<PAGE>

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

                                    FORM 10-K
(Mark One)
[X]               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                    For the fiscal year ended MARCH 31, 2003

                                       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 No. 0-13084

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

                  DELAWARE                             13-3178732
            ------------------                         ----------------
         (State or other jurisdiction of      (IRS Employer Identification No.)
         incorporation or organization

           2220 HIGHWAY 121, SUITE 100 BEDFORD, TEXAS               76021
         ----------------------------------------------             -----
          (Address of Principal Executive Offices)               (Zip Code)

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

       Securities registered pursuant to Section 12(b) of the Act:

          TITLE OF EACH CLASS         NAME OF EACH EXCHANGE ON WHICH REGISTERED
      Common Stock $.007 par value                   None

           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $.007 par value
        ---------------------------------------------------------------------
                                (Title of Class)

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

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K |X|.

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

     The aggregate market value of the voting and non-voting  common equity held
by  non-affiliates  of the  registrant as of September 30, 2002,  based upon the
closing  price of the  registrant's  common  stock  on  September  30,  2002 was
$13,784,270  (For  purposes  of  calculating  the  preceding  amount  only,  all
directors  and  executive   officers  of  the   registrant  are  assumed  to  be
affiliates.)

     The number of shares outstanding of the registrant's common stock as of May
30, 2003 was 15,280,634.

                       DOCUMENTS INCORPORATED BY REFERENCE
Portions of the  Registrant's  Definitive  Proxy  Statement  for its 2003 Annual
Meeting of Stockholders to be filed pursuant to Regulation 14A promulgated under
the Securities Exchange Act of 1934, as amended are incorporated by reference in
Part III.

Index to Exhibits is on page 63.

Document contains 78 pages.


<PAGE>

                     WARRANTECH CORPORATION AND SUBSIDIARIES

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                        PAGE NO.
                                     PART I
<S>                                                                                                          <C>
Item 1.    Business..............................................................................            1
                General..........................................................................            1
                Sales and Marketing..............................................................            5
                Significant Customers............................................................            5
                Competition......................................................................            6
                Contract Obligors................................................................            6
                Insurance Coverage...............................................................            6
                Federal and State Regulation.....................................................            7
                Intellectual Property............................................................            8
                Employees........................................................................            8
Item 2.    Properties............................................................................            9
Item 3.    Legal Proceedings.....................................................................            9
Item 4.    Submission of Matters to a Vote of Security Holders...................................            9

                                     PART II
Item 5.    Market of the Registrant's Common Equity and Related Stockholder Matters .............            10
Item 6.    Selected Financial Data...............................................................            10
Item 7.    Management's Discussion and Analysis of Financial Condition and Results of ...........
           Operations............................................................................            11
               General...........................................................................            11
               Results of Operations.............................................................            13
               Insurer in Liquidation............................................................            17
               Agreements........................................................................            18
               Liquidity and Capital Resources...................................................            20
               Loans to Directors................................................................            21
               Outlook...........................................................................            22
               Critical Accounting Policies......................................................            22
Item 7A.   Qualitative and Quantitative Disclosures About Market Risk............................            23
Item 8.    Financial Statements and Supplementary Data...........................................            24
Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial
           Disclosures...........................................................................            53

                                    PART III
Item 10.   Directors and Executive Officers of the Registrant ...................................            53
Item 11.   Executive Compensation................................................................            53
Item 12.   Security Ownership of Certain Beneficial Owners and Management........................            53
Item 13.   Certain Relationships and Related Transactions........................................            53
Item 14.  Controls and Procedures................................................................            53

                                     PART IV
Item 15.   Exhibits, Financial Statement Schedules and Reports on Form 8-K.......................            54

Signatures      .................................................................................            58
Certifications of the CEO and CFO................................................................         60-62
Index to Consolidated Financial Statements.......................................................            25
Financial Statement Schedules....................................................................            26
</TABLE>


<PAGE>

                                     PART I


ITEM 1.      BUSINESS

GENERAL

     Warrantech  Corporation,  a  Delaware  corporation,  and  its  subsidiaries
(collectively,  "Warrantech" or the "Company")  maintains  executive offices and
operating  facilities at 2200 Highway 121 Suite 100 Bedford,  Texas 76021, where
the telephone number is (800) 544-9510.

     Warrantech, through its wholly owned subsidiaries,  markets and administers
service contracts,  extended  warranties and replacement plans. 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's service contract programs benefit consumers by providing them
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.
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 and by providing  them with the  opportunity  for increased
revenue  and income  without  the costs and  responsibilities  of  operating  an
extended warranty program.

     The  service  contracts,  extended  warranties  and  replacement  contracts
generally  have terms ranging from three (3) to one hundred twenty (120) months.
Since the Company  acts solely as a third party  administrator  on behalf of the
dealer/clients and insurance  companies,  the actual repairs and/or replacements
required  under  the  agreements  are  performed  by  independent   third  party
authorized repair  facilities or dealers.  The cost of repairs is generally paid
for by the insurance  companies which have the ultimate  responsibility  for the
claims  or,  where  insurance  coverage  is  unavailable,  by  Butler  Financial
Solutions,  LLC ("Butler"),  if Reliance  Insurance Company  ("Reliance") or the
Company is the obligor.  The insurance  policy  indemnifies  the  dealer/clients
against losses resulting from service contract claims and protects  consumers by
ensuring  their claims will be paid.  See "Contract  Obligors"  and  "Insurance"
below.


Essential to the Company's  success is its ability to capture,  maintain,  track
and analyze all  relevant  information  regarding  its  service  contracts.  The
Company internally  developed and operates  proprietary software that allows the
tracking  for  millions of service  contracts  and  consists of custom  designed
relational  databases  with  interactive  capabilities,   which  provides  ample
capacity  and  processing  speed  for  its  current  and  future   requirements.
Additionally,  Warrantech's  web-enabled  applications  such as VSCOnline(R) and
WCPSOnline(R)  facilitate  information  exchange with outside businesses such as
dealers and service  centers.  These optimize the data  acquisition  and service
processing  functions.  The software  programs allow for the analysis of current
and historical  statistical data which the Company uses to monitor the Company's
service contract program performance and to support future growth.


                                       2
<PAGE>

     The Company operates in three major business segments: Automotive, Consumer
Products and International, discussed below.

WARRANTECH AUTOMOTIVE SEGMENT

     The Company's  Automotive  segment markets and administers  vehicle service
contract ("VSC") programs, GAP insurance and other related automotive after-sale
products,  all of which enhance the  profitability  of the sale of  automobiles,
light trucks,  motorcycles,  recreational  vehicles and  automotive  components.
These products are sold principally by franchised and independent automobile and
motorcycle  dealers,  leasing  companies,  repair  facilities,   retail  stores,
financial institutions and other specialty marketers.

     Warrantech  Automotive has expanded its efforts in the automotive  field to
provide administrative  expertise and secure the placement of insurance coverage
to other parties requiring these services on either VSC's or similar products.

     Warrantech  Automotive employs sales personnel and utilizes the services of
independent  agents to call on dealers to solicit their use of the VSC programs.
At this time,  Warrantech  Automotive is represented by more than 100 agents and
sub-agents in 46 states and provinces in the United States and in Canada.

     The VSC is a contract between the  dealer/lessor or third party obligor and
the vehicle  purchaser/lessee  (and,  for the State of Florida only,  Warrantech
Automotive)  that  offers  coverage  for a term  ranging  from  three (3) to one
hundred twenty (120) months and/or 3,000 to 100,000 miles. Coverage is available
in the event of the failure of a broad range of mechanical  components occurring
during the term of the VSC,  other  than  failures  covered by a  manufacturer's
warranty.

     Warrantech  Automotive's  continuing success and ability to outdistance its
competitors,  relies on its high quality  products,  exceptional  service,  fair
product pricing along with its ability to immediately  react to client needs and
its ability to seize new market  opportunities as they arise. Under the programs
marketed and administered by Warrantech Automotive,  it provides services to the
dealer, such as development and distribution of marketing materials,  processing
dealer produced VSC's and  administering  and paying of claims filed by contract
holders under the terms of their VSC.

     Under  the  Warrantech  Automotive  VSC  programs,  liability  is  borne by
insurers who have issued insurance  policies  assuming this risk in exchange for
premiums and fees. Currently,  Great American Insurance Company ("GAIC") insures
the Warrantech Automotive's VSC programs. The Company also has an agreement with
Heritage  Insurance Risk Retention Group ("Heritage") and is reinsured by one of
North America's largest reinsurance companies on reinsurance programs offered to
large  automobile  dealerships.  Previously,  a portion  of the  Warrantech  VSC
programs  were insured by either  Reliance  (see  "Management's  Discussion  and
Analysis - Insurer in Liquidation"  below), the New Hampshire  Insurance Company
or other American International Group, Inc. companies.

     In 2003,  2002 and 2001 the Automotive  segment  received $2 million,  $1.8
million and $1.5 million,  respectively in net earned  administrative  fees from
one  significant  customer/agent,  which  accounted  for  10%,  9% and 9% of the
Automotive segment's total net earned administrative fees, respectively.

WARRANTECH CONSUMER PRODUCTS SEGMENT

     The Company's  Consumer Products segment develops,  markets and administers
extended  warranties  and product  replacement  plans on  household  appliances,
consumer electronics,  televisions,  computers and home office equipment,  which
are sold principally  through retailers,  distributors,  manufacturers,  utility
companies, financial institutions and other specialty marketers. Warrantech also

                                       3
<PAGE>

markets these  warranties and plans directly to the ultimate  consumer on behalf
of the retailer/dealer  and/or the manufacturer through telemarketing and direct
mail campaigns.  It also offers call center and technical computer services. The
extended  warranties and product  replacement  plans  administered by Warrantech
Consumer   Products  are  service   contracts  between  the  purchaser  and  the
retailer/dealer  and/or the insurance  company that  typically  offers  coverage
ranging from twelve (12) to sixty (60) months.

     The  Consumer  Products  segment  also  develops,  markets and  administers
service  contract  programs in the United States and Canada covering  mechanical
breakdowns  of the  working  systems and  components  in homes.  These  programs
protect  homeowners against the cost of repairs in case of a breakdown of one or
more of the major home systems including heating and air conditioning, plumbing,
electrical and built-in appliances.

     The programs  marketed and  administered  by Warrantech  Consumer  Products
require  that the selling  dealer,  distributor  or  manufacturer  enter into an
agreement outlining the duties of each party. Those duties specifically  assumed
by Warrantech  Consumer  Products  include the development  and  distribution of
marketing  materials,  sales and  motivational  training,  processing of service
contracts,  operating a call center and the adjustment and payment of claims. It
has also entered into service center  agreements with  independent  third party,
authorized  repair facilities  located  throughout the United States and Canada.
These service center agreements  identify the amount of reimbursement the repair
facility will receive from a repair claim.

     Effective  February 12, 2000,  the Company  entered into an agreement  with
GAIC  pursuant to which GAIC insures any new service  contracts  issued in North
America or Puerto Rico. Insurance for service contracts issued between August 1,
1997 until February 12, 2000 are covered by Cigna Insurance Company.

     In 2003, 2002 and 2001 the Consumer Products segment received $2.1 million,
$2.1 million and $2.4 million,  respectively,  in net earned administrative fees
from a significant customer which accounted for 24%, 19% and 9% of the segment's
net earned administrative fees,  respectively.  Additionally,  in 2003, 2002 and
2001 the Consumer  Products  segment  received from a second customer net earned
administrative   fees  of  $2.7   million,   $4.2  million  and  $4.5   million,
respectively,  which  accounted  for 30%, 37% and 16% of the  Consumer  Products
segment's total net earned administrative fees, respectively.  Finally, in 2003,
2002 and 2001 the Consumer  Products segment received net earned  administrative
fees of $1.8 million, $2.2 million and $2.7 million, respectively,  from a third
significant  customer,  which  accounted  for 21%, 19% and 10% of the  segment's
total net earned administrative fees, respectively. The Company has extended its
contracts with its three significant  customers through 2005, and 2006. In 2003,
2002 and 2001 net earned  administrative fees from Staples were $0, $0 and $12.0
million,  respectively,  which  accounted  for 0%,  0% and  44% of the  Consumer
Products segments total net earned  administrative fees,  respectively.  Because
Warrantech  could not reach an agreement with Staples to extend its agreement on
terms  which  would not erode the  profitability  of the  program,  the  program
expired on February 26, 2001.

WARRANTECH INTERNATIONAL SEGMENT

     Warrantech  International  markets and  administers  the same  products and
services  outside the United States that  Warrantech  Automotive  and Warrantech
Consumer Products market and administer in the United States and Canada.

     Warrantech  International  conducts  its efforts on a direct  basis and has
developed relationships with retailers and distributors throughout the Caribbean
and Central and South  America.  It is currently  doing business in Puerto Rico,
Guatemala,  Chile and Peru. The Company believes its expansion in South American
markets  will  be  facilitated  by  its  strategic   alliance  with  Atento,   a
multi-national call center owned by Spain's Grupo Telefonica, which should allow

                                       4
<PAGE>

Warrantech  International to readily enter markets in Latin America where Atento
has existing call center operations.

     In 2003,  2002 and 2001 the  International  segment  received $0.6 million,
$0.3 million and $0.4 million,  respectively in net earned  administrative  fees
from a  significant  customer,  which  accounted  for  20%,  14%  and 22% of the
International  segment total in net earned  administrative  fees,  respectively.
Additionally,  in 2003, 2002 and 2001 the  International  segment  received $0.2
million, $0.3 million and $0.1 million,  respectively, net earned administrative
fees from another  significant  customer,  which accounted for 6%, 13% and 7% of
the International  segment total net earned  administrative fees,  respectively.
Additionally,  in 2003 and 2002 the International  segment received $0.3 million
and $0.1  million,  respectively,  net earned  administrative  fees from another
significant  customer,  which  accounted  for  10%  and 4% of the  International
segment total net earned  administrative fees,  respectively.  Finally, in 2003,
2002 and 2001 the  International  segment received $0 million,  $0.2 million and
$0.5  million,  respectively,  in net earned  administrative  fees from  another
significant  customer  which  accounted for 0%, 7% and 29% of the  International
segment total net earned administrative fees, respectively.

SALES AND MARKETING

     Warrantech's  sales and marketing  activities are managed by each segment's
own sales and  marketing  personnel.  In  certain  circumstances,  the  business
segments have entered into marketing  agreements with independent  organizations
that  solicit  dealers at their own  expense,  and receive a  commission  on all
service contracts sold by such dealers.

     The  Warrantech  business  segments  foster  awareness of their  respective
programs through cooperative  advertising programs,  which may be jointly funded
by Warrantech and the client/dealer or independent agent.

     Sales  training  and  motivational  programs  are a  primary  form  of  the
specialized   assistance   provided   by  the   Company  to   retailers/dealers,
distributors and  manufacturers  to assist them in increasing the  effectiveness
and  profitability of their service contract program sales efforts.  The Company
also develops materials and provides  educational  seminars.  These seminars are
conducted  either at the client's place of business,  an offsite  facility or at
the  Company's   state-of-the-art   training  facility  at  its  Bedford,  Texas
administrative  offices.  This  facility  features  the  latest  in  audio/video
technology designed to enhance the training and learning experience.

     Warrantech also markets directly to the ultimate  consumer on behalf of the
retailer/dealer and for manufacturer's programs through telemarketing and direct
mail campaigns. These direct marketing campaigns generate sales through renewals
of expiring  contracts and  second-effort  sales to customers who did not buy an
extended service contract at the time of purchase.

SIGNIFICANT CUSTOMERS

     During the fiscal year ended March 31,  2003,  the Company did not have any
customers  which accounted for more than 10% of the Company's  consolidated  net
earned  administrative  fees. In 2003,  2002 and 2001 net earned  administrative
fees from a  significant  customer  were $2.7  million,  $4.2  million  and $4.5
million, respectively, which accounted for 7%, 11% and 9% of the Company's total
net earned administrative fees, respectively.  In 2003, 2002 and 2001 net earned
administrative  fees from  another  significant  customer  were $0, $0 and $12.0
million, respectively, which accounted for 0%, 0% and 25% of the Company's total
net earned administrative fees, respectively. Because Warrantech could not reach
an agreement with this customer to extend its agreement on terms which would not
erode the  profitability  of the  program,  the program  expired on February 26,
2001.


                                       5
<PAGE>

COMPETITION

     Warrantech  competes  with  a  number  of  independent  administrators  and
divisions of distributors and manufacturers,  as well as financial  institutions
and  insurance  companies.  The Company is not one of the largest  marketers and
administrator of service contracts and limited warranties,  and some competitors
may have greater operating  experience,  more employees and/or greater financial
resources.  Further,  many  manufacturers,  particularly  those  producing motor
vehicles,  market and  administer  their own service  contract  programs for and
through  their  dealers.  However,  the  Company  believes  that it  occupies  a
preeminent position among competitors in its field.

CONTRACT OBLIGORS

     There  is,  under  each  service  contract,  a party  which  is  ultimately
responsible  as obligor, for the payment for repairs if the insurance company is
unable  to.  At  times, in the past, the Company and its dealers was the obligor
under  some  of the agreements. Since April 1, 2000, Butler, a company unrelated
to Warrantech, serves as the obligor under all service contracts administered by
the  Company,  in  exchange  for  a  fee  payable  by  the  dealers.

     In addition, Butler has agreed to assume the obligation under agreements as
to which the Company and its obligors were formerly the obligor. Whether Butler,
the Company, or its dealers is or was the obligor, insurance is secured for each
agreement with a reputable  insurer which, in exchange for a premium,  agrees to
underwrite the cost of any claims.  Thus, if the insurer honors its obligations,
it will pay all  claims  and  neither  the  Company  nor  Butler  will  have any
responsibility  to make any payments.  If, however,  the insurer fails to make a
payment, the ultimate obligor will be responsible to do so. The insurance policy
indemnifies the  dealer/clients  against losses  resulting from service contract
claims and protects the consumers by ensuring their claims will be paid.

