UNITED STATES
                        SECURITIES AND EXCHANGE COMMISSION

                               Washington, D.C. 20549

                                    FORM 10-Q/A

(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 December 31, 1998
Common stock, par value $.007 per share            15,125,611 shares


___________________

* Registrant  has filed all reports  through the date of this  report,  however,
Registrant  intends to file  amendments  to the Form 10-Qs for the periods ended
June  30,  1999  and  September  30,  1999  to  include  information  concerning
Registrant's  financial  results for those  periods  which was omitted  from the
reports that were previously filed.

                         1

<PAGE>

                    WARRANTECH CORPORATION AND SUBSIDIARIES


                                  I N D E X
<TABLE>
<S>                                                                                                      <C>
                                                                                                     Page No.
PART I  -  Financial Information:



              Item 1.  Financial Statements

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


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


                Condensed Consolidated Statements 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 ........................           11



PART II  - Other Information  ...................................................................           13

Signatures ......................................................................................           14

</TABLE>

                                   2

<PAGE>


                     WARRANTECH CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<S>                                                                 <C>                  <C>
                                                   A S S E T S
                                                                          (Unaudited)
                                                                         December 31,           March 31,
                                                                      ------------------ -----------------------
                                                                             1998                 1998
                                                                      ------------------ -----------------------
Current assets:
Cash and cash equivalents                                                    $3,832,312             $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)                                   48,776,784              27,878,335

Other receivables, net                                                        4,849,038               2,197,405
Deferred income taxes                                                         -                         503,282
Prepaid expenses and other current assets                                     2,051,588               1,775,316
                                                                      ------------------ -----------------------
   Total current assets                                                      61,522,563              56,954,314
                                                                      ------------------ -----------------------






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                                                        11,090,054               8,121,666
Deferred direct costs                                                        80,566,917              65,354,341
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                                                100,300,555              82,217,031
                                                                      ------------------ -----------------------

                    Total assets                                           $177,443,947            $152,811,266
                                                                      ================== =======================

                 LIABILITIES AND 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                                                            247,880               2,073,284
Accounts and commissions payable                                              8,525,919               7,698,948
Legal settlements payable                                                     -                         200,000
Accrued expenses and other current liabilities                                6,555,114               6,011,572
                                                                      ------------------ -----------------------
   Total current liabilities                                                 49,132,228              40,625,055
                                                                      ------------------ -----------------------


Deferred revenues                                                           110,418,767              87,890,306

Long-term debt and capital lease obligations                                  2,050,036               2,153,286

Deferred rent payable                                                           515,257                 608,736
                                                                      ------------------ -----------------------
   Total liabilities                                                        162,116,288             131,277,383
                                                                      ------------------ -----------------------

Commitments and contingencies

Stockholders' equity:
Preferred stock - $.0007 par value authorized - 15,000,000
Shares issued- none at December 31, 1998 and March 31, 1998                        -                     -

Common stock - $.007 par value: authorized - 30,000,000
Shares issued; - 16,498,333  shares at December 31,1998 and
13,449,382 shares at March 31, 1998                                             115,488                  94,146
   Additional paid-in capital                                                23,518,341              14,124,700
    Loans to directors and officers                                         (8,291,784)             -
   Accumulated  other comprehensive income, net of taxes                       (24,164)                  85,608
   Retained earnings                                                          3,634,273               7,744,879
                                                                      ------------------ -----------------------
                                                                             18,952,154              22,049,333
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                                           15,327,659              21,533,883
                                                                      ------------------ -----------------------

        Total Liabilities and Stockholders' Equity                         $177,443,947            $152,811,266
                                                                      ================== =======================

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


                                        3

<PAGE>
<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                                  $37,865,775    $34,447,899      $108,529,304    $104,088,151
Net (increase) in deferred revenues             (7,593,094)    (5,763,603)      (22,592,813)    (16,561,250)
                                              -------------- -------------- ----------------- ---------------
Net revenues                                     30,272,681     28,684,296        85,936,491      87,526,901

