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 September 30, 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 November 2, 1998
Common stock, par value $.007 per share            15,524,596 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 September 30, 1998
           (Unaudited) and March 31, 1998...................            3


           Condensed Consolidated Statement of Operations
            For the Three and Six Months Ended September 30, 1998
            and 1997 (Unaudited) ............................           4


           Condensed Consolidated Statement of Cash Flows
            For the Six Months Ended September 30, 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)
                                                     September 30,       March 31,
                                                    ------------------------------- 
                                                          1998             1998
                                                    -------------    -------------- 
                                                     
<S>                                                 <C>             <C>
Current Assets:
Cash and cash equivalents                           $  21,113,458    $  24,062,052

Investments in marketable securities                         --            537,924
                                                    

Accounts receivable, (net of allowances of $899,531
and $1,223,173, respectively)                          31,624,159       27,878,335
   

Prepaid income taxes                                      460,322           --    
Other receivables, net                                  5,168,919        2,197,405
Prepaid expenses and other current assets               2,190,478        1,775,316
                                                     ---------------    --------------
   Total Current Assets                                60,557,336       56,451,032
                                                      -------------    --------------


Property and Equipment - Net                           14,562,908       13,639,921
                                                      -------------    --------------

Other Assets:
Excess of cost over fair value of assets acquired
   (net of accumulated amortization of
    $4,547,583 and $4,212,956, respectively)             3,610,950       3,945,577
Deferred income taxes                                    3,208,115       3,085,311
Investments in marketable securities                     2,168,732       1,967,817
Restricted cash                                            800,000         800,000
Split dollar life insurance policies                     1,149,570       1,054,045
Notes receivable                                           567,815         654,068
Collateral security fund                                   199,389         199,389
Other assets                                               137,139         120,128
                                                      -------------    --------------
                                           
          Total Other Assets                            11,841,710      11,826,335
                                                      -------------    --------------
 
                Total Assets                          $ 86,961,954     $81,917,288
                                                      =============    ==============  

LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
                                                      (Unaudited)
                                                      September 30,     March 31,
                                                    ------------------------------- 
                                                          1998             1998
                                                    -------------    -------------- 

Current Liabilities:
Current maturities of long-term debt and capital 
  lease obligations                                   $  1,696,134     $  2,371,662
Insurance premiums payable                              29,964,431       22,269,589
Income taxes payable                                          --          1,850,999
Accounts and commissions payable                         8,778,299        7,698,948
Accrued expenses and other current liabilities           5,549,893        6,211,572
                                                     ---------------    --------------
   Total current liabilities                            45,988,757       40,402,770
                                                     ---------------    --------------

Deferred revenues                                        8,016,135        6,987,541

Long-term debt and capital lease obligations             1,802,720        2,153,286
                                                     
Deferred rent payable                                      551,117          608,736
                                                     ---------------    --------------
Total liabilities                                       56,358,729       50,152,333
                                                     ---------------    --------------

Commitments and contingencies

Stockholders' Equity:
   Common stock - $.007 par value:
     authorized   - 30,000,000 shares
     Issued; outstanding - 16,495,396 shares
      at Sept. 30, 1998 and 13,449,382 shares
      at March 31, 1998                                    115,468           94,146
   Additional paid-in capital                           15,305,712       14,124,700
   Accumulated other comprehensive income, 
      net of taxes                                          75,657           85,608
   Retained earnings                                    17,342,256       17,975,951
                                                     ---------------    --------------
                                                        32,839,093       32,280,405
Less:  Deferred compensation                                (9,832)         (21,631)
Treasury stock - at cost, 612,700 shares
   at September 30, 1998 and 100,000 at
   March 31, 1998                                       (2,226,036)        (493,819)
                                                     ---------------    --------------
        Total Stockholders' Equity                      30,603,225       31,764,955
                                                     ---------------    --------------

        Total Liabilities and
            Stockholders'  Equity                    $ 86,961,954       $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 Six Months Ended,
                                                            September 30,                                   September 30,
                                                       -------------------------                       --------------------------
                                                       1998              1997                      1998               1997
                                                       ------------      ------------              -------------      -------------