     Some of the  service  contracts  under  which  Butler is the  obligor  were
insured  by  Reliance,  and the  liquidation  of  Reliance  has  eliminated  the
insurance  coverage  to  Butler  under  those  contracts.  Funding  to Butler is
provided  by a  special  surcharge,  which is  payable  on all  vehicle  service
contracts  administered  by the  Company  sold  after  November  19,  2001.  The
surcharge will be paid by dealer/agents through which  Reliance-insured  service
contracts  were sold.  Butler will use these funds to pay the claims  previously
insured by Reliance and to repay its loans from Warrantech.

     Additionally,  in  order to  assist  Butler  in  addressing  its  potential
obligations under the service contracts previously insured by Reliance for which
Butler is, or the dealer, or Warrantech was, the obligor,  Warrantech Automotive
has made loans to Butler,  as  necessary,  for claims  obligations  in excess of
Butler's fee revenues. Subject to the terms of the agreement between the Company
and Butler, the Company has and will make further loans to Butler, as necessary,
for claims  obligations in excess of Butler's fee revenues.  All of Warrantech's
loans to Butler  bear  interest  at the rate of prime plus 2% per annum and will
begin to be paid down once Butler's fee revenues exceed the claims obligations.

INSURANCE COVERAGE

     Liability for performance  under the terms of service contracts and limited
warranties  administered  by  Warrantech  is assumed by an insurance  company in
return for agreed  upon  premiums.  This  coverage  provides  the  Company  with
indemnification  against loss  resulting from service  contract  claims and also
protects the consumers by ensuring that their claims will be paid.

     Currently, GAIC primarily insures Warrantech Automotive's VSC programs. The
Company also has an agreement  with Heritage  which is reinsured by one of North
America's largest reinsurance companies on reinsurance programs offered to large
automobile  dealerships.  Previously,  a portion of the  Warrantech VSC programs
were insured by either Reliance,  the New Hampshire  Insurance  Company or other
American  International  Group,  Inc.  ("AIG") member  companies (see "Item 7. -
Management's  Discussion  and  Analysis -  Significant  Insurer in  Liquidation"
below).

                                       6
<PAGE>

     GAIC also insures service contracts issued by Warrantech  Consumer Products
after February 12, 2000.  Insurance for service  contracts issued between August
1, 1997 and February 12, 2000 is provided by CIGNA Insurance Company.

     The current  insurance  protection is provided by highly rated  independent
insurance companies. As noted above, in the United States and Canada,  providers
include GAIC which is rated A -  (Excellent)  and Heritage  and  reinsurance  is
provided by one of the largest reinsurance companies in North America,  which is
an A rated  carrier.  Other  programs have been or are currently  insured by New
Hampshire Insurance Company,  other AIG member companies and Tokio Marine & Fire
Insurance  Company  each of which is rated A++  (Superior)  and CIGNA  Insurance
Company  owned  by  (ACE)  which  is  rated  A -  (Excellent).  Internationally,
insurance  protection is provided by Cruz del Sur in Chile, La Positiva in Peru,
and Universal  Insurance Company in Puerto Rico, which is rated A - (Excellent).
All ratings for the United States,  Canada and Puerto Rico are made by A.M. Best
Company.

     For each service contract or limited  warranty sold, a contractually  fixed
amount  is  remitted by the retailer/dealer to Warrantech and premium portion is
passed  on  to  the  insurance  company.  The amount is based upon the insurance
company's  actuarial  analysis  of claims data collected and maintained for each
type  of  coverage  and  contract  term. Neither the customer nor the Company is
obligated  to  the insurer if claims under a policy exceed the premiums remitted
for  it.

     Additionally,  agreements  between the Company and the insurers may contain
profit-sharing features that permit the Company to share in underwriting profits
earned by the service contract programs. The amounts to be received, if any, are
determined in accordance with certain specified  formulae by the type of program
and by policy year. Certain of these agreements require interim calculations and
distributions  for  various  programs,  with  final  calculations  being made as
contracts  expire by term.  The  Company  recognized  $71,784 in profit  sharing
through its  International  segment in the fiscal year ended March 31, 2003.  No
profit sharing was recognized for the fiscal years ended March 31, 2002 or 2001.

FEDERAL AND STATE REGULATION

     The service contract and limited warranty  programs  developed and marketed
by the  Company's  subsidiaries  and their related  operations  are regulated by
federal law and the  statutes  of a  significant  number of states.  The Company
continually  reviews all  existing  and proposed  statutes  and  regulations  to
ascertain  their  applicability  to its existing  operations,  as well as to new
programs that the Company is developing.

     Generally,  these statutes apply to the scope of service contract  coverage
and  content of the  service  contract or limited  warranty  document.  Statutes
typically  require that specific wording expressly stating the consumer's rights
in  the  event  of a  claim,  how  the  service  contract  may be  canceled  and
identification   of  the  insurance   company  that   indemnifies  the  dealers,
distributors or  manufacturers  against loss for performance  under the terms of
the service contract.

     Insurance  departments in some states have sought to interpret the consumer
product service contract, or certain items covered under the contract, as a form
of  insurance  requiring  that  the  issuer  be a duly  licensed  and  chartered
insurance  company.  The  Company  does  not  believe  that  it or  any  of  its
subsidiaries  is an insurer and has no  intention  of filing the  documents  and
meeting  the capital and surplus  requirements  that are  necessary  to obtain a
license as an insurance company.


                                       7
<PAGE>

     There are instances where the  applicability of statutes and regulations to
programs  marketed and  administered  by the Company and  compliance  therewith,
involve  issues of  interpretation.  The Company uses its best efforts to comply
with  applicable  statutes  and  regulations  but  it  cannot  assure  that  its
interpretations,  if challenged,  would be upheld by a court or regulatory body.
In any  situation  in which the  Company  has been  specifically  notified  by a
regulatory  body that its methods of doing business were not in compliance  with
state regulations, the Company has taken the steps necessary to comply.

     If the Company's  right to operate in a state is  challenged  successfully,
the Company may be required to cease  operations  there and the state might also
impose  financial  sanctions  against the Company.  These  actions,  should they
occur, could have an adverse consequence on the Company's  operations.  However,
within the framework of currently known  statutes,  the Company does not believe
that this is a present concern.

     The Company has begun a reorganization  of its subsidiaries  structure,  in
order to reduce its state  franchise tax  obligation,  involving the transfer of
some  of  the  Company's   operations   from   corporate   entities  to  limited
partnerships.  The only effect of this  reorganization  should be a reduction of
the Company's franchise tax obligation.

INTELLECTUAL PROPERTY

     The Company holds numerous  registered United States  trademarks,  the most
important of which are the "Warrantech" and its stylized "W" logo service marks.
Additional  service marks are registered  covering  subsidiary names and product
names and descriptions,  such as "Repairmaster(R),"  "RepairGuard(R),"  "Xchange
Card(R)"  and  "VSCOnline(R)."  The  Company  has kept,  and intends to keep the
registration for all service marks current.

     The Company developed proprietary software that consists of custom designed
relational databases with interactive capabilities.  Essential to the success of
Warrantech  Automotive  and  Warrantech  Consumer  Products is their  ability to
capture,  maintain,  track and analyze all relevant data regarding the contracts
they administer.  Development  costs  associated with this proprietary  software
have been  capitalized  and are being amortized over the expected useful life of
the software.

EMPLOYEES

     As of March 31, 2003 the Company and its subsidiaries had approximately 372
employees,  a decrease of approximately nine employees from the preceding fiscal
year. As of May 30, 2003, the Company had approximately  382 employees.  None of
the Company's employees are covered by a collective  bargaining  agreement.  The
Company considers its relations with its employees to be good.


                                       8
<PAGE>



ITEM 2.      PROPERTIES

     The  Company's  executive  office is  located  at 121  Airport  Centre  II,
Bedford, Texas. The premises, consisting of approximately 56,696 square feet, is
leased pursuant to a lease agreement  expiring February 28, 2012, which provides
for an annual base rent of $1  million.  These  premises  also  accommodate  the
Company's  Automotive,  Consumer  Products,  International  and Direct Marketing
operations.

         Additionally,  the  Company  leases  48,053  square  feet at 1441  West
Airport Freeway,  Euless, Texas for a base rent of $570,185.  This lease expires
March 31, 2004. The Company's lease for an additional  29,531 square feet at 150
Westpark Way,  Euless,  Texas expires July 31, 2003. Base rent for the remaining
term of the lease is $143,598.

     Warrantech  International's  Puerto Rico  operations  are located in leased
premises at 1225 Ponce de Leon Avenue, Santurce, Puerto Rico pursuant to a lease
that expired March 31, 2003 and continues on a monthly basis. The lease provides
for annual base rent of $54,928 for 3,433 square feet.

     Warrantech  International's Chile operations are located in leased premises
at Avenida 11 de  Septembre  No. 1881  Officia No. 1619  Providencia,  Santiago,
Chile.  This  office  supports  the  operations  in  Chile,  and  is  Warrantech
International's  flagship  operation to pursue and help  implement the Company's
international  expansion strategies throughout South America. The lease provides
for annaul base rent payments of $54,000 for 145 square meters.

     Warrantech  International's  Peru operations are located in leased premises
at Avenida  Paseo de la Republica  #3691  Officina No 501 San Isidro Peru.  This
office  supports the operations in Peru. The lease provides for annual base rent
payments of $4,920.


ITEM 3.      LEGAL PROCEEDINGS

     Information  regarding  legal  proceedings  is set  forth in Note 13 in the
Notes to Consolidated  Financial Statements set forth in `Item 8. - Consolidated
Financial Statements and Supplementary Data" under the subheading  "Litigation,"
which is hereby incorporated by reference.

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of the Company's Stockholders,  through
the  solicitation  of proxies  or  otherwise,  during the fourth  quarter of the
Company's fiscal year ended March 31, 2003.


                                       9
<PAGE>



                                     PART II

ITEM 5.   MARKET FOR WARRANTECH'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     The Company's common stock,  $.007 par value per share (the "Common Stock")
trades  under the symbol  "WTEC."  Trades are  reported on the  Over-The-Counter
("OTC") electronic  quotation service of the National  Association of Securities
Dealers Market Makers.

     As of May 30, 2003,  there were  15,280,634  shares of  outstanding  Common
Stock and  approximately  883 stockholders of record.  On that date, the closing
bid price for the Common Stock, as reported on the OTC was $1.35.

     Following  is a summary of the price range of the  Company's  Common  Stock
during fiscal years 2003 and 2002:

<TABLE>
<CAPTION>
                                                   FISCAL 2003                 FISCAL 2002
                                                   -----------                ------------
                QUARTER                        HIGH & LOW BID             HIGH & LOW BID
                -------                        ---------------            --------------
<S>                                         <C>           <C>            <C>           <C>
           First                            $ 0.77        $   0.42       $ 0.89        $   0.50
           Second                           $ 1.29        $   0.59       $ 0.69        $   0.32
           Third                            $ 1.65        $   0.75       $ 0.91        $   0.32
           Fourth                           $ 1.50        $   1.05       $ 0.85        $   0.57
</TABLE>

     No cash dividends have been paid to holders of Common Stock since inception
of the Company. The Company anticipates that, earnings, if any, will be retained
for  use  in  the  business  or  for  other  corporate  purposes  and  it is not
anticipated that cash dividends will be paid in the foreseeable future.

ITEM 6.  SELECTED FINANCIAL DATA

     The  Selected  Financial  Data  should  be read  in  conjunction  with  the
consolidated  financial  statements  and  related  notes as of and for the years
ended March 31,  2003,  2002 and 2001.  The Selected  Financial  Data for fiscal
2002,  2001  and  2000  has  been  restated.  See  Note  3 to the  notes  to the
consolidated financial statements.

<TABLE>
<CAPTION>

                                                                        FOR THE YEARS ENDED MARCH 31,
                                             ------------------------------------------------------------------------------------
                                                  2003              2002             2001              2000             1999
                                             ----------------  ---------------  ----------------  ---------------   -------------
<S>                                              <C>              <C>               <C>              <C>             <C>
Net earned administrative fee                    $38,155,914      $38,000,275       $47,316,042      $47,648,109     $50,727,313
                                             ================  ===============  ================  ===============   =============
Profit (loss) from operations                     $3,027,476       $3,575,825           $78,590     ($7,545,959)    ($12,232,124)
                                             ================  ===============  ================  ===============   =============
Net income (loss)                                 $2,861,279       $2,694,682          $312,388     ($5,368,872)    ($7,639,725)
                                             ================  ===============  ================  ===============   =============
Basic earnings (loss) per common share                 $0.19            $0.18             $0.02          ($0.35)         ($0.51)
                                             ================  ===============  ================  ===============   =============
Diluted earnings (loss) per common share               $0.19            $0.18             $0.02          ($0.35)         ($0.51)
                                             ================  ===============  ================  ===============   =============
Cash dividend declared                            None              None             None              None             None
                                             ----------------  ---------------  ----------------  ---------------   -------------
Total assets                                     $74,856,128      $76,656,018       $96,456,522     $145,430,137    $186,910,270
                                             ================  ===============  ================  ===============   =============
Long-term debt and capital lease obligations      $1,218,670         $957,159        $1,209,853       $1,668,478      $2,420,967
                                             ================  ===============  ================  ===============   =============
Common stockholders' equity                       $9,534,616       $7,164,431        $4,700,719       $4,715,953     $10,400,002
                                             ================  ===============  ================  ===============   =============
</TABLE>


                                       10
<PAGE>



                     WARRANTECH CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

CAUTIONARY  STATEMENT  REGARDING RISKS AND UNCERTAINTIES  THAT MAY AFFECT FUTURE
RESULTS

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

         Although the Company  believes that the  expectations  reflected in the
forward-looking  statements  are  reasonable,  it can give no assurance that its
expectations  will prove to be correct.  These statements are subject to certain
risks,  uncertainties  and  assumptions,  including,  but not  limited  to,  (a)
prevailing  economic  conditions which may  significantly  deteriorate,  thereby
reducing the demand for the Company's products and services, (b) availability of
technical  support  personnel  or  increases  in the  rate of  turnover  of such
personnel,  resulting from 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, (e)
loss of business from, or significant  change in  relationships  with, any major
customer,  (f) the ability to  successfully  identify  and contract new business
opportunities, both domestically and internationally,  (g) the ability to secure
necessary  capital for general  operating or expansion  purposes,(h) the adverse
outcomes of litigation,(i)  the non-payment of notes due from an officer and two
directors  of the Company in 2007,  (j) the  inability  of any of the  insurance
companies which insure the service  contracts  marketed and  administered by the
Company to pay the claims  under the service  contracts,  (k) the  inability  of
Butler to pay the claims previously insured by Reliance,  (l) the termination of
extended credit terms being provided by the Company's current insurance company,
(m) the  inability  of the  Company to collect  the "Other  Receivables"  in the
amount of $8,612,678 by the end of the Company's fiscal year and (n) the outcome
of the review  currently  being  conducted  by the staff of the  Securities  and
Exchange  Commission ("SEC") of the Company's  financial  statements and related
disclosures.  Should  one or more of these or any other  risks or  uncertainties
materialize  or  develop  in a manner  adverse  to the  Company,  or should  the
Company's underlying assumptions prove incorrect,  actual results of operations,
cash flows or the Company's  financial  condition may vary materially from those
anticipated,  estimated  or  expected  and there could be a  materially  adverse
effect on the Company's business.

GENERAL

     Warrantech, through its wholly owned subsidiaries,  markets and administers
service contracts,  extended  warranties and replacement plans. 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

                                       11
<PAGE>

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 in three major business segments: Automotive, Consumer
Products and  International.  The  Automotive  segment  markets and  administers
extended  warranties on  automobiles,  light trucks,  motorcycles,  recreational
vehicles and automotive  components.  These  warranties are sold  principally by
franchised and independent automobile and motorcycle dealers, leasing companies,
repair  facilities,  retail stores,  financial  institutions and other specialty
marketers.  The Consumer  Products  segment  develops,  markets and  administers
extended warranties and product  replacement plans on home appliances,  consumer
electronics,  televisions,  computers, home office equipment and homes which are
sold principally by retailers,  distributors,  manufacturers,  utility companies
and financial  institutions.  Warrantech also markets these warranties and plans
directly  to the  ultimate  consumer  on  behalf  of  retailers/dealers  and for
manufacturing  programs  through  telemarketing  and direct mail campaigns.  The
International  segment  markets and  administers  outside the United  States and
Canada  predominately  the same  products  and  services  of the other  business
segments.  The International segment is currently operating in Central and South
America, Puerto Rico and the Caribbean.

     The Company's service contract programs benefit consumers by providing them
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.
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 and by providing  them with the  opportunity  for increased
revenue  and income  without  the costs and  responsibilities  of  operating  an
extended warranty program.

     The  service  contracts,  extended  warranties  and  replacement  contracts
generally  have terms ranging from three (3) to one hundred twenty (120) months.
Since the Company  acts solely as a third party  administrator  on behalf of the
dealer/clients and insurance  companies,  the actual repairs and/or replacements
required  under  the  agreements  are  performed  by  independent   third  party
authorized repair facilities or dealers.  There is, under each service contract,
a party who is ultimately  responsible,  as obligor,  for the payment of amounts
necessary to pay for repairs,  if the insurance  company is unable to. At times,
in the past,  the Company was the obligor  under some of the  agreements.  Since
April 1, 2000, Butler, a company unrelated to Warrantech,  serves as the obligor
under all service contracts  administered by the Company,  in exchange for a fee
payable by the dealers.

     In  addition,  Butler  has  agreed to assume  the  obligation  under  those
agreements  as to which the Company and its dealers  were  formerly the obligor.
Whether Butler, the Company, or its dealers is or was the obligor,  insurance is
secured for each agreement with a reputable  insurer,  which,  in exchange for a
premium,  agrees to  underwrite  the cost of any  claims.  Thus,  if the insurer
honors its  obligations,  it will pay all claims and  neither  the  Company  nor
Butler will have any  responsibility  to make any  payments.  If,  however,  the
insurer fails to make a payment,  the ultimate obligor will be responsible to do
so. The insurance policy indemnifies the dealer/clients against losses resulting
from service  contract  claims and protects  consumers by ensuring  their claims
will be paid.

     Some of the  service  contracts  under  which  Butler is the  obligor  were
insured  by  Reliance,  and the  liquidation  of  Reliance  has  eliminated  the
insurance coverage to Butler under those contracts.


