and cash equivalents at beginning of period                        24,062,052                17,031,925
                                                                --------------------     --------------------

Cash and cash equivalents at end of period                              $3,832,973               $18,466,127
                                                                ====================     ====================

Supplemental Cash Flow Information

Cash payments for:
   Interest                                                               $346,967                  $262,878
                                                                ====================     ====================
   Income taxes                                                         $1,033,436                $2,132,175
                                                                ====================     ====================

Non-Cash Investing and financing activities
    Property and equipment financed through capital leases              $1,348,614                $1,373,450
                                                                ====================     ====================

</TABLE>

       See accompanying notes to condensed consolidated financial statements.

                              5

<PAGE>



                                   WARRANTECH CORPORATION AND SUBSIDIARIES
                          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                                       December 31, 1998
                                                          (Unaudited)


1.  THE COMPANY

Warrantech Corporation ("Warrantech" or the "Company"), through its wholly-owned
subsidiaries, Warrantech Automotive, Inc., Warrantech Consumer Product Services,
Inc.,  Warrantech Help Desk,  Inc.,  Warrantech  Direct,  Inc.,  Warrantech Home
Service  Company and Warrantech  International,  Inc.,  markets and  administers
service  contract  programs for retailers,  distributors  and  manufacturers  of
automobiles,  homes, home appliances, home entertainment products, computers and
peripherals,  and office and communication  equipment. The Company operates call
centers which provide  technical  and computer  services and is currently  doing
business in the United States,  Puerto Rico, Mexico,  Canada,  Caribbean,  South
America  and  the  United  Kingdom.  Additionally,   third-party  administrative
services are provided to manufacturers  of consumer and automotive  products and
other business entities requiring such services. The actual repair service under
such  extended  service  contracts  and limited  warranties is provided by third
party  repair  facilities  and the cost of such repair  services is borne by the
insurance  companies.  The predominant terms of the contracts and manufacturers'
warranties range from twelve (12) to eighty-four (84) months.


2.  BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-Q and Article 10 of
Regulation S-X.  Accordingly,  they do not include all information and footnotes
required by generally  accepted  accounting  principles  for complete  financial
statements. In the opinion of management,  all adjustments (consisting of normal
recurring  accruals)  considered  necessary  for a fair  presentation  have been
included.  Operating  results for the quarter  ended  December  31, 1998 are not
necessarily  indicative  of the results that may be expected for the year ending
March 31, 1999. For further  information,  refer to the  consolidated  financial
statements  and footnotes  thereto  included in the Company's Form 10-K and Form
10K/A for the year ended March 31, 1998.

Certain prior year amounts may have been reclassified to conform to current year
presentation.


                              6

<PAGE>

COMPREHENSIVE INCOME
 
The components of  comprehensive  income,  net of related tax, for the three and
nine month periods ended December 31, 1998 and 1997 are as follows:

<TABLE>
<S>                                            <C>                 <C>                 <C>                  <C>
                                                    For the Three Months Ended              For the Nine Months Ended
                                               -----------------   -----------------   ------------------   ---------------

                                                           December 31,                            December 31,
                                               -----------------   -----------------   ------------------   ---------------
                                                     1998                1997                 1998               1997
                                               -------------------------------------   ------------------------------------
Net income                                           $1,817,062          $1,012,324           $1,183,367        $3,909,208

Other Comprehensive Income, net of tax
   Foreign currency translation adjustments            (100,464)             41,577             (107,860)           20,641
   Unrealized gain(loss) on investments                     643               3,265               (1,912)            8,311

                                               -----------------   -----------------   ------------------   ---------------
Comprehensive Income                                 $1,717,241          $1,057,166           $1,073,595        $3,938,160
                                               =================   =================   ==================   ===============
</TABLE>

The components of accumulated other comprehensive income, net of related tax, at
December 31, 1998 and March 31, 1998 are as follows:


                                              December 31,          March 31,
                                                  1998                1998
                                           -----------------   -----------------
Unrealized gain(loss) on investments                 $5,143              $7,055
Foreign currency translation adjustments            (29,307)             78,553
                                           -----------------   -----------------
Accumulated other comprehensive income             ($24,164)            $85,608
                                           =================   =================

4. EARNINGS PER SHARE

The computation of earnings per share at December 31, 1998 and December 31, 1997
was as follows:

<TABLE>
<S>                                                 <C>               <C>             <C>               <C>

                                                    For The Three Months Ended          For The Nine Months Ended
                                                            December 31,                      December 31,
                                                         1998             1997             1998             1997
                                                    --------------   --------------    -------------   ---------------
Numerator:
------------------------------------------
   Net income applicable to common stock               $1,817,062       $1,012,324       $1,183,367        $3,909,208
                                                    ==============   ==============    =============   ===============

Denominator
------------------------------------------
    Average outstanding shares  used in the
    computation of per share earnings:
      Common Stock issued-Basic shares                 15,520,411       13,284,760       14,981,328        13,228,056
      Stock Options (treasury method)                      11,527        2,501,812          419,764         2,557,358
                                                    --------------   --------------    -------------   ---------------
      Diluted shares                                   15,531,938       15,786,572       15,401,092        15,785,414
                                                    ==============   ==============    =============   ===============
Earnings Per Common Share:
------------------------------------------
   Basic                                                    $0.12            $0.08            $0.08             $0.30
   Diluted                                                  $0.12            $0.06            $0.08             $0.25

 
</TABLE>


                              7

<PAGE>


 
5.  NEW ACCOUNTING PRONOUNCEMENTS

The  Financial   Accounting   Standards  Board  issued  Statement  of  Financial
Accounting  Standards No. 131,  Disclosures  about Segments of an Enterprise and
Related  Information ("FAS 131"). FAS 131 is effective for financial  statements
for periods  beginning after December 15, 1997.  This Statement  requires that a
public business  enterprise  report financial and descriptive  information about
its  reportable  operating  segments.  Operating  segments are  components of an
enterprise  about which  separate  financial  information  is available  that is
evaluated  regularly by the chief  operating  decision  maker in deciding how to
allocate   resources  and  in  assessing   performance.   Generally,   financial
information  is required to be reported on the basis that it is used  internally
for evaluating  segment  performance  and deciding how to allocate  resources to
segments.  FAS 131 will have no impact on the Company's  results of  operations,
financial condition or liquidity.



                              8

<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  may  contain  forward  looking
statements that involve risks and uncertainties.  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 are
based on management's beliefs and assumptions,  as well as information currently
available to management.  Such beliefs and assumptions are based on, among other
things, the Company's operating and financial  performance over recent years and
its  expectations  about its  business  for the current  fiscal year and beyond.
Although the Company  believes that the  expectations  reflected in such forward
looking  statements  are  reasonable,   it  can  give  no  assurance  that  such
expectations  will prove to be correct.  Such  statements are subject to certain
risks,   uncertainties  and  assumptions,   including  (a)  prevailing  economic
conditions may  significantly  deteriorate,  thereby reducing the demand for the
Company's  products  and  services,  (b)  unavailability  of  technical  support
personnel  or increases  in the rate of turnover of such  personnel,  reflecting
increased  demand  for such  qualified  personnel,  (c)  changes in the terms or
availability of insurance coverage for the Company's programs, (d) regulatory or
legal changes affecting the Company's business, or (e) loss of business from, or
significant  change in  relationship  with,  any major  customer of the Company.
Should one or more of these or any other  risks or  uncertainties  materialize, 
or should the underline  assumptions prove incorrect,  actual results may vary
materially from those anticipated, estimated or expected.


Three Months Ended December 31, 1998 Compared to the Three Months ended December
31, 1997

Gross revenues for the three month period ended December 31, 1998 increased $6.4
million or 11.9% to $59,578,186 as compared with $53,224,914 for the same period
last year. This increase is directly  attributable to increased revenue with new
and existing  customers  resulting  from  continued  market  penetration  in the
Consumer  Products,  Help Desk,  Home Services and  International  markets.  The
Company realized through its Help Desk subsidiary  during the quarter  increased
revenue relating to CompUSA's acquisition of Computer City.