Gross revenues                                         $ 61,141,164      $ 50,191,635              $111,405,646      $103,518,665
Revenues deferred to future periods                        (971,806)         (606,841)               (1,752,757)       (1,165,049)
Deferred revenues earned                                    320,278           205,405                   611,179           354,454
                                                       ------------      ------------              -------------      -------------
Net revenues                                             60,489,636        49,790,199               110,264,068       102,708,070

Costs and expenses:
   Direct costs                                          45,469,541        35,822,264                82,004,757        74,767,349  
   Service, selling, and general and administrative      13,235,901        10,817,861                27,412,748        22,132,636
   Depreciation and amortization                          1,137,027           774,995                 2,411,641         1,500,951 
                                                       ------------      ------------              -------------      -------------
Total costs and expenses                                 59,842,469        47,415,120               111,829,146        98,400,936
                                                       ------------      ------------              -------------      -------------

Income (loss) from operations                               647,167         2,375,079                (1,565,078)        4,307,134

Other income                                                347,261           198,532                   517,221           395,911
                                                       ------------      ------------              -------------      -------------

Income (loss) before provision (benefit)
   for income taxes                                         994,428         2,573,611                 (1,047,857)       4,703,045
Provision (benefit) for income taxes                        401,495         1,003,931                   (414,162)       1,806,161
                                                       ------------      ------------              -------------      -------------

Net income (loss)                                          $592,933        $1,569,680                  ($633,695)      $2,896,884
                                                       ------------      ------------              -------------      -------------

Earnings per share:
   Basic                                                      $0.04             $0.12                     ($0.04)           $0.22
                                                       ------------      ------------              -------------      -------------
   Diluted                                                    $0.04             $0.10                     ($0.04)           $0.18
                                                       ------------      ------------              -------------      -------------

Weighted average number of shares outstanding:
   Basic                                                 16,043,736        13,204,446                 14,710,342       13,190,402
                                                       ------------      ------------              -------------      -------------
   Diluted                                               16,070,990        15,717,314                 15,417,404       15,705,676
                                                       ------------      ------------              -------------      -------------
</TABLE>
        See accompanying notes to condensed consolidated financial statements.


                                                  4

<PAGE>


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

<TABLE>
                                                                        For the Six Months Ended September 30,
<S>                                                                     <C>                          <C>    
                                                                        1998                         1997
                                                                        ---------------              -------------
Net cash provided by operating activities                                 $1,143,452                   $4,976,983
Cash flows from investing activities:
  Property and equipment purchased                                        (2,568,331)                  (2,129,103)
  Purchase of marketable securities                                         (205,420)                    (241,562)
  Proceeds from sales of marketable securities                               542,586                      184,225
                                                                        ---------------              -------------

Net cash used in investing activities                                     (2,231,165)                   (2,186,440)
                                                                        ---------------              -------------

Cash flows from financing activities:
   Decrease  (increase) in notes receivable                                   86,253                      (745,931)
   Proceeds from exercise of common stock options                            118,584                       298,350
   Tax benefit from exercise of common stock options                       1,083,750
   Purchase of treasury stock                                             (1,732,217)
   Repayments, notes and capital leases                                   (1,417,251)                   (1,118,340)
                                                                        ---------------              -------------
   Net cash used in financing activities                                  (1,860,881)                   (1,565,921)
                                                                        ---------------              -------------

Net increase (decrease) in cash and cash equivalents                      (2,948,594)                    1,224,622

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

Cash and cash equivalents at end of period                               $21,113,458                   $18,256,547
                                                                        ---------------              -------------

Supplemental Cash Flow Information

Cash payments for:
   Interest                                                                 $237,720                      $157,962
                                                                        ---------------              -------------
   Income taxes                                                             $980,536                      $902,375
                                                                        ---------------              -------------

Non-Cash Investing and financing activities:
    Property and equipment financed through capital leases                  $391,157                      $869,595


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


                                                  5

<PAGE>


                                     WARRANTECH CORPORATION AND SUBSIDIARIES
                          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                                      September 30, 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  and operates call center
services and  technical  computer  services 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  September 30, 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>

3. COMPREHENSIVE INCOME

The components of  comprehensive  income,  net of related tax, for the three and
six month periods ended September 30, 1998 and 1997 are as follows:

<TABLE>
                                                      For the Three Months Ended,                      For the Six Months Ended,
                                                            September 30,                                   September 30,
                                                       -------------------------                       --------------------------
<S>                                                    <C>               <C>                       <C>                <C> 
                                                       1998              1997                      1998               1997
                                                       ------------      ------------              -------------      -------------
Net income (loss)                                        $592,933         $1,569,680                ($633,695)         $2,896,884
Other Comprehensive Income, net of tax
   Foreign currency translation adjustments                12,965            (36,255)                  (7,396)            (20,936)
   Unrealized gain(loss) on investments                    (1,422)             7,747                   (2,555)              5,046
                                                       ------------      ------------              -------------      -------------
Comprehensive income (loss)                              $604,476         $1,541,172                ($643,646)         $2,880,994 

    The components of accumulated other comprehensive income, net of related 
tax, at September 30, 1998 and March 31, 1998 are as follows:


                                                        September 30,      March 31,
                                                            1998              1998
                                                       ------------      ------------ 
Unrealized gain on investments                             $4,500             $7,055
Foreign currency translation adjustments                   71,157             78,553
                                                       ------------      ------------
Accumulated other comprehensive income                    $75,657            $85,608
                                                       ------------      ------------  

4. EARNINGS PER SHARE

The computation of earnings per share at September 30, 1998 and
September 30, 1997 was as follows:

                                                      For the Three Months Ended,                      For the Six Months Ended,
                                                            September 30,                                   September 30,
                                                       -------------------------                       --------------------------
                                                       1998              1997                      1998               1997
                                                       ------------      ------------              -------------      -------------
Numerator:
-----------------------------------
   Net income (loss) applicable to common stock          $592,933         $1,569,680                ($633,695)         $2,896,884
                                                       ------------      ------------              -------------      -------------

Denominator
-----------------------------------
   Average outstanding shares  used in the
   computation of per share earnings:
      Common Stock issued-Basic shares                 16,043,736         13,204,446               14,710,342          13,190,402
      Stock Options (treasury method)                      27,254          2,512,868                  707,062           2,515,274
                                                       ------------      ------------              -------------      -------------
      Diluted shares                                   16,070,990         15,717,314               15,417,404          15,705,676
                                                       ------------      ------------              -------------      -------------
Earnings Per Common Share:
-----------------------------------
   Basic                                                    $0.04              $0.12                   ($0.04)              $0.22
   Diluted                                                  $0.04              $0.10                   ($0.04)              $0.18
</TABLE>

5.  OTHER MATTERS

     On  July 6,  1998,  Joel  San  Antonio,  Warrantech's  Chairman  and  Chief
Executive Officer,  and William Tweed and Jeff J. White, members of Warrantech's
Board of Directors, exercised all of their vested options to purchase Warrantech
common  stock.  A total of  3,000,000  shares were  purchased,  with  payment by
delivery of promissory notes payable over three years at an annual interest rate
of 6%. The exercise of these options and the  anticipated  tax benefit from this
transaction represents a combined


                              7
<PAGE>


investment of approximately $10 million.


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  ("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 are 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 or (d) regulatory
or legal changes affecting the Company's business,  although none of these risks
are  anticipated  at the present time.  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  September  30,  1998  Compared to the Three  Months  ended
September 30, 1997

Gross revenues for three month period ended  September 30, 1998 increased  $10.9
million or 21.8% to $61,141,164 as compared with $50,191,635 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, Automotive, Home Services and international markets.

Direct costs are those costs directly  related to the production and acquisition
of service  contracts.  Direct costs were $45,469,541 for the three month period
ended September 30, 1998 as compared with $35,822,264 for the comparable  period
in Fiscal 1998. This increase is primarily attributable to the increase in gross
revenues.  The increase in direct costs as a percent of revenue sales is in part
a result of increased  sales in Home Services,  an incremental  business and new
market.

Service,  selling and general and  administrative  expenses for the three months
ended  September 30, 1998 were  $13,235,901 as compared to  $10,817,861  for the
three months ended September 30, 1997, an increase of $2.4 million or 22.4%. The
increase is primarily  related to the increased  revenue and higher  payroll and
payroll related costs. As a percentage of sales SG&A remained  constant at 21.6%
for the  comparable  periods.  During the quarter,  the Company  benefited  from
several cost cutting and operational  efficiency  initiatives which included the
reengineering  of its call center  processes.  The Company reduced SG&A expenses
$940,946  for the three months ended  September  30, 1998  compared to the three
months ended June 30, 1998.  As a percentage  of sales SG&A was reduced to 21.6%
from 28.2% for the comparable periods.