                                       12
<PAGE>

     Funding to Butler will be provided by a special  surcharge,  payable on all
vehicle  service  contracts  administered by the Company sold after November 19,
2001. The surcharge will be paid by dealer/agents through which Reliance insured
service  contracts  were  sold.  Butler  will use these  funds to pay the claims
previously insured by Reliance and to repay Butler's loans from Warrantech.

     Additionally,  in  order to  assist  Butler  in  addressing  its  potential
obligations under the service contracts previously insured by Reliance for which
Butler or the dealer is or Warrantech was the obligor, Warrantech Automotive has
made loans to Butler, as necessary,  for claim obligations in excess of Butler's
fee  revenues.  Subject to the terms of the  agreement  between  the Company and
Butler,  the Company will make further loans to Butler,  as required,  for claim
obligations  in excess of Butler's fee revenues.  All of  Warrantech's  loans to
Butler bear interest at the rate of prime plus 2% per annum and will begin to be
paid down once Butler's fee revenues exceed the claims obligations.

         Revenue  for   administrative   obligor   contracts  is  recognized  in
accordance with, Staff Accounting  Bulletin 101 ("SAB 101").  Under SAB 101, the
Company  recognizes  revenue  when the revenue is  realizable  and  earned.  The
Company  considers  revenue  realized  and earned when a  definitively  discrete
earnings event has occurred. The Company, primarily, has two discrete events (1)
for  marketing  and  administration  of service  contracts and (2) for servicing
fees.  The  marketing  and  administrative  fee is paid by the  retailer  of the
service  contract.  This  revenue is  recognized  at the time of the sale by the
retailer,  as the Company will have substantially  completed the services it has
agreed to  provide  the  retailer  in  connection  with the sale of the  service
contract to the consumer.  The second  discrete  earnings  event occurs over the
life of the contract as claims  administrative  obligations are being satisfied.
As such, Warrrantech recognizes and realizes the revenue over the contract life.

RESULTS OF OPERATIONS

     The  following   information   should  be  read  in  conjunction  with  the
information  contained in the  Consolidated  Financial  Statements and the Notes
thereto included in "Item 8 - Financial  Statements and  Supplementary  Data" of
this Annual Report.

SEC REVIEW OF THE COMPANY'S FILINGS

     The  Staff of the  Division  of  Corporation  Finance  of the SEC  recently
selected the Company's  periodic reports for review. The reports reviewed by the
SEC staff  included  the Annual  Report on Form 10-K for the  fiscal  year ended
March 31, 2002 and the Quarterly Reports on Form 10-Q for the periods ended June
30, 2002,  September 30, 2002 and December 31, 2002.  The SEC staff informed the
Company  that  the  purpose  of the  review  is to  assist  the  Company  in its
compliance with applicable  disclosure  requirements  and to enhance the overall
disclosure in the Company's reports.  In the course of its review, the SEC staff
requested clarification of certain of the Company's disclosures and items in its
financial  statements.  As a result  of the  communications  with the SEC  staff
during its review,  the Company agreed to amend certain of its  disclosures on a
going-forward basis and these disclosures are reflected in this Annual Report on
Form 10-K.  Additionally,  the Company agreed to amend its Annual Report on Form
10-K for the  period  ended  March 31,  2002.  The  Company  intends to file the
amended  Annual  Report on Form 10-K  after the SEC  staff's  review  process is
completed.  The SEC staff's most recent set of  questions,  to which the Company
has responded,  pertained primarily to the Company's accounting treatment of the
obligations  assumed by Butler under the service  contracts  administered by the
Company  and related  financial  disclosures.  The  Company is awaiting  further
comments from the SEC staff on the Company's response.


                                       13
<PAGE>


                                 GROSS REVENUES

                                  FOR THE YEARS ENDED MARCH 31,
                    ----------------------------------------------------------
                          2003                 2002                2001
                    ------------------   -----------------   -----------------
Gross revenues          $150,344,194        $121,118,698        $135,859,446
                        =============       =============       =============


     Gross revenues for the year ended March 31, 2003  increased  $29,225,496 or
24% over 2002. The  Automotive and  International  segments  reported  increased
gross  revenues of 38%, and 21%  respectively,  in the year ended March 31, 2003
over 2002, while the Consumer  Products segment reported a slight 4% decrease in
gross revenues  during the same period.  Gross revenues for the year ended March
31, 2002  decreased  $14,740,748  or 11% from the year ended March 31, 2001. The
Automotive  segment reported  increased gross revenues of 14%, in the year ended
March 31, 2002 compared to 2001, while the Consumer  Products and  International
segments  reported  decreased gross revenues of 43% and 14%,  respectively.  The
loss  of  the  Staples   contract,   which  represented  10%  of  the  Company's
consolidated  gross  revenues and 23% of the  Consumer  Products  segment  gross
revenues  during fiscal year 2001, had an adverse impact on both the Company and
its Consumer Products segment's during the year ended March 31, 2002 and 2001.



<TABLE>
<CAPTION>
                         NET EARNED ADMINISTRATIVE FEES

                                                     FOR THE YEARS ENDED MARCH 31,
                                       ----------------------------------------------------------
                                             2003                 2002                2001
                                       ------------------   -----------------   -----------------
<S>                                           <C>                 <C>                 <C>
Automotive segment                           $18,517,389         $19,346,137         $15,989,590
Consumer Products segment                     13,765,514          16,711,092          29,872,227
International segment                          3,181,849           2,353,491           1,815,700
Other                                          2,691,162           (410,445)           (361,475)
                                       ------------------   -----------------   -----------------
   Total earned administrative fee           $38,155,914         $38,000,275         $47,316,042
                                       ==================   =================   =================
</TABLE>

     Net earned  administrative  fees are gross revenues less directs costs, the
combined sum of net  premiums,  commissions  and sales  allowances  and deferred
revenue.  Net  earned  administrative  fees for the year  ended  March 31,  2003
increased  $155,639 or less than 1% over 2002. A 38% increase in the  Automotive
segment  gross  revenue more than offset lower net deferred  revenues from prior
periods recognized in fiscal year ended March 31, 2003 versus the same period in
fiscal  2002.  As the  Company's  older  obligor  contracts,  which  make up the
majority of its deferred  revenue,  continue to decline,  there is less deferred
revenue to record in the current period. Net earned  administrative fees for the
year ended March 31, 2002  decreased  $9,315,767  or 20%  compared to 2001.  The
change was  primarily  due to the loss of Staples as a customer in February 2001
and  decreased  net deferred  revenue from prior  periods  recognized  this year
versus last year.  Excluding  the loss of Staples,  the Company  experienced  an
appreciable increase in net earned administrative fees from its existing and new
dealers.

     The Automotive segment net earned administrative fees decreased $828,748 or
4% during the fiscal year ended March 31, 2003 compared to 2002.  The Automotive
segment reflected a 50% increase in the number of contracts sold,  generating an
increase of $1,050,751 in net earned administrative fees from its customers. The
increased gross revenue was partially  offset by higher premium cost,  lower net

                                       14
<PAGE>

margin for  contracts  sold and lower net deferred  revenues  from prior periods
recognized  in the year ended March 31, 2003 versus 2002.  During the year ended
March 31, 2003,  the  Automotive  segment  recorded  $3,647,123  in net deferred
revenue compared to $5,526,623 in 2002, a decrease of $1,879,500. The Automotive
segment's net earned  administrative  fees  increased  $3,356,547 or 21% for the
fiscal year end March 31, 2002 compared to 2001, primarily resulting from higher
sales  volumes  from new  customers  and a  $1,386,853  increase in net deferred
revenue  from prior  periods  recognized  in 2002.  The increase in net deferred
revenue from prior periods increased due to a reduction associated from deferred
direct premium costs on administrative obligor contracts.

     The Consumer  Products  segment net earned  administrative  fees  decreased
$2,945,578  or 18% during the fiscal year ended March 31, 2003 compared to 2002.
The change was primarily attributed to lower net earned  administrative fees due
to higher  variable  costs  associated  with a major  customer  and premium fees
associated with the products sold to the customer, which cut into the net earned
administrative   fee  margin.   The   Consumer   Products   segment  net  earned
administrative  fees decreased  $13,161,135 or 44% during 2002 compared to 2001.
The change was primarily  attributable to decreased sales volumes related to the
loss of Staples as a customer  and a decrease  in  deferred  revenue  from prior
periods  recognized  in 2002  versus  2001 of  $5,698,128.  The  decrease in net
deferred revenue from prior periods decreased due to higher associated  deferred
direct premium costs on administrative obligor contracts.

     The International segment net earned administrative fees increased $828,358
or 35% during 2003 compared to 2002.  Increased market penetration from existing
customers in South  America and Puerto Rico offset the loss of a large  customer
in Chile. The  International  segment net earned  administrative  fees increased
$537,791 or 30% for the fiscal year ended March 31, 2002  compared to 2001.  The
South American market  contributed higher volumes from new customers in Peru and
Chile and increased market penetration from existing customers in Chile.

                                      SG&A

<TABLE>
<CAPTION>
                                                                 FOR THE YEARS ENDED MARCH 31,
                                                   ----------------------------------------------------------
                                                         2003                 2002                2001
                                                   ------------------   -----------------   -----------------
<S>                                                      <C>                 <C>                <C>
Legal settlement                                                   -          ($824,332)                   -
Service, selling and general administrative              $31,092,940         $30,768,340        $ 39,775,539
</TABLE>

     Service, selling and general and administrative ("SG&A") for 2003 increased
$1,148,932 or 4% compared to 2002,  including an $824,332  legal  settlement the
Company received in 2002. Legal expenses increased $1,656,377 for the year ended
March 31, 2003 compared to 2002, primarily due to litigation expenses related to
several  lawsuits that were settled during fiscal year 2003 which were offset by
lower employee costs and telephone  costs during 2003.  Reflecting the Company's
continued  cost  containment  measures,  employee costs were down $632,413 or 3%
from  $18,589,220  in the  year  ended  March  31,  2002 to  $17,956,807,  while
telephone  expenses  were reduced 39% or $951,446  from  $2,418,892  in the year
ended March 31, 2002 as compared to $1,467,446 in the year ended March 31, 2003.
Rent  expense  increased  from  $1,389,764  for the year ended March 31, 2002 to
$1,837,314  for the year ended March 31, 2003,  reflecting the Company's move to
its new corporate headquarters in Bedford, Texas.

     SG&A  expenses for 2002,  including the legal  settlement,  were reduced by
$9,831,531  or 25%  compared  to 2001.  The  decrease  reflected  the  Company's
improved call center technologies,  cost containment measures and the closing of
the United Kingdom operations.  Total employee and payroll related expenses were
down $3,767,040 or 17% from $22,356,260 for the fiscal year ended March 31, 2001

                                       15
<PAGE>

to  $18,589,220  for the fiscal year ended  March 31,  2002.  Additionally,  the
decrease in SG&A  expenses  reflected  the  reimbursement  by AIG of $824,332 in
August  2001 for legal fees  associated  with its lawsuit  against the  Company.
Outside  services,  including  consulting and legal fees were down $3,639,514 or
56% from $6,479,217 in the fiscal year ended March 31, 2001 to $2,839,703 in the
fiscal year ended March 31, 2002, primarily due to the settlement with AIG and a
reduction in computer system development. Rent expense for the fiscal year ended
March 31, 2002 decreased $1,013,725 from the same period last year, primarily as
result of the Company's  relocation of its headquarters to Texas and to a lesser
degree, the closing of the United Kingdom offices.

                          LOSS ON ABANDONMENT OF ASSETS

     Effective  September 30, 2000, the Company ceased  operations in the United
Kingdom  as a result  of  unprofitable  operations  and  recorded  a loss on its
operations.  Loss on  abandonment  of assets was  $1,029,731 for the fiscal year
ended March 31, 2001.

<TABLE>
<CAPTION>
                          DEPRECIATION AND AMORTIZATION

                                                                 FOR THE YEARS ENDED MARCH 31,
                                                   ----------------------------------------------------------
                                                         2003                 2002                2001
                                                   ------------------   -----------------   -----------------

<S>                                                       <C>                <C>                 <C>
   Depreciation and amortization                          $3,885,054         $4,480,442          $6,417,115
                                                          ==========         ===========         ===========
</TABLE>

     Depreciation  and  amortization  expenses  were  reduced by $595,388 or 13%
during 2003 compared to 2002. The decrease in depreciation  and  amortization is
the result of the Company's  assets maturing and continued  reduction of capital
expenditures for the past few years. Depreciation and amortization expenses were
reduced by  $1,936,673  or 30% during 2002  compared to 2001.  The  decrease was
partially  the  result of the early  adoption  of SFAS 142,  which  allowed  the
Company to elect not to amortize its remaining  goodwill and the maturing of the
Company's net property and equipment.  Amortization  of $919,466 in goodwill was
charged  to  operations  in 2001 with no  amortization  in  subsequent  periods.
Additionally,  depreciation was lower in during 2002 versus 2001, as a result of
closing its United Kingdom operations.

<TABLE>
<CAPTION>
                                  OTHER INCOME

                                                                 FOR THE YEARS ENDED MARCH 31,
                                                   ----------------------------------------------------------
                                                         2003                 2002                2001
                                                   ------------------   -----------------   -----------------

<S>                                                         <C>                 <C>               <C>
Interest and dividend income                                $933,944            $855,877          $1,292,335
Interest expense                                           (275,185)           (217,072)           (234,102)
Gain (loss) on sale of assets                               (70,463)            (45,018)            (23,258)
Credit card usage rebate                                     453,760             147,735                   -

Miscellaneous income                                          18,790             115,944            (12,463)

      Total other income                                  $1,060,846            $857,466          $1,022,512
                                                   ==================   =================   =================
</TABLE>

     Other income for 2003 increased $203,381 or 24% compared to 2002, primarily
due to an increase in the amount of rebates the Company  received  from a credit
card company. Other income decreased $165,046 or 16% during 2002, primarily as a
result of lower interest and dividend income as the Company decreased its amount
of investments in marketable securities during 2002 from 2001.

                                       16
<PAGE>


<TABLE>
<CAPTION>
                               INCOME TAX EXPENSE

                                                                 FOR THE YEARS ENDED MARCH 31,
                                                   ----------------------------------------------------------
                                                         2003                 2002                2001
                                                   ------------------   -----------------   -----------------
<S>                                                       <C>                <C>                  <C>
Income taxes expense                                      $1,227,043         $1,738,609           $788,714
                                                   ==================   =================   =================

</TABLE>

     The net deferred tax asset as of March 31, 2003,  2002 and 2001  contains a
benefit of $205,470,  $594,599 and  $280,625,  respectively,  related to foreign
losses.  Management expects to realize a portion of this tax benefit,  which has
an indefinite  carry-forward period,  against future foreign income.  Management
has reserved the amount of this benefit, which it presently believes is not more
likely than not to be realized.

<TABLE>
<CAPTION>
                              COMPREHENSIVE INCOME
                                                                            FOR THE YEARS ENDED MARCH 31,
                                                               ---------------------------------------------------------
                                                                    2003                 2002                2001
                                                               ----------------   -------------------  -----------------
<S>                                                                 <C>                   <C>                  <C>
Net income                                                          $2,861,279            $2,694,682           $312,388
Other Comprehensive Income, net of tax
   Unrealized gain (loss) on investments                                13,713               (8,936)             30,001
   Foreign currency translation adjustments                          (158,719)              (11,143)             82,182
                                                               ----------------   -------------------  -----------------
Comprehensive Income                                                $2,716,273            $2,674,604           $424,571
                                                               ================   ===================  =================

Net income per share                                                     $0.19                 $0.18              $0.02
                                                               ================   ===================  =================
Comprehensive income per share:                                          $0.19                 $0.18              $0.02
                                                               ================   ===================  =================
</TABLE>

     Losses from foreign  currency  translation  adjustments  for the year ended
March 31, 2003  increased  $147,576  compared to 2002 primarily due increased to
Peru and Chile foreign currency translation losses. Losses from foreign currency
translation  adjustments  for the year  ended  March  31,  2002 were $ 11,143 as
compared to a gain of $93,325 in 2001  primarily due to increased Peru and Chile
foreign currency translation losses.

INSURER IN LIQUIDATION

     During  the  second  fiscal  quarter of 2002,  the  Pennsylvania  Insurance
Commissioner  informed the Company that Reliance  would be liquidated  and cease
making payments on claims. The Pennsylvania  Insurance  Commissioner  determined
that  Reliance was not likely to be able to satisfy all of the claims that would
be submitted to it due to the  circumstances  arising out of the  September  11,
2001  terrorist  attacks  on  the  World  Trade  Center.   Reliance   underwrote
approximately  48% of  the  automotive  service  contracts  that  were  sold  by
Warrantech  Automotive  during  approximately  one and one-half  years ending in
November 2001.  Approximately  52% of the automotive  service  contracts sold by
Warrantech  Automotive  during  that  period are not  affected  by the  Reliance
liquidation.  Service  contracts  sold  before  and after  that  period  are not
affected because they are underwritten by other insurance companies.

     Warrantech Automotive was the obligor, as well as the administrator,  under
some of the vehicle  service  contracts  that were insured by  Reliance.  As the
obligor,  Warrantech  Automotive  would ultimately be responsible for paying for
the repairs under these  service  contracts.  Prior to  Reliance's  liquidation,
Reliance  covered  the cost of the  repairs  under  the  insurance  policies  it
provided.  Because of the  liquidation of Reliance,  insurance  coverage for the
Company's obligations under those service contracts was no longer available.  If
Warrantech  Automotive  were to be required to begin  paying  claims under these
contracts,  there could be a material adverse impact on the Company's  liquidity
and earnings.  Presently,  management does not believe that it will have to make
any payments under these contracts.  The Company, one of its insurers and Butler
took steps,  described  below, to arrange for coverage of the cost of the claims
which were previously covered by Reliance (see "Agreements" below).


                                       17
<PAGE>

     Additionally,  the Company is  attempting  to  ascertain if any recovery is
available from the  Pennsylvania  Insurance  Department  Insurance Funds and any
other state guaranty funds or if any Federal subsidies to the insurance industry
in general or Reliance  specifically,  will be made available as a result of the
terrorist  attacks to pay vehicle service contract claims. If such subsidies are
available, it could take years before recovery, if any, is obtained.