Direct costs are those costs directly  related to the production and acquisition
of service  contracts.  Direct costs were $40,921,039 for the three month period
ended December 31, 1998 as compared with  $36,595,198 for the comparable  period
last year.  This  increase is  primarily  attributable  to the increase in gross
revenues.  Gross  margin as a percent of gross  revenues  increased  slightly to
31.3% compared to 31.2% last year.

Service,  selling and general and  administrative  expenses for the three months
ended  December 31, 1998 were  $13,756,606  as compared to  $13,673,500  for the
three months ended  December 31,  1997.  This  increase is primarily  due to the
increase in sales. SG&A as a percentage of sales improved to 23.1% for the third
quarter,  versus  25.7% for the third  quarter of fiscal  1998 and 28.2% for the
first quarter of fiscal 1999. This decrease is the result of the  re-engineering
of the Company's call center processes and other cost cutting  initiatives which
began in the second quarter of the current fiscal year.


                                   9

<PAGE>

Depreciation  and  amortization  increased  $401,010 to $1,336,174 for the three
months  ended  December  31, 1998  compared to $935,164 for the same period last
year  primarily  as the result of  capital  additions  related to the  Company's
ongoing upgrade of its computer systems.

Net income for the three months ended  December 31, 1998  amounted to $1,817,062
or $.12 per diluted  share as compared to  $1,012,324  or $.06 per diluted share
for the comparable period last year.


Nine Months Ended  December 31, 1998 Compared to the Nine Months Ended  December
31, 1997

Gross  revenues for the nine months  ended  December  31, 1998  increased  $14.2
million or 9.1% to  $170,983,832  as  compared  with  $156,743,579  for the same
period  last  year.  This  increase  is the result of the  Company's  efforts in
expanding its market  penetration in the personal  computer  industry as well as
continued market penetration in the Automotive,  Home Services and International
markets.

Direct costs are those costs directly  related to the production and acquisition
of service  contracts.  Direct costs were $122,925,796 for the nine months ended
December  31,  1998,  as compared  with  $111,362,547  for the nine months ended
December 31, 1997.  The  increase is primarily  attributable  to the increase in
gross revenues.  Gross margins as a percent of gross revenue  decreased to 28.1%
for the nine months ended December 31, 1998 compared to 29.0% for the comparable
period.  This decrease is primarily  attributable to increased sales in the Home
Services division, a lower margin incremental business.

Service,  selling and general and  administrative  expenses  for the nine months
ended December 31, 1998 were  $41,169,354,  an increase of $5.4 million or 15.0%
compared to  $35,806,136  for the nine  months  ended  December  31,  1997.  The
increase is primarily  related to the increased  revenue and higher  payroll and
payroll  related costs. As a percentage of sales SG&A increased to 24.1% for the
nine  months  ended  December  31, 1998 as compared to 22.8% for the nine months
ended December 31, 1997.

Depreciation  and amortization  increased  $1,311,700 to $3,747,815 for the nine
months ended  December 31, 1998 compared to $2,436,115  for the same period last
year  primarily  as the result of  capital  additions  related to the  Company's
ongoing upgrade of its computer systems.

Net income for the nine months ended December 31, 1998 amounted to $1,183,367 or
$.08 per diluted share, compared to net income of $3,909,208 or $.25 per diluted
share for the comparable period last year.


Liquidity and Financial Resources

The Company has an ongoing  relationship with equipment  financing companies and
intends to continue  financing  certain future  equipment  needs through leasing
transactions.  The total amount financed through leasing transactions during the
nine month period ended  December 31, 1998 amounted to  $1,348,614.  The Company
has a line of  credit  with a  bank,  which  provides  for a  maximum  aggregate
borrowing up to $10  million.  The line of credit,  which  expires on August 16,
1999, is secured by certain accounts  receivable.  The Company is in the process
of renewing this credit facility. During the nine months ended and as of


                                   10

<PAGE>


December 31,  1998,  the Company did not have any  borrowings  under the line of
credit.