Costs and expenses:
   Direct costs                                  16,994,480     12,453,595        48,108,692      42,382,185
   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                         32,087,260     27,062,259        93,025,861      80,624,436
                                              -------------- -------------- ----------------- ---------------

Income (loss) from operations                   (1,814,579)      1,622,037       (7,089,370)       6,902,465

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

Income (loss) before provision for income
  taxes                                         (1,503,362)      1,875,892       (6,260,932)       7,552,231
Provision (benefit) for income taxes              (263,838)        710,013       (2,150,327)       2,746,490
                                              -------------- -------------- ----------------- ---------------

Net income (loss)                              ($1,239,524)     $1,165,879      ($4,110,605)      $4,805,741
                                              ============== ============== ================= ===============

Earnings per share:
    Basic                                           ($0.08)          $0.09           ($0.27)           $0.36
                                              ============== ============== ================= ===============
    Diluted                                         ($0.08)          $0.07           ($0.27)           $0.30
                                              ============== ============== ================= ===============

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

</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 operating activities                          ($10,166,006)         $7,339,879
Cash flows from investing activities:
  Property and equipment purchased                                   (3,813,415)        (3,062,217)
  Net cash paid for acquired business                                  -                (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:
    (Increase) decrease in notes receivable                              110,219          (666,705)
    Exercise of common stock options and stock grants                    268,733            840,214
    Purchase treasury stock                                          (3,126,743)          -
    Repayments, notes and capital leases                             (1,839,694)        (1,651,085)
                                                              --------------------  ----------------
Net cash (used in) financing activities                              (4,587,485)        (1,477,576)
                                                              --------------------  ----------------

Net increase (decrease) in cash and cash equivalents                (20,229,740)          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                            $3,832,312        $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:
    Purchase of preferred stock                                        -                 $6,420,363
    Note issued in connection with purchase of preferred stock         -                  2,395,960
    Property and equipment financed through capital leases            $1,348,614          1,373,450
    Exercise of restricted common stock options                        9,146,250          -
    Increase in loans to officers and directors                      (8,291,784)          -


</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,  through its wholly  owned  subsidiaries,  markets  and  administers
service  contracts  and  extended  warranties.  The  Company  is a  third  party
administrator for a variety of dealer/clients in selected  industries and offers
call center and technical computer services.  The Company assists dealer/clients
in  obtaining  insurance  policies  from  highly  rated  independent   insurance
companies for all contracts and programs offered.  The insurance company is then
responsible  for  the  cost  of  repairs  or  replacements   for  the  contracts
administered by Warrantech.

The Company operates under three major business segments:  Automotive,  Consumer
Products and  International.  The  Automotive  segment  markets and  administers
extended  warranties on  automobiles,  light trucks,  recreational  vehicles and
automotive  components.  These  products are sold  principally by franchised and
independent  automobile dealers,  leasing companies,  repair facilities,  retail
stores and financial  institutions.  The Consumer  Products  segment markets and
administers extended warranties on household appliances,  electronics and homes.
These  products  include home  appliances,  consumer  electronics,  televisions,
computers,  home office equipment and homes. These products are sold principally
by  retailers,  distributors,  manufacturers,  utility  companies  and financial
institutions.  Warrantech  also direct  markets  these  products to the ultimate
consumer  through  telemarketing  and direct mail campaigns.  The  International
segment markets and administers outside the United States predominately the same
products and services of the other business segments.  The International segment
is currently operating in the United Kingdom,  Central and South America, Puerto
Rico and the Caribbean.

The predominant  terms of the service  contracts and extended  warranties  range
from twelve (12) to eighty-four  (84) months.  The Company acts as a third party
administrator  on behalf of the  dealer/clients  and  insurance  companies.  The
actual repairs and replacements  required under the service contract  agreements
are performed by independent third party authorized repair facilities.  The cost
of these  repairs is borne by the  insurance  companies  which have the ultimate
responsibility   for  the  claims.   The  insurance   policy   indemnifies   the
dealer/clients  against  losses  resulting  from  service  contract  claims  and
protects the consumer by ensuring their claims will be paid.