     The Company is aware that  significant  financial  pressures were placed on
insurance  companies,  due to the terrorist attacks on the World Trade Center on
September  11,  2001;  however,  the  Company is not aware  that Great  American
Insurance Company, which insures most of the obligations under the other service
contracts marketed and administered by the Company,  is under any such financial
pressures.  If for any reason,  an insurance company is not able to cover claims
under the service contracts  marketed and administered by the Company due to its
financial insolvency or other reasons,  there could be a material adverse effect
on the Company's future business.


AGREEMENTS

     Butler  serves  as  the  ultimate  obligor  under  all  service   contracts
administered by the Company in exchange for a fee. Some of the service contracts
under which Butler is the obligor were insured by Reliance,  and the liquidation
of Reliance has eliminated this insurance coverage.

     In order to assist Butler in addressing its potential obligations under the
service  contracts  previously  insured  by  Reliance  for  which  Butler  is or
Warrantech  was the obligor,  Warrantech  Automotive  made an initial $1 million
loan to Butler and  further  loans  through  March 31, 2003 of  $13,009,059.  On
October 9, 2002,  the Company  executed an agreement with GAIC that will provide
it  with  extended  payment  terms  and  a $3  million  line  of  credit  ("GAIC
Agreement").  Warrantech is currently  discussing with Reliance Warranty Company
("RWC") the  possibility  of obtaining  the RWC proceeds  (as  discussed  below)
directly from RWC without the  participation  of GAIC.  Under that  arrangement,
GAIC would not assume the  claims  obligations  of RWC and would not  receive an
assumption  fee. All of the Company's  obligations  to GAIC pursuant to the GAIC
Agreement are secured by all of the Company's accounts receivable.

     The funds being loaned by the Company to Butler cover Butler's  obligations
to pay claims under service contracts  insured by Reliance.  As explained above,
Reliance  is in  liquidation.  RWC, an  affiliate  of  Reliance,  that is not in
liquidation, is currently holding premiums paid by Warrantech on certain service
contracts  that  had  been  insured  by  Reliance  and  its  affiliates.  Of the
$14,009,059  that  Warrantech  has  loaned  to  Butler  as of  March  31,  2003,
approximately  $8,612,678,  represents  the  payment  of  claims  under  service
contracts covered by the insurance  premiums being held by RWC, and the balance,
totaling  $5,396,381  represents  the payment on claims under service  contracts
covered by  insurance  premiums  that were  retained  by  Reliance  and that are
expected to be repaid from the surcharge been paid by the dealers.

     At the request of Warrantech as set forth in the GAIC Agreement,  providing
for the extended credit terms to the Company,  GAIC began  negotiating  with the
representatives of RWC to arrange for GAIC's assumption of the obligation to pay
the claims under the service  contracts which were covered by the premiums being
held by RWC in  exchange  for the  release of the RWC funds to GAIC.  GAIC would
then reimburse  Warrantech for any monies loaned to Butler to cover claims under
the service contracts covered by the RWC funds and GAIC would thereafter pay all
claims  pertaining to such service  contracts.  GAIC's  willingness to undertake
these new obligations was premised on payment of a fee from the premiums held by
RWC and the receipt of a full indemnity  from  Warrantech.  As the  negotiations
progressed over time, however, GAIC added certain conditions to the consummation
of the obligation  assumption.  In light of GAIC's request for these  additional
conditions  Warrantech approached RWC about the possibility of obtaining the RWC
proceeds  directly  from RWC  without  the  participation  of GAIC.  Under  this
proposed  arrangement,  GAIC would not assume the claims  obligations of RWC and

                                       18
<PAGE>

therefore,  would  receive  no  fee  for  its  services.   Management  currently
anticipates that the negotiations concerning the RWC proceeds will be concluded,
either  with GAIC and RWC or with RWC  directly  at which time the RWC  proceeds
will be released by the third quarter of fiscal 2004.

     At the years ended March 31, 2003 and 2002,  Warrantech  had loaned  Butler
$14,009,059 and $5,435,646, respectively. RWC, which is not part of the Reliance
liquidation, is obligated to pay Butler $8,612,678 and $2,754,691, respectively,
of that amount.  The Company  expects Butler to collect the $8,612,678  from RWC
during the third  quarter of fiscal 2004 and  simultaneously  the  Company  will
collect  this  amount  from  Butler.  The  receivable  is  reflected  as  "Other
Receivables" on the Consolidated Balance Sheet set forth in "Item 8. - Financial
Statements and Supplementary  Data." The remaining amount representing the loans
due from Butler of $5,396,381  and  $2,680,955,  at fiscal years ended March 31,
2003 and  2002,  respectively,  are  classified  as  "Notes  Receivable"  on the
Consolidated  Balance Sheet.  The Company  anticipates  the cumulative  notes to
Butler to increase by $2.6 million,  including interest,  during the next fiscal
year.

     Funding is provided by a special  surcharge  payable on all vehicle service
contracts  administered  by the  Company  sold  after  November  21,  2001.  The
surcharge is paid by agents through whom the Reliance insured service  contracts
were sold. Butler will use these funds to pay the claims  previously  insured by
Reliance to repay Butler's loans from Warrantech

     Additionally,  the Company will make further loans to Butler,  as required,
for claim  obligations in excess of Butler's fee revenues.  The note from Butler
bears  interest at the rate of prime plus 2% per annum and will begin to be paid
down once Butler's fee revenues exceed the claims payments.

     The following table sets forth the carrying  amounts and fair values of the
Company's notes receivable and other receivables at March 31, 2003.

<TABLE>
<CAPTION>
                             EXPECTED MATURITY DATE
                                 2004         2005         2006        2007      2008    THEREAFTER     TOTAL       FAIR VALUE
                                 ----         ----         ----        ----      ----    ----------     ------      ----------
<S>                              <C>           <C>          <C>         <C>       <C>        <C>         <C>           <C>
Note Receivable - Butler
  Equals 2% above prime                 -   $2,563,129   $2,833,252         -        -            -     $5,396,381   $5,396,381

Note Receivable - other         $  15,272            -            -          -        -            -        15,272       15,272

Loan Receivable - Butler ;
0%  interest                    8,612,678            -            -          -        -            -     8,612,678    8,612,678

Other Receivable - 0%
interest                        5,299,887            -            - -                 -            -     5,299,887    5,299,887

</TABLE>


                                       19
<PAGE>

The  following  table sets forth the  carrying  amounts  and fair  values of the
Company's notes receivable at March 31, 2002.

<TABLE>
<CAPTION>
                           EXPECTED MATURITY DATE
                             2003            2004         2005         2006       2007   THEREAFTER     TOTAL        FAIR VALUE
                             ----            ----         ----         ----       ----   ----------     ------       ----------
<S>                           <C>            <C>          <C>         <C>       <C>        <C>         <C>           <C>
Note Receivable -
Butler

  Equals 2% above
prime                                  -            -  $ 2,563,129     $ 117,826       -          -      $2,680,955   $2,680,955

Note Receivable -             $  137,684            -            -             -       -          -         137,684      137,684
other

Loan Receivable -              2,754,691            -            -             -       -          -       2,754,691    2,754,691
Butler; 0% interest

Other Receivable - 0%          2,149,667
interest                                            -            -             -       -          -       2,149,667    2,149,667

</TABLE>

     The Company will provide further loans to Butler if the claims  obligations
paid by Butler  exceed the fees it receives  from the dealers.  Warrantech  will
provide these loans from the  additional  terms and credit line provided by GAIC
and its cash flow from  operations.  These loans will be  reflected as long-term
obligations until the fees exceed the claims obligations.  The amount which will
be collected within one year will then be treated as a current asset.

     The Company believes that the  arrangements  with Butler and GAIC described
above provide a mechanism to cover the claims under all of the service contracts
in which the  Company,  Butler,  or its  dealers  were the obligor and will also
provide  Butler with funds  necessary  to repay its loan from the  Company.  If,
however,  Butler, for any reason,  becomes unable to pay any such claims,  which
were previously insured by Reliance,  or if GAIC ceases to provide credit to the
Company  in  order  to  fund  any  shortfalls  required  by  Butler,  Warrantech
Automotive may ultimately be required to honor the claims under those  contracts
in which  it was the  obligor.  The  total  amount  of the  Company's  potential
obligations  with  respect to such  claims is not known since it is subject to a
number of uncertainties.  However, it is unlikely that the Company would be able
to honor such claims without finding other sources of capital.  There is also no
assurance  that Butler  will have the funds to repay its loan from the  Company.
Management  believes  that  Butler  will be able to cover all of such claims and
repay all of the amounts  loaned by the Company to cover such claims  based upon
the  revenue  stream  from the  surcharge  paid and to be paid by the dealers to
Butler.  Consequently,  management  believes that the  possibility of Warrantech
having to pay such  claims is remote and that a valuation  allowance  or reserve
for collectability of the receivable due from Butler is not currently necessary.

     As part of the GAIC  agreement,  GAIC  received  options to  purchase up to
1,650,000 shares of Warrantech's  common stock at an exercise price of $2.00 per
share subject to certain  adjustments.  In the event that GAIC  exercises all of
these options,  it would own  approximately  10.8% of the Company's  outstanding
shares.

LIQUIDITY AND CAPITAL RESOURCES

         As of March 31, 2003,  total cash and  short-term  investments  totaled
$6,322,075,  a decrease of $1,666,026 or 21% from  $7,988,101 at March 31, 2002.
During the fiscal year ended March 31, 2003, the Company's  operations  provided
$9,558,420 of net cash compared to cash from  operations of $10,077,578  for the
fiscal  year  ended  March 31,  2002.  The  change in net cash from  operations,
relates to unfavorable  changes in its working capital from negative  $1,656,179
at March 31,  2002 to a negative  $2,985,930  at March 31,  2003.  The change in
working  capital  resulted  primarily  from  advances made by the Company to the
claims  payment fund  described in the  "Agreements"  above.  During fiscal year
2003,  the Company  increased  its other  accounts  receivables  by $3.6 million
resulting from extended terms on a portion of its new automotive  business.  The
Company offset the use of those funds with an increase in its insurance  premium
payable of $9.6  million,  primarily  due to  extended  terms from its  insurer,
thereby  generating  a source of cash for the  fiscal  year.  The  Company  also
generated a source of cash with a reduction in the income tax receivable.

                                       20
<PAGE>

     The Company  believes that internally  generated  funds,  reimbursement  of
claims  paid for RWC  obligations  and the $3 million  line of credit from GAIC,
will be  sufficient  to finance  its  current  operations  for at least the next
twelve  months.   The  Company  is  aggressively   pursuing  new  business  both
domestically and  internationally  to fund future working  capital.  The Company
plans to  continue  to  contain  its SG&A  costs and  utilize  technologies  for
operational  efficiencies to further enhance both its operating  income and cash
flows from operating activities.

     During the fiscal year ended March 31, 2003,  the Company used  $10,114,225
in cash in investing  activities  compared to the use of $5,484,977 in investing
activities  in the prior year.  This  increase in use of funds of  $4,629,258 is
primarily  due to an increase in the amount of funds  loaned to Butler under its
notes receivable arrangement.  During the current fiscal year, the Company spent
less on computer  development but more on property and equipment  purchases than
in the  prior  year,  as the  Company  increased  spending  to  furnish  its new
headquarters.  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 fiscal year ended March 31, 2003 amounted to $1,120,273
compared to $594,797 during the fiscal year ended March 31, 2002. At fiscal year
end 2003,  the Company had  $2,020,740  in debt from capital  lease  obligations
compared to $1,758,793 at fiscal year-end 2002.

     During the fiscal year ended March 31, 2003,  the Company used  $999,548 in
cash from  financing  activities  compared to $561,087 in fiscal year 2002.  The
variance was primarily due an increase in the Company's  capital  leases and the
purchase of treasury stock.

     During the fiscal  year  ended  March 31,  2003,  the  Company  repurchased
259,753 shares of its common stock for treasury purposes for an aggregate amount
of $155,774.  During the fiscal year ended March 31,  2002,  the Company did not
repurchase any of its stock.

LOANS TO DIRECTORS

     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 an aggregate of 3,000,000 of their vested options
to purchase  Warrantech common stock.  Promissory notes totaling $8,062,500 were
signed  with  interest  payable  over three  years at an annual  rate of 6%. The
promissory notes, which were with recourse and secured by the stock certificates
issued,  matured July 5, 2001. On March 22, 1999, Joel San Antonio  delivered an
additional  promissory note for $595,634,  payable to the Company,  representing
the amounts  funded by the Company for the payroll taxes payable by him upon for
the  exercise of these  options.  The  exercise  of these stock  options and the
anticipated  tax benefit from this  transaction  represented  approximately  $10
million.  These  amounts are  recorded as a  contra-equity  account,  which is a
reduction of stockholders' equity.

     In February 2000, the Company agreed to restructure  the loans to Mr. Tweed
and Mr. White by  capitalizing  the interest due and extending the loan maturity
from July 5, 2001 until  January 31, 2005.  Interest on the  restructured  loans
accrued   annually  at  the   applicable   federal  rate  of  6.2%.   Under  the
restructuring,  interest  first became  payable on the third  anniversary of the
restructuring  and was payable  annually  thereafter.  In July 2002, the Company
extended the loan maturity dates until February 1, 2007 ( the "loan extension").
The interest,  which accrued on the notes up to the time of the loan  extension,
was added to the principal of the notes. The new principal amount of Mr. Tweed's
note is $3,189,675 and of Mr. White's note is $2,912,430. The applicable federal
interest rate on the notes following the loan extension is 4.6%.  Under the loan
extension, interest on the notes will accrue until February 1, 2005 and, at that
time, the accrued interest will be added to the principal of the notes. Interest
on the new principal amounts thereafter become payable annually until maturity.


                                       21
<PAGE>

     In February 2000,  the Company also agreed to restructure  the two existing
loans to Mr. San Antonio (as restructured,  the "Combined  Loan").  The Combined
Loan,  finalized in March 2001, was due on January 31, 2005 and accrued interest
annually at 5.2%.  In July 2002,  the Company  extended the loan  maturity  date
until February 1, 2007 and the interest rate was changed to the then  applicable
federal  rate of  4.6%.  The  principal  amount  of Mr.  San  Antonio's  note is
$4,165,062. Interest will be forgiven as long as Mr. San Antonio continues to be
employed by the Company.  The $200,506 and $330,631 of interest which accrued on
the note during fiscal years 2003 and 2002 has been  forgiven.  The interest was
charged to operations as additional  compensation in the respective fiscal years
the interest income was accrued.

     The total amount of the restructured  loans to Mr. Tweed, Mr. White and Mr.
San Antonio, including the capitalized interest of $194,827, is $10,462,094.

OUTLOOK

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

     The Company  continued to improve  customer service and technology with the
introduction  in  fiscal  2002  of its  innovative  web-based  platform  for its
Consumer Products segment. WCPS Online provides real-time capabilities that meet
the needs of dealers,  service providers and consumers. It is designed to reduce
paperwork and cut the time and costs of administering warranties for dealers and
service  providers,  while providing a better  experience and faster service for
their  customers.  The future  profitability  of this  segment of the Company is
dependent  on its  ability to provide  technology  and  customer  service and to
acquire new business.  The Company is currently negotiating with prospective new
customers  which are projected to begin  programs in fiscal year 2003.  Based on
these events developing, the segment should not incur losses this fiscal year

     During the previous fiscal year, the Company signed an agreement with MARTA
Cooperative  of  America,   one  of  the  largest   member-owned  retail  buying
cooperative in the U.S.  consumer  electronics and appliance.  In April 2003 the
Company announced that it had signed agreements with more than 10% of the buying
cooperatives consumer electronics and appliance retailers.

     The Company  announced  in fiscal 2002 that an  agreement  had been reached
with AIG "  Automotive  Investment  Group" to  provide  marketing  services  for
reinsurance programs for large automobile dealerships. The terms of the contract
allowed  Warrantech  Automotive to begin marketing a new reinsurance  program to
the nation's  larger  automobile  dealerships  on January 1, 2002.  This program
along with other new programs in the Automotive segment should allow the Company
to experience an increase in automotive  contracts sold  continuing  into fiscal
year 2004.

     The Company was notified that its major  insurer will  implement an average
15%  increase  in  premium.  This  increase  will be passed onto the dealers and
agents.  As a result,  gross revenues and gross premium  expense will be higher,
but the premium  increase is expected to have a minimal  effect on the Company's
net earned administrative fee amount.

CRITICAL ACCOUNTING POLICIES

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

                                       22
<PAGE>

preparation of the Consolidated  Financial Statements.  The following lists some
of the Company's critical accounting policies affected by judgments, assumptions
and estimates.

REVENUE RECOGNITION
     Under  SAB  101,  the  Company  recognizes  revenue  when  the  revenue  is
realizable and earned.  The Company considers revenue realized and earned when a
definitively discrete earnings event has occurred.  The Company has two discrete
earnings events (1) for marketing and  administration  of service  contracts and
(2) for servicing  fees.  The marketing  and  administrative  fee is paid by the
retailer of the service contract.  This revenue is recognized at the time of the
sale to the  retailer  as the  Company  will have  substantially  completed  the
services  it has agreed to provide in  connection  with the sale of the  service
contract to the consumer.

     The second discrete earnings event occurs over the life of the contract. As
such, Warrrantech recognizes and realizes the revenue over the contract life.

IMPAIRMENT OF LONG-LIVED ASSETS
     The Company assesses potential  impairment of its long-lived assets,  which
include its property and  equipment  and its  identifiable  intangibles  such as
software development costs,  goodwill and deferred charges under the guidance of
SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived  Assets." Once
annually or as events or  circumstances  indicate that an asset may be impaired,
the Company assesses potential  impairment of its long-lived assets. The Company
determines  impairment by measuring the undiscounted  future cash flow generated
by the assets,  comparing the result to the assets  carrying value and adjusting
the asset to the lower of its carrying value or fair value and charging  current
operations for the measured  impairment.  At year ended March 31, 2003 and 2002,
the Company  found no  impairment  to its  property  and  equipment or its other
identifiable intangibles.