Cash used by operations  during the nine months ended December 31, 1998 amounted
to  $11,019,811  which is directly  attributable  to the  temporary  increase in
accounts  receivable offset in part by increases in insurance  premiums payable.
During the nine months ended  December 31, 1998,  the  Company's  cash  position
decreased  from  $24,620,000  to  $3,833,000,   while  its  accounts  receivable
increased from $27,878,000 to $51,627,000, resulting from the temporary delay in
receipt of payments for contracts closed prior to December 31, 1998.  During the
nine months ended  December 31, 1998,  the Company's  investments  in marketable
securities  increased by $1,673,484 to $4,179,225.  As of February 5, 1999, the
Company's cash and cash equivalents  returned to a normal level of approximately
$15,000,000.   The  reduction  in  cash  and  cash   equivalents  also  reflects
expenditures to purchase an aggregate of 925,300 shares of the Company's  common
stock for treasury  purposes during the nine months ended December 31, 1998. The
Company  believes that internally  generated funds will be sufficient to finance
its current operations for at least the next twelve months.

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


Readiness For Year 2000

The Company is currently in the process of addressing  the business,  financial,
technical,  legal, and other  implications  that arise due to the Year 2000 date
issues.  A  comprehensive  Year 2000  program was put into place during the last
quarter of 1997.  The primary goal of the Year 2000 program is to implement  the
changes needed to answer functionality in the Year 2000, as cost effectively and
expeditiously  as possible.  Towards that goal, the Company has  established the
following  objectives:  

-  Implementation of overall Year 2000 program
-  Develop and  implement a  methodology  for  assessment,  project  planning,
   development, testing and implementation
-  Implement a business partner management framework
-  Develop a risk management approach

Scope

The scope of the Year  2000  program  includes  both  InformationTechnology  and
non-Information Technology assets:

IT Assets:

-  Micro-computer software and hardware
-  In-house application software
-  Acquired third-party vendor application software
-  Operating system components
-  Proprietary mid-range computers
-  Network and communication hardware and software


Non-IT assets:

-  Energy management systems
-  Security systems
-  Fire protection systems
-  UPS systems
-  Automated HVAC systems
-  Elevators
-  Vaults
 
 
                              11

<PAGE>

Overall Project Plan

The Year 2000 program is  structured  into five major  phases,  with our overall
objective to have Warrantech  Corporation Year 2000 compliant by the end of June
30, 1999.


<TABLE>
<S>                                 <C>                                <C>                        <C>    
Phase                               Tasks                              Target Completion          Objectives
---------------                     ------------------                 ---------------------      ------------------ 
Formalize Project                   Define:                            November 1997              Communicate issues to
                                    -  Process                                                    management
                                    -  Roles
                                    -  Responsibilities                % Complete-100%
                                    -  Deliverables
---------------                     ------------------                 ---------------------      ------------------ 
Assessment                          Inventory of                       January 1998               - Define Scope
                                    systems affected                                              - Identify resource needs
                                                                       % Complete-100%              for 1998-99   
                                                                                                  - Set expectations for future
                                                                                                    impact
---------------                     ------------------                 ---------------------      ------------------ 
Strategy Formulation                Develop projects and               March 1998                 Ensure necessary funding is
                                    estimates                          % Complete-100%            included in the Annual 
                                                                                                  Operating Plan
---------------                     ------------------                 ---------------------      ------------------ 
Execute                             - Upgrade/develop new              June  30, 1999             Compliant systems
                                    - Test                             % Complete-50%
                                    - Employment
---------------                     ------------------                 ---------------------      ------------------ 

</TABLE>


YEAR 2000 PROGRAM STATUS

Overall,  the Company is at varying stages of readiness in each of the following
functional areas:

     -   Business Applications
     -   Hardware
     -   Major business partners


Business Applications

In  conjunction  with  the  Company's  1995   reengineering   and  restructuring
initiatives,  the Company  began a complete  process  redesign  and new system's
architecture  including  desktops,  networking and  development  infrastructure,
which is expected to be completed in June 1999. It is anticipated that these new
systems,  which are Year 2000 compliant,  will replace  substantially all of the
Company's critical business application software.