                                   9

<PAGE>


The increase in depreciation  and  amortization of $362,032 for the three months
ended  September 30, 1998 compared to the same period last year is the result of
capital  additions  related to the  Company's  ongoing  upgrade of its  computer
systems and the additional equipment requirements resulting from the increase in
service contracts in force.

The  increase in other  income for the three  months  ended  September  30, 1998
compared to the three months  September  30, 1997 is due  primarily to increased
interest income.

Net income for the three months ended September 30, 1998 amounted to $592,933 or
$.04 per basic share as compared to  $1,569,680  or $.12 per basic share for the
comparable period in fiscal 1997.


Six Months Ended  September 30, 1998 Compared to the Six Months Ended  September
30, 1998

Gross  revenues  for the six months  ended  September  30, 1998  increased  $7.9
million or 7.6% to  $111,405,646  as  compared  with  $103,518,665  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 Consumer Products, Automotive, Home Services
and international markets.

Direct costs are those costs directly  related to the production and acquisition
of service  contracts.  Direct costs were  $82,004,757  for the six months ended
September  30,  1998,  as compared  with  $74,767,349  for the six months  ended
September 30, 1997. The increase is primarily  attributable  to the increases in
gross revenues.

Service,  selling  and general and  administrative  expenses  for the six months
ended September 30, 1998 were $27,412,748,  an increase of $5.3 million or 23.9%
compared  to  $22,132,636  for the six months  ended  September  30,  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 24.6% for the
six months  ended  September  30,  1998 as  compared to 21.4% for the six months
ended September 30, 1997.  During the second quarter of Fiscal 1999, the Company
benefited from several cost cutting and operational efficiency initiatives which
included the  reengineering  of its call center  processes.  The Company reduced
SG&A expenses $940,946 for the three months ended September 30, 1998 compared to
the three months ended June 30, 1998.  As a percentage of sales SG&A was reduced
to 21.6% from 28.2% for the comparable periods.

The increase in  depreciation  and  amortization  of $911,050 for the six months
ended  September 30, 1998 compared to the same period last year is the result of
capital  additions  related to the  Company's  ongoing  upgrade of its  computer
systems and the additional equipment requirements resulting from the increase in
service contracts in force.

The  increase  in other  income  for the six months  ended  September  30,  1998
compared to the six months  September  30, 1997 is due  primarily  to  increased
interest income.

The net loss for the six months ended September 30, 1998 amounted to $633,695 or
$.04 per basic  share,  compared to net income of  $2,896,884  or $.22 per basic
share for the comparable period in fiscal 1997.

                              10

<PAGE>

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
six month period ended September 30, 1998 amounted to $391,157.  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 November 30,
1998, is secured by certain accounts  receivable.  The Company is in the process
of renewing this credit  facility.  At September  30, 1998,  the Company did not
have any borrowings under the line of credit.

The Company  believes  that  internally  generated  funds will be  sufficient to
finance its current operations for at least the next twelve months. Cash used by
operations during the six months ended September 30, 1998 amounted to $1,143,452
which is principally attributable to the net loss from operations.

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:


                                   11
<PAGE>


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


     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
Fiscal 1999 (March 31, 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              March 31, 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



                                   12
<PAGE>


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 March 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.

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  $50,000 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



                                        13

<PAGE>

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)  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 system's development,  the Company is redeveloping its
data feeds and should be fully Year 2000  compliant at the end of the  Company's
fourth quarter fiscal period (March 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
 
              Not applicable.
 
Item 5.       Other Information
 
              Not applicable.
 
Item 6 (a)    Exhibits
 
               (27)        Financial Data Schedule
 
Item 6        Reports on Form 8-K
 
              Report on Form 8-K reporting item 4, dated August 28, 1998 filed 
              September 4, 1998.


                                        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:  November 13, 1998

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


Date:  November 13, 1998




                                        17