INCOME TAXES
     Deferred tax assets and liabilities are determined  using enacted tax rates
for the effects of net operating  losses and temporary  differences  between the
book and tax bases of assets and  liabilities.  The Company  records a valuation
allowance on deferred tax assets when appropriate to reflect the expected future
tax benefits to be realized. In determining the appropriate valuation allowance,
certain  judgments are made relating to  recoverability  of deferred tax assets,
use of tax loss  carryforwards,  level of  expected  future  taxable  income and
available tax planning  strategies.  These  judgments are routinely  reviewed by
management.  At  March  31,  2003,  the  Company  had  deferred  tax  assets  of
$2,898,577, net of a valuation allowance of $256,434.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     As of March 31,  2003,  the Company did not have any  derivatives,  debt or
hedges  outstanding.  Therefore,  the Company  was not subject to interest  rate
risk.  In  addition,  the risk of foreign  currency  fluctuation  was and is not
material to the Company's financial position or results of operations.

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


                                       23
<PAGE>

     Principal  amounts by expected  maturity as of March 31, 2003 of marketable
securities are as follows:
<TABLE>
<CAPTION>
                                                   EXPECTED MATURITY DATE
                             -------------------------------------------------------------------
                              2004        2005      2006       2007     2008    THEREAFTER    TOTAL COST   FAIR VALUE
                              ----        ----      ----       ----     ----    ----------    ----------   ----------
<S>                           <C>         <C>        <C>       <C>       <C>        <C>         <C>           <C>
Available for sale
securities                   $1,765,588  $360,533          --         -              $37,550    $2,199,711   $2,199,243
       Interest rate              4.93%     4.96%       4.96%         -                5.50%
</TABLE>

Principal  amounts  by  expected  maturity  as of March 31,  2002 of  marketable
securities are as follows:
<TABLE>
<CAPTION>
                             EXPECTED MATURITY DATE
                             ----------------------------------------------------------------
                                 2003       2004     2005      2006    2007    THEREAFTER     TOTAL COST    FAIR VALUE
                                 ----       ----     ----      ----    ----    ----------     ----------    ----------
<S>                           <C>         <C>        <C>       <C>       <C>        <C>         <C>           <C>
Available for sale securities  $1,592,220  $398,907 $318,228         -     -           -       $2,309,455    $2,331,272

         Interest rate              4.21%     5.25%    4.98%     5.38%     -           -
</TABLE>


                                       24
<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
                          FINANCIAL STATEMENT SCHEDULES


<TABLE>
<CAPTION>

                                                                                         Page No.

<S>                                                                                        <C>
Report of Independent Auditors..........................................................   26

Consolidated Financial Statements:
              Statements of Operations and Comprehensive Income
         For the Fiscal Years Ended March 31, 2003, 2002 and 2001........................  27

         Balance Sheets as of March 31, 2003 and 2001...................................  28-29

         Statements of Common Stockholders' Equity
         For the Fiscal Years Ended March 31, 2003, 2002 and 2001.......................   30

         Statements of Cash Flows
         For the Fiscal Years Ended March 31, 2003, 2002 and 2001.......................   31

Notes to Consolidated Financial Statements..............................................   32

Consolidated Financial Statement Schedules
Schedule VIII - Valuation and Qualifying Accounts.......................................   52
</TABLE>



All  other  schedules  for  which  provision  is made in  applicable  accounting
regulations of the Securities and Exchange Commission are not required under the
related  instructions or are inapplicable and therefore have been omitted or the
information   is  presented  in  the   consolidated   financial   statements  or
accompanying notes.

                                       25
<PAGE>

[WSL LOGO]

WEINICK
-------
SANDERS                                                          1375 BROADWAY
LEVENTHAL & CO. LLP                                  NEW YORK, N.Y. 10018-7010
-------------------------------------------------------------------------------
CERTIFIED PUBLIC
ACCOUNTANTS 212-869-3333

FAX: 212-764-3060

WWW.WSLCO.COM




                         REPORT OF INDEPENDENT AUDITORS


To the Board of Directors and Stockholders of
Warrantech Corporation

         We  have  audited  the  accompanying  consolidated  balance  sheets  of
Warrantech  Corporation  and  Subsidiaries as of March 31, 2003 and 2002 and its
related consolidated  statements of operations and comprehensive  income, common
stockholders'  equity and cash flows for the fiscal  years ended March 31, 2003,
2002 and 2001. Our audits also included the financial statement schedules listed
in the index.  These  consolidated  financial  statements  and schedules are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.

        We conducted our audits in accordance with auditing standards  generally
accepted in the United States of America.  Those standards  require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In  our opinion, the consolidated financial statements referred to above present
fairly,  in  all  material  respects,  the  consolidated  financial  position of
Warrantech  Corporation  and  Subsidiaries  at  March  31, 2003 and 2002 and the
consolidated results of their operations and comprehensive income and their cash
flows  for  the  years  ended  March 31, 2003, 2002 and 2001, in conformity with
accounting  principles generally accepted in the United States of America. Also,
in  our  opinion,  the  related consolidated financial statement schedules, when
considered  in  relation  to  the  basic  financial statements taken as a whole,
present  fairly,  in  all  material respects, the information set forth therein.

As discussed  in Note 3, the Company has  restated  its  consolidated
financial statements for the years ended March 31, 2002 and 2001.


                                      /s/ Weinick Sanders Leventhal & Co., LLP



New York, NY
June 13, 2003


                                       26
<PAGE>



                     WARRANTECH CORPORATION AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>


                                                                            For the Years Ended March 31,
                                                              -----------------------------------------------------------
                                                                    2003                2002 *              2001 *
                                                              -----------------    -----------------   ------------------
<S>                                                                <C>                  <C>                  <C>
Earned administrative fee (net of amortization of                  $38,155,914          $38,000,275          $47,316,042
deferred costs)
                                                              -----------------    -----------------   ------------------
Costs and expenses
   Service, selling, and general and administrative                 31,092,940           30,768,340           39,775,539
   Legal settlement                                                          -            (824,332)                    -
   Provision for bad debt expense                                      150,444                    -               15,067
   Depreciation and amortization                                     3,885,054            4,480,442            6,417,115
   Loss on abandonment of assets                                             -                    -            1,029,731
                                                              -----------------    -----------------   ------------------
Total costs and expenses                                            35,128,438           34,424,450           47,237,452
                                                              -----------------    -----------------   ------------------

Income from operations                                               3,027,476            3,575,825               78,590
Other income                                                         1,060,846              857,466            1,022,512
                                                              -----------------    -----------------   ------------------

Income before provision for income taxes                             4,088,322            4,433,291            1,101,102
Provision for income taxes                                           1,227,043            1,738,609              788,714
                                                              -----------------    -----------------   ------------------

Net income                                                          $2,861,279           $2,694,682             $312,388
                                                              =================    =================   ==================

Earnings per share:
Basic                                                                    $0.19                $0.18                $0.02
                                                              =================    =================   ==================
Diluted                                                                  $0.19                $0.18                $0.02
                                                              =================    =================   ==================

Weighted average number of shares outstanding:
Basic                                                               15,317,881           15,259,437           15,265,114
                                                              =================    =================   ==================
Diluted                                                             15,398,910           15,261,444           15,271,218
                                                              =================    =================   ==================


                                                                            FOR THE YEARS ENDED MARCH 31,
                                                               ---------------------------------------------------------
                                                                    2003                2002 *              2001 *
                                                               ----------------   -------------------  -----------------
Net income                                                          $2,861,279            $2,694,682           $312,388
Other Comprehensive Income, net of tax
   Unrealized gain (loss) on investments                                13,713               (8,936)             30,001
   Foreign currency translation adjustments                          (158,659)              (11,143)             82,182
                                                               ----------------   -------------------  -----------------
Comprehensive Income                                                $2,716,333            $2,674,603           $424,571
                                                               ================   ===================  =================

Comprehensive income per share:                                          $0.18                 $0.18              $0.03
                                                               ================   ===================  =================
</TABLE>




* Restated to reflect the  correction  of net earned  administrative  fees - See
Note 3.

See  report of  independent  auditors  and  accompanying  notes to  consolidated
financial statements.

                                       27
<PAGE>




                     WARRANTECH CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                 MARCH 31,       MARCH 31,
                                                                   2003           2002 *
                                                               --------------  -------------
A S S E T S

<S>                                                               <C>            <C>
Current assets:
   Cash and cash equivalents                                      $5,478,095     $7,033,448
   Investments in marketable securities                              843,980        954,653
   Accounts receivable, (net of allowances of
      $230,064 and $256,019, respectively)                        22,008,608     18,442,135
   Loan receivable - Butler Financial Solutions, Inc.              8,612,678      2,754,691
   Other receivables, net                                          5,299,887      2,149,667
   Income tax receivable                                                   -      1,129,076
   Deferred income taxes                                           2,098,171      2,653,000
   Employee receivables                                               73,833         27,391
   Prepaid expenses and other current assets                       1,218,392        600,944
                                                               --------------  -------------
       Total current assets                                       45,633,644     35,745,005
                                                               --------------  -------------

Property and equipment, net                                        8,296,313      9,299,713
                                                               --------------  ---------------

Other assets:
   Excess of cost over fair value of assets acquired
   (net of accumulated amortization of $5,825,405)                 1,637,290      1,637,290
   Deferred income taxes                                             800,406      1,434,104
   Deferred direct costs                                           9,972,309     22,570,930
   Investments in marketable securities                            1,355,263      1,376,619
   Restricted cash                                                   825,000        825,000
   Split dollar life insurance policies                              877,126        904,172
   Notes receivable                                                5,411,653      2,818,639
   Other assets                                                       47,124         44,546
                                                               --------------  -------------
          Total other assets                                      20,926,171     31,611,300

                                                               --------------  -------------
                    Total Assets                                 $74,856,128    $76,656,018
                                                               ==============  =============

</TABLE>




* Restated to reflect the  correction  of net earned  administrative  fees - See
Note 3.

See  report of  independent  auditors  and  accompanying  notes to  consolidated
financial statements.

                                       28
<PAGE>

                     WARRANTECH CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                      MARCH 31,      MARCH 31,
                                                                        2003          2002 *
                                                                    -------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY

<S>                                                                      <C>            <C>
Current liabilities:
   Current maturities of long-term debt and capital lease                $802,070       $801,788
obligations
   Insurance premiums payable                                          36,070,992     26,470,265
   Income taxes payable                                                    81,236              -
   Accounts and commissions payable                                     8,118,371      6,960,465
   Accrued expenses and other current liabilities                       3,534,106      3,168,666
                                                                    -------------- --------------
      Total current liabilities                                        48,606,757     37,401,184
                                                                    -------------- --------------

Deferred revenues                                                      15,065,547     30,942,984
Long-term debt and capital lease obligations                            1,218,670        957,159
Deferred rent payable                                                     417,720        190,260
                                                                    -------------- --------------
     Total liabilities                                                 65,308,718     69,491,587
                                                                    -------------- --------------

Commitments and contingencies
                                                                                -              -
Stockholders' equity:
   Preferred stock - $.0007 par value authorized - 15,000,000
       Shares issued  - none at March 31, 2003 and March 31, 2002               -              -
   Common stock - $.007  par  value  authorized - 30,000,000 Shares
       issued -16,530,324 shares at March 31, 2003 and
       16,525,324 shares at March 31, 2002                                115,714        115,679
   Additional paid-in capital                                          23,760,809     23,745,944
   Loans to directors and officers                                   (10,462,094)   (10,163,875)
   Accumulated other comprehensive income, net of taxes                 (196,974)       (52,028)
   Retained earnings (Accumulated Deficit)                               604,631    (2,256,648)
                                                                    -------------- --------------
                                                                       13,822,086     11,389,072
Treasury stock - at cost, 1,249,690 shares at March 31, 2003
    and 1,212,159 shares  at  March 31, 2002                          (4,274,670)    (4,224,641)
                                                                    -------------- --------------
        Total Stockholders' Equity                                      9,547,416      7,164,431
                                                                    -------------- --------------

                                                                    -------------- --------------
        Total Liabilities and Stockholders' Equity                    $74,856,128    $76,656,018
                                                                    ============== ==============

</TABLE>

* Restated to reflect the  correction  of net earned  administrative  fees - See
Note 3.

See  report of  independent  auditors  and  accompanying  notes to  consolidated
financial statements.

                                       29
<PAGE>



                     WARRANTECH CORPORATION AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                 FOR THE YEARS ENDED MARCH 31,
                                                      -----------------------------------------------------
                                                           2003             2002 *             2001 *
                                                      ----------------  ----------------  -----------------
<S>                                                        <C>               <C>                <C>
Common Stock Outstanding (shares)
Balance, beginning of year                                 16,525,324        16,514,228         16,505,911
Exercise of common stock options                                5,000                 -                  -
Issuance of common stock                                            -            11,096              8,317
                                                      ----------------  ----------------  -----------------
Balance, end of year                                       16,530,324        16,525,324         16,514,228
                                                      ================  ================  =================
Common Stock
Balance, beginning of year                                   $115,679          $115,580           $115,541
Exercise of common stock options                                   35                 -                  -
Issuance of common stock                                            -                99                 39
                                                      ----------------  ----------------  -----------------
Balance, end of year                                         $115,714          $115,679           $115,580
                                                      ================  ================  =================
Additional paid-in capital
Balance, beginning of year                                $23,745,944       $23,742,868        $23,737,835
Exercise of common stock options                                2,065                 -                  -
Compensatory element of common stock options                   12,800                 -                  -
Issuance of common stock                                            -             3,076              5,033
                                                      ----------------  ----------------  -----------------
Balance, end of year                                      $23,760,809       $23,745,944        $23,742,868
                                                      ================  ================  =================
Loans to directors and officers
Balance, beginning of year                              ($10,163,875)      ($9,833,244)       ($9,505,406)
Loans for exercise of stock of stock options                (298,219)         (330,631)          (327,838)
                                                      ----------------  ----------------  -----------------
Balance, end of year                                    ($10,462,094)     ($10,163,875)       ($9,833,244)
                                                      ================  ================  =================
Accumulated other comprehensive income
Balance, beginning of year                                  ($52,028)         ($31,949)         ($144,132)
Foreign currency translation adjustments                    (158,659)          (11,143)             82,182
Unrealized gain (loss) on investments                          13,713           (8,936)             30,001
                                                      ----------------  ----------------  -----------------
Balance, end of year                                       ($196,974)         ($52,028)          ($31,949)
                                                      ================  ================  =================
Retained Earnings (Accumulated Deficit)
Balance, beginning of year                               ($2,256,648)      ($4,951,330)       ($8,101,029)
Effect of restatement (note 3)                                      -                 -          2,837,311
Net income                                                  2,861,279         2,694,682            312,388
                                                      ----------------  ----------------  -----------------
Balance, end of year                                         $604,631      ($2,256,648)       ($4,951,330)
                                                      ================  ================  =================
Common stock in treasury (shares)
Balance, beginning of year                                (1,212,159)       (1,415,171)        (1,211,024)
Purchase of treasury shares                                 (259,753)                 -          (450,000)
Issuance of treasury shares                                   222,222           203,012            245,853
                                                      ----------------  ----------------  -----------------
Balance, end of year                                      (1,249,690)       (1,212,159)        (1,415,171)
                                                      ================  ================  =================
Common stock in treasury (amount)
Balance, beginning of year                               ($4,224,641)      ($4,341,206)       ($4,224,167)
Purchase of treasury shares                                 (155,774)                 -          (308,920)
Issuance of treasury shares                                   105,745           116,565
                                                                                                   191,881
                                                      ----------------  ----------------  -----------------
Balance, end of year                                     ($4,274,670)      ($4,224,641)       ($4,341,206)
                                                      ================  ================  =================

                                                      ----------------  ----------------  -----------------
Total Stockholders' Equity                                 $9,547,416        $7,165,431         $4,700,719
                                                      ================  ================  =================

</TABLE>


* Restated to reflect the  correction  of net earned  administrative  fees - See
Note 3.

See  report of  independent  auditors  and  accompanying  notes to  consolidated
financial statements.


                                       30
<PAGE>



                     WARRANTECH CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                            FOR THE YEARS ENDED MARCH 31,
                                                            --------------------------------------------------------------
                                                                  2003                 2002 *               2001 (A)*
                                                            -----------------      ----------------      -----------------
<S>                                                               <C>                   <C>                      <C>
Cash flows from operating activities:
  Net income                                                      $2,861,279            $2,694,682               $312,388
                                                            -----------------      ----------------      -----------------
  Adjustments  to  reconcile  net  income  to net  cash
     provided  by  operating activities:
     Depreciation and amortization                                 3,885,054             4,480,442              6,417,115
     Compensatory element of stock options                            12,800                     -                      -
     Provision for bad debt expense                                  150,444                     -                 15,067
     Deferred revenues                                          (15,877,437)          (27,171,294)           (42,585,819)
     Deferred direct costs                                        12,598,621            23,688,041             34,538,228
     Deferred income taxes                                         1,188,527           (1,452,477)              6,741,052
     Deferred rent payable                                           227,460             (103,033)               (91,208)
     Other                                                         (513,004)             (357,828)                125,431
     Increase (decrease) in cash flows as a result of
        changes in asset and liability balances:
        Accounts receivable                                      (3,566,473)           (6,289,620)              (293,862)
        Other receivables                                        (3,150,220)             4,888,473            (4,649,283)
        Income taxes receivable                                    1,210,312             4,249,572            (1,343,302)
        Prepaid expenses and other current assets                  (617,448)               363,985                273,122
        Split dollar life insurance policies                          27,046             (195,910)                119,000
        Other assets                                                 (2,577)                20,263                311,846
        Insurance premiums payable                                 9,600,727             7,370,101                938,807
        Accounts and commissions payable                           1,157,906               613,593            (2,510,684)
        Accrued expenses and other current liabilities               365,403           (2,721,412)            (3,601,097)
                                                            -----------------      ----------------      -----------------
  Total adjustments                                                6,697,141             7,382,896            (8,810,855)
                                                            -----------------      ----------------      -----------------
Net cash provided by (used in) by operating activities             9,558,420            10,077,578            (6,943,931)
                                                            -----------------      ----------------      -----------------

Cash flows from investing activities:
  Property and equipment purchased-net of retirements            (1,818,224)           (1,496,747)            (1,930,448)
  Purchase of marketable securities                                (790,000)             (430,000)              (715,000)
  (Increase) decrease in loans and notes receivable              (8,451,001)           (4,973,524)                567,929
  Proceeds from sales of marketable securities                       945,000             1,415,304              3,600,000
                                                            -----------------      ----------------      -----------------
Net cash provided by (used in) investing activities             (10,114,225)           (5,484,967)              1,522,481
                                                            -----------------      ----------------      -----------------

Cash flows from financing activities:
    Exercise of common stock options and stock grants                  2,100                     -                  5,072
    Purchase treasury stock                                        (155,774)                     -              (308,920)
    Repayments of notes and capital leases                         (845,874)             (561,087)            (1,307,781)
                                                            -----------------      ----------------      -----------------
Net cash (used in) financing activities                            (999,548)             (561,087)            (1,611,629)
                                                            -----------------      ----------------      -----------------

Net (decrease) in cash and cash equivalents                      (1,555,353)             4,031,524            (7,033,079)

Cash and cash equivalents at beginning of year                     7,033,448             3,001,924             10,035,003
                                                            -----------------      ----------------      -----------------
Cash and cash equivalents at end of year                          $5,478,095            $7,033,448             $3,001,924
                                                            -----------------      ----------------      -----------------

Supplemental Cash Flow Information:
Cash payments made (recovered) during the year for:
   Interest                                                         $275,185              $217,072               $234,102
                                                            -----------------      ----------------      -----------------
   Income taxes                                                 ($1,218,916)          ($1,107,494)               $259,224
                                                            -----------------      ----------------      -----------------

Non-Cash Investing and financing activities:
    Property and equipment financed through capital leases        $1,120,273              $443,232               $519,369
    Increase in loans to officers and directors                    (298,219)             (330,631)              (327,838)
    Issuance of treasury stock                                       105,745               116,565                191,881
   Capital leases refinanced                                               -               151,565                      -
</TABLE>

(a)  Reclassified for comparability.
     * Restated to reflect the  correction of net earned  administrative  fees -
See Note 3.