                                   12

<PAGE>


As a result of this new architecture,  the Company replaced significant portions
of its  software  and  hardware.  In  connection  with  such  installation,  the
Company's  vendors  have  represented  to the Company  that the new hardware and
applications software are Year 2000 compliant. Therefore, the Company's existing
information technology systems are 100% compliant.

The total cost of the Year 2000  project is  estimated  at $250,000 and is being
funded  through   operating  cash  flows.  To  date  the  Company  has  incurred
approximately $100,000 related to the Year 2000 project. All Year 2000 costs are
expensed as incurred.

A full  application  survey,  by subsidiary,  has been completed and remediation
strategies  created.  Critical  third-party  packaged software vendors have been
identified and assessed for compliance.  Contingency plans will be developed and
put into place after testing is performed on compliant  versions of the software
package. Alternate vendors will be identified, if necessary.

Compliance  statements  identifying  software  product  release levels have been
received.  Software upgrade  implementation and testing plans are in the process
of being  scheduled.  Outside  vendors and  internal  resources  will be used to
implement third-party software upgrades.


Hardware

A complete computer, telecommunications, and office equipment hardware inventory
has been taken by each functional area. Manufacturer compliance plans and timing
have been requested. Plans to install new/upgraded products and to test products
for compliance in local environments are being developed.

The Company has standardized  desktop and server platforms,  Gateway and Compaq,
respectfully.   Risk   assessment   on  current   hardware   inventory  is  low.
Manufacturers of 95% of the Company's desktop and server hardware have published
compliance   assertions.   Their  published  compliance  assertions  are  not  a
substitute  for a formal  statement  of vendor  intent  targeted  to a  specific
product.  The Company has sent  vendor  certification  letters to all vendors to
document  their  Year  2000  strategies.  An  assessment  of  critical  vendors'
commitment to  compliance  has been  performed.  A risk factor rating system has
been  applied to all  vendors.  A vendor  letter has been sent to obtain  formal
vendor commitments.


Major Business Partners

Customers:

Critical to performing service contract administration is the ability to acquire
contract  sales  data  from our  customers.  Due to the  nature  of the  service
contract business  (five-year  contract  expiration dates, etc.) electronic data
import  modules have been  programmed to interpret the criteria  based upon data
windowing techniques.  In the event sales data is not available,  the ability to
verify and administer should not be impeded due to the current processes already
in place at many of the subsidiaries.

The Company has  identified  critical  customers  and suppliers and is assessing
their plans and progress in addressing the Year 2000 problem.

Customer letters requesting certification, compliance plans and timing 
have been sent to all of the Company's major customers.  As part of 
system's development, data acquisition (electronic data feeds)


                                        13

<PAGE>


from major customers is being  redeveloped.  This process will allow the Company
to identify,  review, and compensate for inadequacies in the customer's internal
data  reporting  processes.  The Company will supply  customers  with modern EDI
software interfaces and help them achieve Year 2000 compliant reporting methods.
The Company will also identify  alternative  reporting  methods  should the need
arise.


Insurance Companies:

Insurance  companies require the Company to report sales and claims  information
periodically.  As part of systems  development,  the Company is redeveloping its
data feeds and should be fully Year 2000  compliant at the end of the  Company's
first quarter fiscal period ending June 30, 1999.