The Company's  service contract  programs benefit consumers with expanded and/or
extended  product 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.  Such  coverage
generally provides for the repair or replacement of the product,  or a component
thereof,  in the event of its failure.  The Company's  service contract programs
benefit the dealer/clients by providing enhanced value to the goods and services
they offer. It also provides the  opportunity  for increased  revenue and income
while  outsourcing  the costs and  responsibilities  of  operating  an  extended
warranty program.


                                             6

<PAGE>

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 10K/A for the
year ended March 31, 1999.

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

Revenue  Recognition  Policy  - The  Company's  revenue  recognition  policy  is
segregated  into two  distinct  methods  depending on whether the Company or the
retailer/dealer  is designated as the obligor on the service  contract  sale. In
either case, a highly rated  independent  insurance  company  assumes all claims
liabilities of the service contracts administered by the Company.

Dealer  obligor  service  contracts  are sales in which the  retailer/dealer  is
designated  as  the  obligor.  For  these  service  contract  sales,  using  the
proportional  performance  method,  the  Company  recognizes  revenues 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 thereon are deferred.  Sales
of dealer  obligor  service  contracts  are  reflected in gross  revenues net of
premiums paid to insurance companies.

Administrator  obligor  service  contracts  are  sales  in which  Warrantech  is
designated  as the  obligor.  For these  service  contract  sales,  the  Company
recognizes  revenues in accordance  with Financial  Accounting  Standards  Board
Technical  Bulletin 90-1 ("TB 90-1"),  Accounting for Separately Priced Extended
Warranty  and  Product  Maintenance   Contracts,   and  Statement  of  Financial
Accounting  Standards No. 60 ("SFAS 60"),  Accounting and Reporting by Insurance
Enterprises.  These accounting standards require the recognition of revenue over
the  life  of  the  contract  on  a  straight-line   basis,  unless  sufficient,
company-specific,  historical  evidence  indicates  that the cost of  performing
services under these contracts are incurred on other than a straight-line basis.
The Company is recognizing revenue on administrative  obligor contracts based on
company specific historical claims experience over the life of the contract.

The financial statements for the fiscal years ended March 31, 1998 and 1997 have
been restated to retroactively reflect the adoption of this change in accounting
policy.  The financial  statements  for the period ending  December 31, 1998 are
also restated to reflect the adoption of this  accounting  change and the effect
of the  reversal  of  $2,600,000  of net  revenue on the  portfolio  transfer of
Computer City by CompUSA.  Previously  the  Company's  Form 10-Q for the quarter
ended  December  31,  1998  had  recognized  $2,600,000  of net  revenue  on the
portfolio  transfer of Computer City by CompUSA.  This  recognition has now been
reversed due to the  termination of Warrantech's  administrative  agreement with
CompUSA. The net effect on income was $1,529,000 or $.10 per share.

3.   CHANGE IN ACCOUNTING POLICY

Effective  with the fiscal year ended March 31,  1999,  the Company  changed its
accounting  policy  with  respect  to the  recognition  of revenue  for  service
contracts  sold  where   Warrantech  is  named  as  the  obligor.   Revenue  for
administrative  obligor  contracts is recognized in  accordance  with  Financial
Accounting  Standards Board Technical Bulletin 90-1 ("TB 90-1"),  Accounting for
Separately  Priced  Extended  Warranty and Product  Maintenance  Contracts,  and
Statement of Financial  Accounting Standards No. 60 ("SFAS 60"), Accounting and
Reporting by  Insurance  Enterprises.  These  accounting  standards  require the
recognition of revenue over the life of the contract on a  straight-line  basis,
unless sufficient, company-specific, historical evidence indicates that the cost
of  performing  services  under  these  contracts  are  incurred on other than a
straight-line  basis.  The  Company is  recognizing  revenue  on  administrative
obligor  contracts based on company specific  historical  claims experience over
the life of the  contract.  In  addition,  the Company has adopted  Statement of
Financial  Accounting  Standards No. 113 ("SFAS 113"),  Accounting and Reporting