See  report of  independent  auditors  and  accompanying  notes to  consolidated
financial statements.

                                       31

<PAGE>

                     WARRANTECH CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       NATURE OF BUSINESS - Warrantech,  through its wholly owned  subsidiaries,
       markets  and  administers  service  contracts,  extended  warranties  and
       replacement  plans.  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's  service contract  programs benefit  consumers by providing
       them 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.  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 and by providing them with the  opportunity  for increased  revenue
       and  income  without  the  costs and  responsibilities  of  operating  an
       extended warranty program.

       The service  contracts,  extended  warranties and  replacement  contracts
       generally  have terms ranging from three (3) to one hundred  twenty (120)
       months.  Since the Company acts solely as a third party  administrator on
       behalf of the dealer/clients and insurance companies,  the actual repairs
       and/or  replacements  required  under the  agreements  are  performed  by
       independent third party authorized repair facilities or dealers. The cost
       of repairs is generally  paid for by the insurance  companies  which have
       the ultimate  responsibility  for the claims or, where insurance coverage
       is  unavailable,  by  Butler  Financial  Solutions,  LLC  ("Butler"),  if
       Reliance  Insurance  Company  ("Reliance") or the Company is the obligor.
       The  insurance  policy  indemnifies  the  dealer/clients  against  losses
       resulting from service contract claims and protects consumers by ensuring
       their claims will be paid.

        BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION - The accompanying
        consolidated  financial statements have been prepared in accordance with
        accounting principles generally accepted in the United States of America
        ("GAAP").  These consolidated  financial statements include the accounts
        of Warrantech Corporation and its subsidiaries,  all of which are wholly
        owned. All intercompany  accounts and transactions  have been eliminated
        in consolidation.

        RISKS AND  UNCERTAINTIES  - The  preparation of financial  statements in
        conformity with accounting  principles  generally accepted in the United
        States of America requires  management to make estimates and assumptions
        which affect the reporting of assets and  liabilities as of the dates of
        the financial  statements and revenues and expenses during the reporting
        period. Actual results could differ from these estimates.

        REVENUE   RECOGNITION  POLICY  -  Revenue  for  administrative   obligor
        contracts is recognized in accordance with,  Staff  Accounting  Bulletin
        101 ("SAB 101").  Under SAB 101, the Company recognizes revenue when the
        revenue is realizable and earned. The Company considers revenue realized
        and earned when a definitively discrete earnings event has occurred. The
        Company,  primarily,  has two  discrete  events  (1) for  marketing  and
        administration  of service  contracts  and (2) for servicing  fees.  The
        marketing and  administrative fee is paid by the retailer of the service
        contract.  This  revenue  is  recognized  at the time of the sale to the
        retailer, as the Company will have substantially  completed the services
        it has agreed to provide the retailer in connection with the sale of the
        service  contract to the consumer.  The second  discrete  earnings event
        occurs  over  the  life  of  the   contract  as  claims   administrative
        obligations are being  satisfied.  As such,  Warrrantech  recognizes and
        realizes the revenue over the contract life.

                                       32
<PAGE>

        DIRECT  COSTS - Direct  costs,  which  consist  primarily  of  insurance
        premiums  and  commissions,  are those  costs  directly  related  to the
        production  and  acquisition  of service  contracts  for  administrative
        obligor service contracts. For administrative obligor service contracts,
        the Company  recognizes  direct cost according to Statement of Financial
        Accounting Standards No. 113 ("SFAS 113"), "Accounting and Reporting 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.

        PROFIT  SHARING  ARRANGEMENT - Pursuant to certain  agreements  with its
        insurers,  the  Company  may be  eligible  to  share  a  portion  of the
        insurers'  profits  on the  Company's  service  contract  programs.  The
        amounts to be received,  if any, are determined  based upon the residual
        value of the  premiums set aside by the insurer to pay losses (the "Loss
        Fund").  The residual  value is comprised  of  underwriting  profits and
        investment  income  earned on the  monies in the Loss  Fund.  Subsequent
        adjustments to original  estimates are solely changes in estimates based
        upon current information,  affording the Company better determination of
        ultimate profit sharing revenues and are reflected in income when known.
        The Company  recognized  $71,784 in profit sharing on its  International
        business in the fiscal year ended March 31, 2003 with no profit  sharing
        recognized for fiscal years ended March 31, 2002 or 2001.

        PROVISION FOR BAD DEBT EXPENSE - The Company's policy is to establish an
        allowance for doubtful  accounts when  receivables  are determined to be
        uncollectible.

        EARNINGS  PER SHARE - The  Company has adopted  Statement  of  Financial
        Accounting  Standards No. 128, "Earnings per Share",  which modified the
        calculation of earnings per share  ("EPS".) This Statement  replaced the
        previous  presentation  of primary  and fully  diluted  EPS to basic and
        diluted  EPS.  Basic EPS is  computed by dividing  income  available  to
        common  stockholders  by the weighted  average  number of common  shares
        outstanding for the period.  Diluted EPS includes the dilution of common
        stock  equivalents,  and is  computed  similarly  to fully  diluted  EPS
        pursuant to Accounting  Principle  Board  ("APB")  Opinion 15. All prior
        periods presented have been restated to reflect this adoption.

        CASH AND CASH EQUIVALENTS - Cash and cash equivalents for the purpose of
        reporting cash flows for all periods  presented  include cash on deposit
        and  certificates  of deposit.  There were no other cash  equivalents at
        March 31, 2003 and 2002.

        At March  31,  2003 and  2002,  respectively,  the  Company  had cash on
        deposit  in  excess  of  federally  insured  limits  of  $4,535,328  and
        $6,659,178.

        INVESTMENTS  IN MARKETABLE  SECURITIES - All  investments  in marketable
        securities have been classified as available-for-sale and are carried at
        fair value with changes in unrealized  gains and losses being  reflected
        as a separate component of accumulated other  comprehensive  income, net
        of tax.

        PROPERTY  AND  EQUIPMENT - Property  and  equipment  are stated at cost.
        Depreciation  is  provided  using  the  straight-line  method  over  the
        estimated  useful lives of the related  assets  ranging  between 3 and 7
        years.

        CAPITALIZATION  POLICY - In accordance  with Statement of Position 98-1,
        the Company capitalizes  purchased software or software  development and
        implementation   costs  incurred   internally  or  through   independent
        consultants  related  to the  Company's  state  of the  art  proprietary
        relational  database  and  interactive  operating  software for warranty
        tracking and sales.  These systems are only  available for internal uses
        and are not  available  for  purchase  by  outside  parties.  All direct
        implementation  costs and purchase  software costs are  capitalized  and
        amortized using the  straight-line  method over their  estimated  useful
        lives not to exceed a five-year period. Of the $4,427,891 and $6,172,570
        of net software  development costs at March 31, 2003 and March 31, 2002,
        respectively, the Company capitalized $779,665 and $954,657.

                                       33
<PAGE>

        Once annually or as events or  circumstances  indicate that an asset may
        be impaired, the Company assesses potential impairment of its long-lived
        assets,  which include its property and  equipment and its  identifiable
        intangibles such as software  development  costs,  goodwill and deferred
        charges.  The  Company  determines  such  impairment  by  measuring  the
        undiscounted  future cash flow  generated by the assets,  comparing  the
        result to the assets carrying value and adjusting the asset to the lower
        of its carrying value or fair value and charging current  operations for
        the  measured  impairment.  At years ended March 31, 2003 and 2002,  the
        Company  found no  impairment to its property and equipment or its other
        identifiable intangibles.

        EXCESS OF COST OVER FAIR  VALUE OF ASSETS  ACQUIRED - The excess of cost
        over fair value of the assets  acquired  ("Goodwill") is a result of the
        purchases  of  Dealer  Based  Services,  Inc.  in 1989,  Home  Guarantee
        Corporation,  PLC in July 1995,  and certain  assets of  Distributors  &
        Dealers  Service Co., Inc. in October 1997.  Prior to the early adoption
        of Statement of Financial  standards No. 142  "Goodwill  and  Intangible
        Assets" on April 1,  2001,  the excess of cost over fair value of assets
        acquired was being  amortized on a  straight-line  basis over 15, 10 and
        4.5 years, respectively.  As a result of the Company closing its offices
        in Europe  during  2001,  the  excess of Cost over Fair  Value of Assets
        acquired from Home Guarantee Corporation,  PLC was charged to operations
        at that time.

        Impairment  of  Long-lived  Assets  -  The  Company  assesses  potential
        impairment  of its  long-lived  assets,  which  include its property and
        equipment and its identifiable  intangibles such as software development
        costs,  goodwill  and  deferred  charges  under the guidance of SFAS 144
        "Accounting for the Impairment or Disposal of Long-Lived  Assets".  Once
        annually  or as events or  circumstances  indicate  that an asset may be
        impaired,  the Company assesses  potential  impairment of its long-lived
        assets,  which include its property and  equipment and its  identifiable
        intangibles such as software  development  costs,  goodwill and deferred
        charges.  The  Company  determines  such  impairment  by  measuring  the
        undiscounted  future cash flow  generated by the assets,  comparing  the
        result to the assets carrying value and adjusting the asset to the lower
        of its carrying value or fair value and charging current  operations for
        the measured impairment.

        ADVERTISING COSTS - The Company expenses  advertising costs as incurred.
        Advertising  expenses for the years ended March 31, 2003,  2002 and 2001
        were $261,182, $388,085 and $473,553, respectively.

        STOCK BASED  COMPENSATION - The Company  applies  Accounting  Principles
        Board Opinion No. 25,  "Accounting for Stock Issued to Employees"  ("APB
        25") and  related  interpretations  in  accounting  for its  stock-based
        compensation plans. Under APB 25, compensation  expense for stock option
        and award plans is recognized as the difference  between the fair values
        of the  stock at the date of the  grant  less the  amount,  if any,  the
        employee or director is required to pay. Certain operating officers have
        been  issued  shares  of the  Company's  common  stock  as part of their
        compensation under their employment agreements.  This compensation is to
        be earned by the officers and charged to operations over five years, the
        term of the employment agreements.  In addition,  certain employees have
        been  issued   restricted  shares  of  the  Company's  common  stock  as
        compensation.  Such  compensation  is  amortized  over  the  restriction
        period,  which is generally two years.  Certain  non-employees have been
        issued options to purchase stock in lieu of compensation.  The intrinsic
        value of these options at the time of grant has been charged to expense.

        INCOME TAXES - Deferred tax assets and liabilities are determined  under
        the liability  method whereby  deferred tax assets and  liabilities  are
        recognized for the expected tax effect of temporary  differences between
        the financial  statement carrying amount and the tax bases of assets and
        liabilities using presently enacted tax rates in effect for the years in
        which the differences are expected to reverse.

        FOREIGN CURRENCY TRANSLATION - Financial statement accounts expressed in
        foreign   currencies  are  translated  into  United  States  dollars  in
        accordance with Statement of Financial Accounting Standards ("SFAS") No.
        52 "Foreign  Currency  Translation".  The  functional  currency  for the
        Company's   United  Kingdom   operations  was  the  British  pound.  The
        functional  currency for the Company's  Chilean and Peruvian  operations
        are their respective local currencies.  Transaction gains and losses are
        reflected  in  operations,   while  translation  gains  and  losses  are
        reflected as a separate  component of  accumulated  other  comprehensive
        income, net of tax.

                                       34
<PAGE>

        COMPREHENSIVE  INCOME - The Company has adopted SFAS No. 130  "Reporting
        Comprehensive  Income". SFAS No. 130 establishes rules for the reporting
        and display of  comprehensive  income and its components;  however,  the
        adoption of this  Statement  had  minimal  impact on the  Company's  net
        income or stockholders'  equity.  SFAS No. 130 requires unrealized gains
        or losses to be recorded on the Company's  available for sale securities
        and  foreign  currency  translation  adjustments,  which  prior  to  the
        adoption  were  reported  separately  in  stockholders'  equity,  to  be
        included in other comprehensive income.

        CONTINGENT  LIABILITY  POLICY - In accordance  with SFAS 5 and Financial
        Accounting  Standards  Interpretation  ("FIN")  14, the Company may have
        certain  contingent  liabilities  with  respect to material  existing or
        potential claims,  lawsuits and other  proceedings.  The Company accrues
        liabilities  when it is probable  that future costs will be incurred and
        such costs can be reasonably estimated and measured.

2.   NEW ACCOUNTING STANDARDS

        In June 2001, the Financial  Accounting  Standards Board (FASB) approved
        for issuance SFAS No. 142,  "Goodwill and  Intangible  Assets," which is
        effective  for fiscal years  beginning  after March 15,  2001.  SFAS 142
        provides that goodwill and intangible  assets with indefinite  lives not
        be  amortized,  and  instead,  be tested  for  impairment  annually  and
        whenever there is an impairment indicator. Early adoption of SFAS 142 is
        permitted for companies with fiscal years beginning after March 15, 2001
        but only if they had not issued their first quarter financial statements
        prior to adoption.  The Company adopted SFAS 142 effective April 1, 2001
        and ceased  amortization of its goodwill.  The following table discloses
        goodwill  amortization  expense  (net of tax effects) and net income for
        the fiscal years ended March 31, 2003, 2002 and 2001.

<TABLE>
<CAPTION>
                                                          FOR THE FISCAL YEARS ENDED MARCH 31,
                                                         2003              2002            2001
                                                         ----              ----            ----
<S>                                                   <C>               <C>            <C>
         Goodwill amortization                                 -                 -      ($919,466)
                                                      ----------        -----------      ---------
         Net income                                   $2,861,279        $2,694,682     $1,231,854
                                                      ----------        -----------    ----------

         Earnings per share: Basic                      $0.19              $0.18          $0.08
                                                        =====              =====          =====
         Earnings per share: Diluted                    $0.19              $0.18          $0.08
                                                        =====              =====          =====
</TABLE>

       Goodwill at March 31, 2003 and 2002 is as follows:

<TABLE>
<CAPTION>
                                                              YEAR ENDED MARCH 31,
                                                              2003             2002
                                                              ----             ----
<S>                                                       <C>              <C>
         Goodwill                                         $7,462,695       $7,462,695
         Accumulated Goodwill Amortization                (5,825,405)      (5,825,405)
                                                          -----------      -----------
                Total                                     $1,637,290       $1,637,290
                                                          ==========       ==========
</TABLE>

        In  December  2002,  the FASB  issued  SFAS  No.  148,  "Accounting  for
        Stock-Based  Compensation - Transition and  Disclosure."  This statement
        amends SFAS 123, "Accounting for Stock-Based  Compensation",  to provide
        alternative methods of transition for an entity that voluntarily changes
        to the fair value based method of accounting  for  stock-based  employee
        compensation. The  Company  has  elected  not to adopt the provisions of
        SFAS  No.  However, the   Company   will   provide  all  newly  required
        disclosures under SFAS No.123.


3.      RESTATEMENT

        The  Company's  financial  statements  have been  restated  to reflect a
        change in accounting treatment in calculating net earned  administrative
        fees for the years ended March 31, 2002 and 2003. For certain contracts,
        the Company  previously  had deferred a portion of the revenue and would
        recognize  such  deferred  revenue  at  the  cancellation  or end of the
        contract's  term. The Company is now  recognizing  this revenue over the
        life of the contract's term.

                                       35
<PAGE>

       The effect of this  restatement  for the years  ended  March 31, 2002 and
2001 is as follows:

<TABLE>
<CAPTION>
                                                                       MARCH 31, 2002            MARCH 31, 2001
                                                                      ---------------            --------------
                                                                          AS                            AS
                                                                      PREVIOUSLY    AS RESTATED     PREVIOUSLY     AS RESTATED
                                                                       REPORTED                      REPORTED
Statement of Operations:

<S>                                                                   <C>             <C>            <C>          <C>
   Earned administrative fee (net of amortization of deferred costs)  $37,327,306     $38,000,275    $49,700,944  $47,316,042
   Income from operations                                               2,902,856       3,575,825      2,463,492       78,590
   Income before provision for income taxes                             3,760,322       4,433,291      3,486,004    1,011,102

   Provision for income taxes                                           1,504,049       1,738,609      1,619,080      788,714

   Net income                                                          $2,256,373      $2,694,682     $1,866,924     $312,388



 Earnings per share:

 Basic                                                                    $0.15           $0.18          $0.12        $0.02
                                                                          =====           =====          =====        =====

 Diluted                                                                  $0.15           $0.18          $0.12        $0.02
                                                                          =====           =====          =====        =====
Balance Sheet:
  Deferred income tax asset                                            $4,982,315      $4,087,104     $3,295,278   $2,434,627
  Deferred revenues                                                    33,559,379      30,942,984     60,057,704   58,114,278
  Retained earnings (deficit)                                         (3,977,832)     (2,256,648)    (6,234,105)  (4,951,330)

</TABLE>

4.       LOSS ON ABANDONMENT OF ASSETS

        Effective  September  30, 2000,  the Company  ceased  operations  in the
        United Kingdom  because of unprofitable  operations.  As a result of the
        closing and  abandonment of the United Kingdom  operations,  the Company
        wrote down its investment in the assets of the United Kingdom operations
        and recorded a $1,029,731 loss on the abandonment of these assets.