RESULTS ON OPERATIONS

The Company has  ascertained  that  failure to  alleviate  the Year 2000 problem
within  its   application   systems   could   result  in  possible   failure  or
miscalculations  causing  disruptions  of  operations.  These  problems could be
substantially  alleviated  with  manual  processing.  However,  this would cause
delays and  additional  costs to the  administration  process.  The  Company has
identified the following key areas at risk:

-  Call Center operations
-  Contract sales acquisition
-  Service fulfillment
-  Payment of invoices
-  Insurance company reporting
-  Financial reporting

Contingency  plans are being  developed to address  each area of risk  depending
upon levels and magnitude of risk.


Worst Case Scenarios


<TABLE>
<C>                                                                      <S>
          Scenario I                                                          Contingency Plan
---------------------------------------------------------                --------------------------------------
- External vendors telecommunications systems do not work                - Developing vendor redundancy plans to
                                                                           minimize impact on operations
---------------------------------------------------------                --------------------------------------
          Scenario II                                                         Contingency Plan
---------------------------------------------------------                --------------------------------------
- Customers' Point of Sales systems cannot record sales                  - Manual entry of contract sales
---------------------------------------------------------                --------------------------------------
          Scenario III                                                        Contingency Plan
---------------------------------------------------------                --------------------------------------
- Internal systems breakdown                                             - Manual operations
---------------------------------------------------------                --------------------------------------
          Scenario IV                                                         Contingency Plan
---------------------------------------------------------                --------------------------------------
- Banking system failure                                                 - Temporary increase in short-term cash holdings
---------------------------------------------------------                --------------------------------------

</TABLE>

                              14

<PAGE>


Based upon current information, the Company does not anticipate costs associated
with the Year 2000 issue to have a material financial impact. However, there can
be no assurances that there will not be  interruptions  or other  limitations of
financial and operating systems functionality, or other problems which cannot be
anticipated  at this  time,  or that  the  Company  will not  incur  significant
financial costs to avoid such interruptions,  limitations or other problems. The
Company's  expectations  about future costs  associated with the Year 2000 issue
are subject to  uncertainties  that could cause actual results to have a greater
financial  impact than currently  anticipated.  Factors that could influence the
amount  and  timing of future  costs  include  the  success  of the  Company  in
identifying  systems and programs that contain  two-digit year codes, the nature
and amount of  programming  required to upgrade or replace  each of the affected
programs,  the rate and magnitude of related labor and consulting costs, and the
success of the Company's partnerships in addressing the Year 2000 issue.



                              15

<PAGE>


PART II. Other Information

Item 1.       Legal Proceedings

              Not applicable
 
Item 2.       Changes in Securities
 
              Not applicable.
 
Item 3.       Defaults Upon Senior Securities
 
              Not applicable.
 
Item 4.       Submission of Matters to Vote of Security Holders
 
              At the Company's  Annual Meeting of Shareholders  held on October
              27,  1998,  the  shareholders  elected the  following to serve as
              directors until the next Annual Meeting of Shareholders and until
              their successors are duly elected and qualified.
 
                                                For                     Withheld

              Joel San Antonio              12,404,274                   200,273
              William Tweed                 12,404,274                   200,273
              Jeffrey J. White              12,404,124                   200,423
              Lawrence Richenstein          12,404,274                   200,273
              Gordon A. Paris               12,404,274                   200,273
 
              In addition, the shareholders approved the 1998 Stock Option Plan
              by a vote of  12,208,562  for,  345,  281  against,  and   50,704
              withheld.
 
Item 5.       Other Information
 
              Not applicable.
 
Item 6 (a)                 Exhibits
 
               (27)        Financial Data Schedule
 
Item 6        Reports on Form 8-K
 
              Not applicable


                                        16                   

<PAGE>

                                                         SIGNATURES


     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    


                                            S/N/S  Joel San Antonio
                                
                                   Joel San Antonio - Chairman of the Board
                                   (Chief Executive Officer)


Date:  February 11, 1999

                                             S/N/S  Richard F. Gavino
                         
                                   Richard F. Gavino - Executive Vice President
                                   and Chief Financial Officer


Date:  February 11, 1999




                                        17