                                             7

<PAGE>

for Reinsurance of  Short-Duration  and Long Duration  Contracts.  This requires
that  insurance  premium costs be ratably  expensed over the life of the service
contract.  The financial  statements for the years ended March 31, 1998 and 1997
were  previously  prepared based on the  proportional  performance  method which
recognized all revenues 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
thereon were deferred.

Dealer  obligor  service  contracts  are sales in which the  retailer/dealer  is
designated  as  the  obligor.  For  these  service  contract  sales,  using  the
proportional  performance  method,  the  Company  recognizes  revenues 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  thereon  are  deferred.
Effective  with the fiscal year ended March 31,  1999,  the Company  changed its
accounting policy with respect to the presentation of revenue for dealer obligor
service  contracts  sold.  Sales of dealer  obligor  service  contracts  are now
reflected  in  gross  revenues  net of  premiums  paid to  insurance  companies.
Previously,  premiums paid to insurance companies were included in gross revenue
and the corresponding amount in direct costs.

The  Company  has  given  retroactive  effect to this new  accounting  policy by
restating  previously  reported financial  statements for the fiscal years ended
March  31,  1998 and  1997.  In  addition,  retained  earnings  at April 1, 1996
reflects the cumulative  $8,080,010 effect of the restatement  through March 31,
1996. The aggregate  reduction in net income of $10,948,664  represents deferred
revenues  net of  deferred  direct  costs  which  will be  recognized  in future
operating periods. The restatement of the 1998 and 1997 financial statements did
not adversely affect the Company's liquidity or cash flows.


The impact of the  restatement for the fiscal year ended March 31, 1998 and 1997
is as follows:


<TABLE>
<S>                                     <C>               <C>              <C>               <C>
                                                             FOR THE YEARS ENDED MARCH 31,
                                        ---------------------------------- -------------------------------------
                                              1998              1998              1997               1997
                                           As Restated     As Previously       As Restated      As Previously
                                                             Reported                              Reported
                                        ----------------- ---------------- ------------------ ------------------
Gross revenues                              $132,797,006     $201,724,332       $106,775,745       $161,044,135
Net (increase) in deferred revenue          (21,447,327)      (1,985,798)       (20,501,768)        (1,381,271)
                                        ----------------- ---------------- ------------------ ------------------
Net revenues                                 111,349,679      199,738,534         86,273,977        159,662,864
                                        ----------------- ---------------- ------------------ ------------------
Net income                                    $5,619,823       $5,261,037         $2,284,867         $4,794,715
                                        ================= ================ ================== ==================

Basic earnings per common share                    $0.42            $0.40              $0.18              $0.37
                                        ================= ================ ================== ==================
Diluted earnings per common share                  $0.36            $0.34              $0.15              $0.31
                                        ================= ================ ================== ==================
Cash dividend declared                        NONE              NONE              NONE               NONE
                                        ================= ================ ================== ==================
Total assets                                $152,811,266      $81,917,288       $117,120,031        $66,124,255
                                        ================= ================ ================== ==================
Long-term debt and
   Capital lease obligations                  $2,153,286       $2,153,286         $2,491,786         $2,491,786
                                        ================= ================ ================== ==================

Common stockholders' equity                  $21,533,883      $31,764,955        $14,692,083        $25,281,941
                                        ================= ================ ================== ==================
Working capital                              $16,329,259      $16,551,543        $13,342,706        $13,602,168
                                        ================= ================ ================== ==================