5.       RESTRICTED CASH

        At March 31, 2003 and 2002 cash in the amount of $825,000 was on deposit
        with  Florida  and Ohio  regulatory  agencies to comply with their state
        insurance laws.


6.       INVESTMENTS IN MARKETABLE SECURITIES

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

       Principal amounts by expected maturity as of March 31, 2003 of marketable
securities are as follows:
<TABLE>
<CAPTION>
                                                EXPECTED MATURITY DATE
                           -----------------------------------------------------------------
                              2004       2005       2006       2007      2008   THEREAFTER  TOTAL COSTS  FAIR VALUE
                              ----       ----       ----       ----      ----   ----------  -----------  ----------
<S>                         <C>          <C>       <C>         <C>       <C>      <C>       <C>          <C>
Available for sale
securities                  $1,765,588   $360,573  $  -        $  -      $  -     $37,550   $2,163,711   $2,199,243
Interest rate                    4.93%      4.96%     -           -         -        5.50%

</TABLE>

                                       36
<PAGE>


       Principal amounts by expected maturity as of March 31, 2002 of marketable
securities are as follows:
<TABLE>
<CAPTION>
                                                  EXPECTED MATURITY DATE
                           ---------------------------------------------------------------------
                              2003       2004        2005        2006      2007     THEREAFTER  TOTAL COSTS  FAIR VALUE
                              ----       ----        ----        ----      ----     ----------  -----------  ----------
<S>                         <C>         <C>            <C>         <C>       <C>         <C>      <C>         <C>
Available for sale
securities                  $1,592,220  $398,907       $318,328    $  -      $    -      $    -   $2,309,455  $2,331,272
Interest rate                    4.21%     5.25%          4.98%       -           -           -
</TABLE>

7.   OTHER RECEIVABLES

     The nature and amounts of Other  Receivables  - Butler as of March 31, 2003
and 2002 are as follows:

<TABLE>
<CAPTION>
                                                                                     MARCH 31,
                                                                        -----------------------------------
                                                                              2003               2002
                                                                        ----------------    ---------------
<S>                                                                          <C>                <C>
              Loan receivable from Butler Financial                          $8,612,678         $2,754,691
                   Solutions, LLC (see note 11)                              ==========         ==========
              Other receivables, net
                Due from insurance companies                                 $4,429,450         $1,407,549
                Due from dealers                                                348,229            388,423
                Agent advances                                                  157,527            306,808
                Other                                                           364,681             46,887
                                                                        ----------------    ---------------
                                                                              5,299,887          2,149,667
              Allowance for doubtful accounts                                         -                  -
                                                                        ----------------    ---------------
              Total other receivables, net                                   $5,299,887         $2,149,667
                                                                        ================    ===============
</TABLE>

     During the current fiscal year, the Company advanced money to Butler to pay
     claims for which Reliance Warranty Corporation ("RWC") is obligated to pay.
     As of the end of the fiscal years ended March 31, 2003 and 2002, $8,612,678
     and $2,754,691, respectively, had been paid. The Company expects to receive
     funds from RWC during fiscal year 2004,  which would  reimburse the Company
     for claims that Butler paid out for which RWC was responsible to pay.

     The following table sets forth the carrying  amounts and fair values of the
     Company's loan and other receivables at March 31, 2003.

<TABLE>
<CAPTION>
                                                EXPECTED MATURITY DATE
                                 ----------------------------------------------------------
                                    2004     2005    2006    2007      2008    THEREAFTER     TOTAL     FAIR VALUE
                                    ----     ----    ----    ----      ----    ----------     ------    ----------
<S>                             <C>             <C>    <C>    <C>      <C>         <C>          <C>        <C>
      Other receivable - Butler $8,612,678      -       -        -          -          -   $8,612,678 $8,612,678

      Other receivable, net      5,299,887      -       -        -          -          -    5,299,887  5,299,887
</TABLE>

     The following table sets forth the carrying  amounts and fair values of the
Company's loan and other receivables at March 31, 2002.

<TABLE>
<CAPTION>
                                          EXPECTED MATURITY DATE
                       --------------------------------------------------------------
                          2003      2004      2005      2006      2007   THEREAFTER  TOTAL     FAIR VALUE
                          ----      ----      ----      ----      ----   ----------  ------    ----------
<S>                        <C>        <C>      <C>      <C>        <C>         <C>     <C>        <C>
Loan receivable -
Butler                  $2,754,691     -         -         -         -          -   $2,754,691 $2,754,691

Other receivable, net    2,149,667     -         -         -         -          -    2,149,667  2,149,667
</TABLE>

                                       37
<PAGE>

8.   PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
                                                                               MARCH 31,
                                                                  ------------------------------------
                                                                       2003                2002
                                                                  ----------------    ----------------
<S>                                                                  <C>                 <C>
             Automobiles                                             $     67,701        $     61,280
             Equipment, furniture and fixtures                         10,486,659           9,981,999
             Leasehold improvements                                     2,135,007           1,384,322
             Software development costs                                15,226,184          14,665,867
                                                                  ----------------    ----------------
                                                                       27,915,551          26,093,468
             Less:  Accumulated depreciation and amortization          21,556,526          18,392,289
                                                                  ----------------    ----------------
                                                                        6,359,025           7,701,179
                                                                  ----------------    ----------------
             Assets under capital leases:
               Cost                                                     9,624,745           9,010,339
               Less:  Accumulated amortization                          7,687,457           7,411,805
                                                                  ----------------    ----------------
                                                                        1,937,288           1,598,534
                                                                  ----------------    ----------------

                                                                  ----------------    ----------------
             Total Property and Equipment, net                       $  8,296,313        $  9,299,713
                                                                  ================    ================
</TABLE>

       Amortization  expense on assets under capital  leases for the years ended
       March 31, 2003,  2002 and 2001 was $662,715,  $1,053,797 and  $1,399,860,
       respectively.  Depreciation  expense on property and equipment other than
       under  capital  leases for the years ended March 31, 2003,  2002 and 2001
       was $3,222,339, $3,426,645 and $4,046,873, respectively.


9.      LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

       Long-term debt and capital lease obligations consisted of the following:

<TABLE>
<CAPTION>

                                                                               MARCH 31,
                                                                      ----------------------------
                                                                         2003            2002
                                                                      ------------    ------------
<S>                                                                       <C>             <C>
              Capital lease obligations - for property and
                 equipment payable monthly with interest
                 rates ranging from 4.92% to 19.98% through 2008       $2,020,740      $1,726,793
                 Sundry                                                         -          32,154
              Less: Current maturities                                    802,070         801,788
                                                                      ------------    ------------
              Long-term portion                                        $1,218,670        $957,159
                                                                      ============    ============
</TABLE>


       The aggregate amounts of maturities at March 31, 2003 were as follows:
<TABLE>
<CAPTION>

                                                                         MINIMUM FUTURE
              FISCAL YEAR                                                LEASE PAYMENTS
                                                                  ----------------------------
<S>           <C>                                                             <C>
              2004                                                            $910,082
              2005                                                             635,744
              2006                                                             366,080
              2007                                                             244,834
              2008                                                             168,625
              2009 and thereafter                                                    -
                                                                          -------------
                                                                             2,325,365
              Less amount representing interest                                304,624
                                                                          -------------
              Net                                                           $2,020,740
                                                                          =============
</TABLE>

       The capital  lease  obligations  are  collateralized  by the  capitalized
property and equipment related to the underlying leases.

10.     SPLIT DOLLAR LIFE INSURANCE POLICIES

       Through April 2003,  the Company made payments on split dollar  insurance
       policies  on the  lives  of  six  and  seven  officers  of  the  Company,
       respectively.  The Company has suspended  payment of premiums under these
       policies  until the  permissability  of making  such  payments  under the
       Sabarnes-Oxley  Act of 2002 is  clarified.  The cash  surrender  value of
       these  policies is $877,126  and  $904,172 as of March 31, 2003 and 2002,
       respectively.  The Company is the  beneficiary  of any proceeds  from the
       policies up to the amount of premiums paid.

                                       38
<PAGE>

11.     NOTES RECEIVABLE

       Butler  serves  as the  ultimate  obligor  under  all  service  contracts
       administered  by the Company in exchange  for a fee.  Some of the service
       contracts under which Butler is the obligor were insured by Reliance, and
       the  liquidation  of Reliance has  eliminated  the insurance  coverage to
       Butler.

       Funding  to Butler is  provided  by a special  surcharge,  payable on all
       vehicle service contracts administered by the Company sold after November
       19,  2001.   The   surcharge   will  be  paid  by  agents   through  whom
       Reliance-insured service contracts were sold. Butler will use these funds
       to pay the claims  previously  insured by Reliance and to repay its loans
       from Warrantech.

       Additionally,  in order to assist  Butler  in  addressing  its  potential
       obligations  under the service contracts  previously  insured by Reliance
       for which  Butler is, or the dealer,  or  Warrantech  was,  the  obligor,
       Warrantech Automotive has made loans to Butler, as necessary,  for claims
       obligations  in excess of Butler's fee revenues.  Subject to the terms of
       the  agreement  between the Company and Butler,  the Company has and will
       make further loans to Butler,  as necessary,  for claims  obligations  in
       excess of Butler's fee revenues. All of Warrantech's loans to Butler bear
       interest at the rate of prime plus 2% per annum and will begin to be paid
       down once Butler's fee revenues exceed the claims obligations.

       At March 31, 2003 and 2002,  Warrantech had loaned Butler $14,009,059 and
       $5,435,646,  respectively.  RWC,  which  is  not  part  of  the  Reliance
       liquidation,  is  obligated  to pay  Butler  $8,612,678  and  $2,754,691,
       respectively,  of that amount.  The Company expects Butler to collect the
       $8,612,678  from  RWC  during  the  third  quarter  of  fiscal  2004  and
       simultaneously  the Company will  collect  this amount from  Butler.  The
       portion of the Butler  receivables,  which RWC is legally responsible for
       payments, is reflected as "Other Receivables" on the Consolidated Balance
       Sheet.  The remaining  amount  representing  the loans due from Butler of
       $5,396,381 and $2,680,955,  at fiscal year ended March 31, 2003 and 2002,
       respectively,  are classified as "Notes  Receivable" on the  Consolidated
       Balance Sheet.

       The  following  table sets forth the carrying  amounts and fair values of
the Company's notes and receivables at March 31, 2003.

<TABLE>
<CAPTION>
                                                 EXPECTED MATURITY DATE
                            ------------------------------------------------------------------
                              2004    2005     2006         2007        2008     THEREAFTER      TOTAL      FAIR VALUE
                              ----    ----     ----         ----        ----     ----------      ------     ----------
<S>                           <C>     <C>       <C>         <C>         <C>         <C>            <C>         <C>
Note Receivable - Butler

  Equals 2% above prime             -     -  $2,563,129    $2,833,252          -            -    $5,396,381   $5,396,381

Note Receivable - other        15,272     -           -             -          -            -        15,272       15,272

</TABLE>
       The  following  table sets forth the carrying  amounts and fair values of
       the Company's notes and other receivables at March 31, 2002.

<TABLE>
<CAPTION>
                                       EXPECTED MATURITY DATE
                       --------------------------------------------------------
                         2003   2004   2005    2006     2007     THEREAFTER    TOTAL     FAIR VALUE
                         ----   ----   ----    ----     ----     ----------    ------    ----------

<S>                       <C>    <C>    <C>    <C>       <C>         <C>         <C>        <C>
Note Receivable - Butler

  Equals 2% above prime        -    -    - $2,563,129  $117,826          -    $2,680,955    $2,680,955

Note Receivable - other  137,684    -    -          -         -          -       137,684       137,684
</TABLE>

12.     INCOME TAXES

       A reconciliation of the income tax provision to the amount computed using
the federal statutory rate is as follows:
<TABLE>
<CAPTION>
                                                                  FOR THE YEARS ENDED MARCH 31,
                                           -----------------------------------------------------------------------------
                                                     2003                     2002                       2001
                                           -------------------------  ----------------------   -------------------------
<S>                                             <C>           <C>            <C>       <C>              <C>        <C>
         Income before income taxes             $4,088,322                $4,433,291               $1,101,102

         Federal statutory rate                  1,390,029    34.0%       $1,507,319  34.0%          $374,375     34.0%
         State tax effect                        (106,553)   (2.6)%           92,839   2.6%           280,942     25.5%
         Goodwill                                        -        -                -      -           281,370     25.5%
         Non-deductible items                       34,657     0.8%           34,179  1.15%                 -         -
         Other                                    (91,090)   (2.2)%          104,272   1.5%         (147,973)   (13.4)%
                                           -------------------------  ----------------------   -------------------------
         Provision for income taxes             $1,227,043    30.0%       $1,738,609  39.2%          $788,714     71.6%
                                           =========================  ======================   =========================
                                                                                                         PROVISION
       FOR THE YEAR ENDED MARCH 31, 2003              CURRENT                   DEFERRED                 (BENEFIT)
                                                  ----------------           ---------------         -------------------
       Federal                                            $32,791                $1,200,694                  $1,233,485
       State                                            (104,423)                  (57,021)                   (161,444)
       Foreign                                            110,148                    44,854                     155,002
                                                  ----------------           ---------------         -------------------
       Total                                              $38,516                $1,188,527                  $1,227,043
                                                  ================           ===============         ===================

       FOR THE YEAR ENDED MARCH 31, 2002
       Federal                                         $3,025,722              ($1,492,341)                  $1,533,381
       State                                              176,629                  (35,964)                     140,665
       Foreign                                            100,573                  (36,010)                      64,563
                                                  ----------------           ---------------         -------------------
       Total                                           $3,302,924              ($1,564,315)                  $1,738,609
                                                  ================           ===============         ===================

       FOR THE YEAR ENDED MARCH 31, 2001
       Federal                                       ($4,207,054)                $3,167,458                $(1,039,596)
       State                                               92,579                  (13,041)                      79,538
       Foreign                                          (109,440)                 1,858,212                   1,748,772
                                                  ----------------           ---------------         -------------------
       Total                                         ($4,223,915)                $5,012,629                    $788,714
                                                  ================           ===============         ===================
</TABLE>

                                       39
<PAGE>

       Deferred  tax  assets  and  liabilities  reflect  the net tax  effect  of
       temporary   differences  between  the  carrying  amounts  of  assets  and
       liabilities  for  financial  reporting  purposes and the amounts used for
       income  taxes.  The  components  of the net  deferred  tax  asset  are as
       follows:

<TABLE>
<CAPTION>
                                                               MARCH 31,
                                                  ----------------------------------
                                                       2003               2002
                                                  ----------------   ---------------
<S>                                                    <C>              <C>
       Deferred Tax Assets:
            Deferred revenue                           $5,086,343       $10,864,923
            Deferred rent                                 142,025            68,151
            Provision for doubtful accounts                78,222            88,152
            Accrued bonus                                 149,447           260,123
            Foreign loss benefit                          205,470           594,599
            Net operating loss                          1,682,365         2,310,365
            Net state benefit                             168,813            27,318
            Tax vs. book depreciation                      39,046            14,024
            Other                                         113,284             3,588
                                                  ----------------   ---------------
                 Total assets                           7,665,015        14,231,243

       Deferred Tax Liabilities:
            Deferred direct costs                     (3,390,585)       (7,932,968)
            Tax vs. book depreciation                           -                 -
            Section 174 expense                       (1,119,419)       (1,633,366)
                                                  ----------------   ---------------
                 Total liabilities                    (4,510,004)       (9,566,334)

                                                  ----------------   ---------------
                                                       3,155,011         4,664,909
         Less:  Valuation Allowance                     (256,434)         (577,805)
                                                  ----------------   ---------------
            Net deferred tax asset                     $2,898,577        $4,087,104
                                                  ================   ===============
</TABLE>

       As of March 31, 2003 the Company had a United States net  operating  loss
       carryforward of approximately $4.95 million, which is available to reduce
       future regular federal taxable income.  If not used, the entire carryover
       will expire in the year 2020. As of March 31, 2003,  the Company also had
       a foreign net operating loss carryforward of approximately $1.26 million.
       Due  to  the   uncertainty  of  the  realization  of  these  foreign  tax
       carryforwards,  the Company has established a valuation allowance against
       these  carryforward  benefits of  approximately  $256,434 and $577,805 at
       March 31, 2003 and 2002, respectively.

       Section 174 expense represents research and experimental expenses related
       to the development of a proprietary  relational  database and interactive
       software.

                                       40
<PAGE>


13.     COMMITMENTS AND CONTINGENCIES

       OPERATING  LEASE  COMMITMENTS  - The Company  leases office and warehouse
       space under noncancellable  operating leases expiring through 2012. These
       leases include  scheduled rent increases over their respective terms. The
       accompanying  consolidated  statements of operations reflect rent expense
       on a straight-line basis over the lease terms, which differ from the cash
       payments  required.  Rent expense,  net of sub-lease  income,  charged to
       operations  for the  years  ended  March  31,  2003,  2002  and  2001 was
       $1,837,314, $1,389,764 and $2,403,489, respectively.

       Future  minimum  commitments  under  these  leases  that have  initial or
       remaining  lease  terms in excess of one year at March 31,  2003,  are as
       follows:

                                           FISCAL YEAR
                                           -----------
                                                 2004     $1,883,303
                                                 2005      1,153,777
                                                 2006      1,108,065
                                                 2007      1,087,189
                                                 2008      1,061,189
                              Thereafter through 2012      5,499,512
                                                      ---------------
                  Total future minimum lease payments   $11,793,035
                                                      ===============



       EMPLOYMENT  CONTRACTS  - The Company has  employment  contracts  with its
       officers and certain key employees. These employment contracts,  expiring
       on various dates through 2004,  provide for aggregate minimum annual base
       compensation of $2,224,837.  Certain  agreements also call for (i) annual
       increases, (ii) cost of living increases, (iii) automobile allowances and
       (iv) additional  compensation if certain defined  performance  levels are
       attained.  This additional compensation is to be paid in the form of cash
       and/or Company common stock.  The Company also agreed to forgive interest
       which has accrued annually on a note between the Company and its CEO, for
       as long as the CEO remains in the Company's employ.