</TABLE>



                                        8

<PAGE>


The impact of the  restatement  for the Three and Nine Months ended December 31,
1998 is as follows:
<TABLE>
<S>                                      <C>                 <C>             <C>                <C>
                                                 FOR THE THREE MONTHS ENDED         FOR THE NINE MONTHS ENDED
                                                     DECEMBER 31, 1998                  DECEMBER 31, 1998
                                          ----------------------------------  --------------------------------------
                                              As Restated     As Previously     As Restated        As Previously
                                                                Reported                               Reported
                                          -----------------  ---------------  ----------------  --------------------
Gross revenues                                  $37,865,775     $59,578,186      $108,529,304          $170,983,832
Net (increase) in deferred revenue              (7,593,094)       (786,474)      (22,592,813)           (1,928,052)
                                          -----------------  ---------------  ----------------  --------------------
Net revenues                                     30,272,681      58,791,712        85,936,491           169,055,780
                                          -----------------  ---------------  ----------------  --------------------
Net income (loss)                              ($1,239,524)      $1,817,062      ($4,110,605)            $1,183,367
                                          =================  ===============  ================  ====================

Basic earnings per common share                     ($0.08)           $0.12           ($0.27)                 $0.08
                                          =================  ===============  ================  ====================
Diluted earnings per common share                   ($0.08)           $0.12           ($0.27)                 $0.08
                                          =================  ===============  ================  ====================
Cash dividend declared                           NONE             NONE              NONE               NONE
                                          =================  ===============  ================  ====================
Total assets                                   $177,443,947     $92,250,482      $177,443,947           $92,250,482
                                          =================  ===============  ================  ====================
Long-term debt and
   Capital lease obligations                     $2,050,036      $2,050,036        $2,050,036            $2,050,036
                                          =================  ===============  ================  ====================

Common stockholders' equity                     $15,327,659     $30,852,704       $15,327,659           $30,852,704
                                          =================  ===============  ================  ====================
Working capital                                 $12,390,335     $14,391,980       $12,390,335           $14,391,980
                                          =================  ===============  ================  ====================

</TABLE>

4.   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(loss)                                   ($1,239,524)          $1,165,879         ($4,110,605)         $4,805,741

Other Comprehensive Income (loss), 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(loss)                         ($1,339,345)          $1,210,721         ($4,220,377)         $4,834,693
                                               =================   =================   ==================   ================

</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 on investments                           $5,143          $7,055
Foreign currency translation adjustments               (29,307)          78,553
                                               -----------------   -------------
Accumulated other comprehensive income(loss)          ($24,164)         $85,608
                                               =================   =============


                                             9

<PAGE>

5.   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                 ($1,239,524)       $1,165,879       ($4,110,605)        $4,805,741
                                                   =================== ================  =================  ================

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)                       -                2,501,812          -                 2,557,358
                                                   ------------------- ----------------  -----------------  ----------------
      Diluted shares                                       15,520,411       15,786,572         14,981,328        15,785,414
                                                   =================== ================  =================  ================
Earnings Per Common Share:
   Basic                                                      ($0.08)            $0.09            ($0.27)             $0.36
                                                   =================== ================  =================  ================
   Diluted                                                    ($0.08)            $0.07            ($0.27)             $0.30
                                                   =================== ================  =================  ================

</TABLE>

6.   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 ("SFAS 131"). SFAS 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.  SFAS 131 will have no impact on the Company's  results of operations,
financial condition or liquidity.


                                        10

<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 annual 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  underlying  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 $3.4
million or 9.9% to $37,865,775 as compared with  $34,447,899 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 and International markets.

The net increase in deferred  revenues for the three month period ended December
31, 1998  amounted to  $7,593,094  as compared with a net increase of $5,763,603
for the three month period ended December 31, 1997. These increases are directly
attributable  to the increased  number of service  contracts sold with a service
period  greater  than one year  during the  current  year  offset in part by the
amounts earned on expiring contracts during the same periods.

Direct costs, which consist primarily of insurance premiums and commissions, are
those  costs  directly  related to the  production  and  acquisition  of service
contracts  where  Warrantech  is  named  as  the  obligor.   Direct  costs  were
$16,994,480  for the three month period ended December 31, 1998 as compared with
$12,453,595  for the comparable  period last year. The increases in direct costs
are  primarily  the  result  of  volume  increases  in  contracts  sold  and the
amortization of previously deferred direct costs being recognized in the current
year.  Direct costs as a percentage  of gross  revenues  increased to 44.9% from
36.2% compared to last year. This increase is due in part to increased volume of
lower margined Home service contracts, as well as higher premium costs.

Service,  selling and general and  administrative  expenses (SG&A) 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 36.3% for the third
quarter 1998 compared to 39.7% for the third quarter 1997.  This decrease is the
result of the continued  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.

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 loss for the three months ended  December 31, 1998 amounted to  ($1,239,524)
or ($0.08) per diluted  share as compared to net income of  $1,165,879  or $0.07
per diluted share for the comparable period last year. This change in net income
(loss) is the result of the factors listed above.


                                   11

<PAGE>

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  $4.4
million or 4.3% to  $108,529,304  as  compared  with  $104,088,151  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 and International markets.

Direct costs, which consist primarily of insurance premiums and commissions, are
those  costs  directly  related to the  production  and  acquisition  of service
contracts  where  Warrantech  is  named  as  the  obligor.   Direct  costs  were
$48,108,692  for the nine months  ended  December  31,  1998,  as compared  with
$42,382,185 for the nine months ended December 31, 1997. The increases in direct
costs are  primarily  the result of volume  increases in contracts  sold and the
amortization of previously deferred direct costs being recognized in the current
year.  Direct costs as a percentage  of gross  revenues  increased to 44.3% from
40.7% compared to last year. This increase is due in part to increased volume of
lower margined Home service contracts, higher premium costs and a partial refund
of prior year insurance payments which reduced premium costs in the period ended
December 31, 1997.

Service,  selling and general and  administrative  expenses  (SG&A) 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 37.9% for the
nine  months  ended  December  31, 1998 as compared to 34.4% 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 loss for the nine months ended December 31, 1998 amounted to ($4,110,605) or
($0.27) per diluted  share,  compared to net income of  $4,805,741  or $0.30 per
diluted  share for the  comparable  period last year.  This change in net income
(loss) is the result of the factors listed above.

Liquidity and Financial Resources

The Company has ongoing  relationships  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.  In addition,
the  Company  has a  revolving  credit  agreement  with a bank which  originally
provided for maximum aggregate borrowings up to $10,000,000 with interest at the
bank's prevailing prime rate or LIBOR plus 2%. Subsequent to March 31, 1999, the
line of credit was adjusted to $1,500,000 and currently  expired on December 31,
1999. The Company is presently in  negotiations  to increase and/or replace this
line of  credit.  Although  it is  anticipated  that this will be  completed  by
February 2000, no assurances can be given this will be accomplished.  During the
fiscal  years  ended  March  31,  1998  and 1999  the  Company  did not have any
borrowings under this line of credit.

Cash used by operations  during the nine months ended December 31, 1998 amounted
to  $10,166,006  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  $24,062,052  to  $3,832,312,   while  its  accounts  receivable
increased from $27,878,335 to $48,776,784  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 March 31, 1999,  the
Company's cash and cash equivalents  returned to a normal level of approximately
$15,000,000.   The  reduction  of  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.


                                   12

<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

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

              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.

</TABLE>

Item 5.       Other Information

              Not applicable.

Item 6 (a)                 Exhibits

               (27)        Financial Data Schedule

Item 6        Reports on Form 8-K

              Not applicable


                                   13

<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



                                      By:  /s/ Joel San Antonio
                                          ------------------------------------
                                          Joel San Antonio - Chairman of the
                                          Board and Chief Executive Officer
Date:  January 5, 2000



                                       By:  /s/ Richard F. Gavino
                                          ------------------------------------
                                          Richard F. Gavino - Executive Vice
                                          President and Chief Financial Officer

Date:  January 5, 2000




                                        14