       LINE OF CREDIT - The Company  executed an agreement  with Great  American
       Insurance  Company ("GAIC") on October 9, 2002,  whereby,  GAIC agreed to
       provide  funding by  extending a favorable  change of its credit terms to
       the Company.

       GAIC also agreed to extend a separate  line of credit for an amount up to
       $3  million to the  Company,  subject  to  certain  adjustments,  to fund
       unanticipated working capital requirements. Interest is charged on monies
       advanced  from the line of credit at an annual  rate of prime plus 2%. No
       amounts have been drawn on the line of credit since its inception.

       EQUIPMENT  FINANCING  -  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 fiscal year ended March
       31, 2003  amounted to $1,120,273  compared to $594,797  during the fiscal
       year ended  March 31,  2002.  At fiscal  year end 2003,  the  Company had
       $2,020,740 in debt from capital lease obligations  compared to $1,758,947
       at fiscal year-end 2002.


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

       STAPLES THE OFFICE SUPERSTORE, INC.
       Staples the Office  Superstore,  Inc.  ("Staples")  v. ACE  Property  and
       Casualty Insurance Company,  Warrantech  Consumer Product Services,  Inc.
       and Warrantech Help Desk, Inc., No. 2001-02277,  District Court of Harris
       County, Texas.

                                       41
<PAGE>

       In  accordance  with  a  Service   Contract   Administration   Agreement,
       Warrantech  administered a service  contract  program for Staples.  For a
       period  of time,  that  program  was  underwritten  by ACE  Property  and
       Casualty  Insurance Company (f/k/a CIGNA Property and Casualty  Insurance
       Company). In March 2001, ACE informed Warrantech that it was implementing
       changes in the process pursuant to which claims  underwritten by ACE were
       to be  adjusted  and paid.  Although  Warrantech  would  continue to take
       inbound  calls and validate  coverage,  ACE would now confirm  diagnoses,
       dispatch service and pay servicer invoices.  Shortly after implementation
       of these  changes,  Staples  reported  that it had  witnessed  a material
       increase  in  complaints  from  customers   holding   service   contracts
       underwritten  by  ACE.  These   complaints  were  primarily   focused  on
       inordinate delays in service  delivery.  Although Staples discussed these
       problems with  Warrantech,  ACE continued to operate under the new claims
       handling procedures. In an effort to satisfy customer complaints, Staples
       stated that it had spent a substantial  amount of its own funds to repair
       or replace covered products.

       This action had two  distinct  components.  Initially,  Staples  sought a
       Temporary  Injunction  against ACE and Warrantech.  The motion, as filed,
       asked that (i) Staples be given control of the toll free telephone  lines
       on  which  customers  call  for  service  and  (ii)  ACE be  required  to
       re-institute those claims handling procedures that were in place prior to
       March 2001. That motion was denied but the parties entered into an Agreed
       Order that governs the administration of the Staples portfolio of service
       contracts.

       Staples  also  pursued  an  action  for  damages  against  both  ACE  and
       Warrantech.  It sought to recover  the  amounts  it spent to satisfy  its
       customers and certain unspecified  amounts  representing loss of business
       and damage to its reputation. It claimed entitlement to these amounts was
       based on a variety of theories  including  breach of contract,  fraud and
       tortuous  interference with business.  Warrantech  believed the claims as
       asserted  against it were without merit.  Warrantech also believed it had
       meritorious  claims  against ACE arising out of these  allegations  which
       claims may be asserted in this litigation or in the arbitration  referred
       to below.  Settlement  discussions  were concluded and all parties to the
       litigation  executed a settlement  agreement on June 11, 2002,  which the
       Court approved and subsequently dismissed the case.

       Simultaneously  with the settlement of the litigation  with Staples,  the
       Company  granted  Staples  options to purchase one (1) million  shares of
       Warrantech's  common  stock at an exercise  price of $2.00 per share (the
       "Staples  Options").  If Staples  exercises all of the options,  it would
       hold an  equity  position  in  Warrantech  of  approximately  6.5% of the
       Company's outstanding shares. Under the guidance of SFAS 123, the Company
       utilized  the  Black-Scholes  option  pricing  model to estimate the fair
       value of the options granted under the settlement agreement. As it had no
       value under the  Black-Scholes  option  pricing  model,  no  compensation
       expense was recorded in the Company's results of operations.

       ACE PROPERTY AND CASUALTY INSURANCE COMPANY

       In the  Matter of the  Arbitration  between  ACE  Property  and  Casualty
       Insurance Company f/k/a CIGNA Property and Casualty  Insurance Company v.
       Warrantech Corporation,  Warrantech Consumer Product Services, Inc., WCPS
       of Florida, Inc. and Warrantech Help Desk, Inc.

       In accordance with an Administrative  Agreement between the various named
       Warrantech  entities and CIGNA,  ACE made a demand for  arbitration  of a
       variety of claims that ACE asserted against Warrantech.  These claims can
       be  divided  into  two  general  categories.   The  first  arose  out  of
       Warrantech's  administration of its service contract program with CompUSA
       prior to and immediately  following the  termination of the  relationship
       between   Warrantech  and  CompUSA.   The  remaining  claims  related  to
       Warrantech's general claims handling procedures. Although all claims were
       not set forth with  specificity,  it was evident  that ACE was seeking to
       recover  damages  in an  amount  in  excess  of  twenty  million  dollars
       ($20,000,000).

       In March 2003, the parties entered into a Final Settlement  Agreement and
       Release  ("Settlement").  Pursuant to this  Settlement,  ACE released the
       Warrantech  entities from any and all claims it now has or may acquire at
       any time in the future and the Warrantech  entities gave ACE a comparable
       release.  In accordance  with this general  release,  the arbitration was
       dismissed.  In addition, the parties agreed upon a methodology to satisfy
       all  outstanding  invoices from the various service centers that provided
       repair services during the time that ACE was the insurer.

                                       42
<PAGE>

       Neither ACE nor any of the  Warrantech  entities  incurred any  financial
       liability as a direct result of obtaining  this  Settlement.  The parties
       will incur certain costs with respect to  satisfying  the service  center
       invoices but the amounts,  in the opinion of management,  will not have a
       material  effect  on  the  Company's  results  of  operations,  financial
       condition or cash flows.

       Warrantech Consumer Product Services,  Inc. et al.  ("Warrantech") v. ACE
       Property and Casualty Insurance Company and Does 1-10, inclusive ("ACE"),
       Superior Court of the State of California, County of Los Angeles.

       In November 2002, Warrantech filed suit against ACE for (i) insurance bad
       faith (aka breach of the implied covenant of good faith and fair dealing)
       and (ii) breach of contract.  This  complaint  arose out of ACE's alleged
       unreasonable  delay in paying,  or failure to pay,  claims  submitted  by
       service  providers  under  service  contracts  underwritten  by ACE. In a
       number of  instances,  this delay  and/or  failure  had  resulted  in the
       service  provider filing suit against  Warrantech to recover the relevant
       payments. Warrantech sought compensatory and punitive damages although no
       specific amount was specified.

       This  litigation was included in the Settlement  described  above and the
       matter has been dismissed with prejudice.

       MICHAEL A. BASONE
       Mr.  Basone is a former  Executive  Vice  President  and Chief  Operating
       Officer of Warrantech,  having resigned in February 2000.  Several months
       after  resigning,  Mr. Basone  contacted the Company through his attorney
       and  claimed  that the  Company's  conduct was such that he was forced to
       resign. For this alleged  "constructive  termination"  without cause, Mr.
       Basone  sought  an amount  equal to what he would  have  received  had he
       completed the term of his employment agreement. The Company believes this
       assertion is  completely  without  merit and has  rejected  Mr.  Basone's
       demand for payment.  Mr. Basone has filed a Demand for  Arbitration  with
       the American Arbitration  Association that seeks damages in the amount of
       $300,000.  An  arbitration  hearing was held on May 13 & 14, 2002 and, on
       July 31, 2002,  the  arbitrator  issued his decision.  The arbitrator has
       denied Mr.  Basone's claim and has held that wages withheld by Warrantech
       shall be applied  to offset  amounts  owed to  Warrantech  by Mr.  Basone
       pursuant to a  promissory  note.  Each party is  responsible  for its own
       attorney's fees and for one-half of the costs of the arbitrator.

       MARKET WEST COMPUTER GROUP

       M.W.C.G.,  Inc.,  d/b/a/ Market West Computer  Group, on behalf of itself
       and all others similarly  situated v. ACE Property and Casualty Insurance
       Company, Warranty Corporation of America ("WaCA"), Warrantech Corporation
       and Warrantech  Consumer Product Services,  Inc. ("WCPS"),  United States
       District Court, Central District of California (Western Division).

       Market  West  is one of many  service  providers  used by WCPS to  repair
       computer-related equipment pursuant to its service contract program. When
       the   administration  of  service  contracts   underwritten  by  ACE  was
       transferred  from WCPS to WaCA,  many service  providers like Market West
       complained  of  material  changes  in  claim  adjustment  procedures  and
       unreasonable  delays in claim  payment.  Market  West filed suit in state
       court in California against the named parties to recover monies it claims
       to be owed as a result of the repair work it has performed.

       The  amount   sought  by  Market  West  under  its   initial   claim  was
       approximately  $225,000.  Warrantech  believed  that  if the  claim  were
       successful,  substantially  all of the  amount  that is awarded to Market
       West  would  be owed  by the  insurers  that  underwrote  the  liability.
       Following removal of the lawsuit to federal court,  Market West attempted
       to have a national class of plaintiffs certified. The class certification
       petition  was denied by the court and Market West was directed to proceed
       with its individual claim. A settlement agreement was executed on October
       28, 2002, under which  Warrantech's  ultimate liability was substantially
       less than the amount originally  sought. All outstanding claims have been
       processed, resulting in a $62,533 charge to operations during fiscal year
       ended March 31, 2003, and the matter has been concluded.

                                       43
<PAGE>

       LLOYD'S UNDERWRITERS

       Certain Underwriters at Lloyd's,  London and Other Reinsurers Subscribing
       to Reinsurance  Agreements  F96/2992/00 and No. F97/2992/00 v. Warrantech
       Corporation,  Warrantech  Consumer Product Services,  Inc. and Warrantech
       Help Desk, Inc.,  District Court of Tarrant County,  Texas, 17th Judicial
       District.

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

       The award supports the assertions of Houston  General with respect to the
       validity of the claims that it paid.  Warrantech  was not involved in the
       selection of these  re-insurers,  has no  contractual  relationship  with
       them, and has had no reporting or other obligation to them. Despite these
       facts,  the Lloyd's  syndicates  now seek to recover  some portion of the
       arbitration  award  from  the  Warrantech  entities  on two  theories  of
       liability.  The first is that, at the time certain  claims were presented
       to  Houston   General  for  payment,   the  Warrantech   entities  either
       fraudulently  or  negligently  represented  to Houston  General that such
       claims  were  valid.   The  second  is  that  the   Warrantech   entities
       intentionally  failed to comply with their legal obligations to cooperate
       with the parties  during the discovery  process for the  arbitration.  No
       specific  demand for damages is contained in the  complaint.  The parties
       are presently engaged in extensive document discovery and, in particular,
       the review of electronic files and databases.

       Management  believes that this case is without merit;  however, it is not
       able to predict the outcome of this litigation.  The Company is unable at
       this time to determine the Company's potential liability,  if any, and as
       such, the accompanying  financial  statements do not reflect any estimate
       for losses.


       American Home Assurance Co., et al, v.  Warrantech  Automotive,  Inc., 99
       Civ. 12040 (BSG)

       Service Guard Insurance Agency, Inc. v. Warrantech Automotive,  Inc., New
       Hampshire Insurance Company, Ronald Glime and Christopher Ford, Cause No.
       99-12650, 126th Judicial District Court of Travis County, Texas

       National Union Fire Insurance  Company of  Pittsburgh,  PA v.  Warrantech
       Corporation and Warrantech Automotive, Inc., United States District Court
       (S.D.N.Y.)

       Each of the matters  set forth  above was  settled  pursuant to a certain
       Settlement Agreement and Release of Claims, effective as of July 25, 2001
       (the  "Agreement").  As  referenced in the title of the  Agreement,  each
       party released all other relevant parties from all claims asserted in any
       of the litigations and all claims that could have been asserted in any of
       said litigations.  Furthermore, releases were granted with respect to all
       potential  future claims  arising out of the subject matter of any of the
       litigations.  As  a  result  of  the  settlement,  in  August  2001,  AIG
       reimbursed  the Company for its legal fees  associated  with its lawsuit;
       $824,332 of which is reflected in the  financial  statements  ended March
       31, 2002 as a legal settlement.

                                       44
<PAGE>

       Additionally, AIG was granted 2,000,000 options to purchase the Company's
       common stock at $2.00 per share,  expiring in five years. The fair market
       value of the option, according to the Black-Scholes option pricing model,
       after tax, was zero.

       INSURANCE  LIABILITY  -  As a  consequence  of  the  September  11,  2001
       tragedies,  one of the Company's  former  insurance  carriers,  Reliance,
       incurred  potential  claim  losses  that  were  greatly  in excess of its
       ability   to  pay  them.   Consequently,   the   Pennsylvania   Insurance
       Commissioner  placed Reliance in  receivership in October 2001.  Reliance
       had been an insurer of the Company's  automotive  contracts  until August
       2000.  The  Company  was  the  obligor  under  approximately  20%  of the
       outstanding  Reliance-insured  contracts.  As disclosed in Note 11 above,
       Butler assumed the obligations of the Company. The Company agreed to make
       loans to Butler to fund the  required  claims  payments it  assumed.  The
       Company  believes  that the  arrangements  with Butler and GAIC provide a
       mechanism to cover the claims under all of the service contracts in which
       the Company was the obligor. If, however, Butler, for any reason, becomes
       unable to pay such claims, which were previously insured by Reliance,  or
       if GAIC  ceases to  provide  credit to the  Company  in order to fund any
       shortfalls  required by Butler, the Company may ultimately be required to
       honor the  claims,  if any,  under those  contracts  for which it was the
       obligor.  Management  is not  presently  able to determine  the Company's
       potential claims liability,  if any, and believes the likelihood that the
       Company  will have to honor any obligor  claims is remote.  As such,  the
       accompanying  financial statements do not reflect any estimate for claims
       losses.

14.     STOCK OPTION AND OTHER BENEFIT PLANS

       STOCK INCENTIVE PLANS - Under the Company's 1998 Employee Incentive Stock
       Option Plan, as amended (the "1998 amended  Plan"),  1,041,987  shares of
       the  Company's  common  stock are  reserved  for  issuance  to  employees
       (including  officers)  upon  exercise of options  granted  under the 1998
       amended  plan.  Options are to be granted at an  exercise  price not less
       than 100% of the fair market value of the Company's  common stock at date
       of grant. The number of shares granted, terms of exercise, and expiration
       dates  are to be  decided  at the  date of grant  of each  option  by the
       Company's  Board of  Directors.  The 1998 Amended Plan will  terminate in
       August 2008 unless sooner terminated by the Board of Directors.

       STOCK AWARDS -  Restricted  common stock of the Company may be awarded to
       officers,  key  employees,   non-employee  directors  and  certain  other
       non-employees.  Shares  granted  are subject to certain  restrictions  on
       ownership and  transferability.  Such restrictions on current  restricted
       stock  awards  typically  lapse one to three years  after the award.  The
       deferred  compensation  expense  related to  restricted  stock  grants is
       amortized to expense on a straight-line  basis over the period of time of
       the  restrictions  are  in  place.  Restricted  common  stock  awards  to
       employees reduce stock options otherwise available for future grants. The
       common  stock  awards  are  valued  based  on the  opening  price  of the
       Company's  stock on the  date  the  award  is  approved  by the  Board of
       Directors.  During the year end March 31, 2003, 134,722 restricted shares
       were awarded to directors and employees and 87,500 restricted shares were
       awarded to  non-employees.  Common stock awards  totaling  155,912 shares
       were granted to directors and employees and 51,225 restricted shares were
       awarded to non-employees during the fiscal year ended March 31, 2002.

       The Company  recognized  costs of $126,505,  $75,416 and $0 for the years
       ended  March 31,  2003,  2002 and  2001,  respectively,  for  stock-based
       compensation to employees and directors.  The Company recognized costs of
       $74,688,  $49,997 and $118,717  for the years ended March 31, 2003,  2002
       and 2001, respectively, for stock-based compensation to non-employees.

                                       45
<PAGE>

       STOCK OPTION PLANS - At March 31, 2003,  the Company had one stock option
       plan, which is described above. SFAS No. 123, "Accounting for Stock-based
       Compensation,"  defines a fair value method of accounting for an employee
       stock  option.  SFAS No.  123  allows a company  to  continue  to measure
       compensation  costs  for  theses  plans  using  APB  No.  25 and  related
       interpretations. The Company has elected to continue using APB No. 25 for
       accounting  for its employee stock  compensation  plan.  Accordingly,  no
       compensation cost has been recognized for its fixed stock option plan. If
       Warrantech  had  determined  compensation  cost for its stock option plan
       based on the fair  value at the grant  dates for  awards  under the plan,
       consistent  with the method  prescribed  by SFAS 123, the  Company's  net
       income and  earnings  per share would have been  reduced to the pro forma
       amounts as follows:

<TABLE>
<CAPTION>
                                                  FOR THE YEARS ENDED MARCH 31,
                                        --------------------------------------------------
                                            2003               2002             2001
                                        --------------    ---------------   -------------
<S>                                        <C>                <C>                <C>
Net income as reported                     $2,861,279         $2,694,682         $312,388
Net income (loss)  pro forma               $2,793,993         $2,453,280       ($510,396)
Shares - Basic                             15,317,881         15,259,437       15,265,114
Basic earnings per share as reported            $0.19              $0.18            $0.02
Basic earnings per share pro forma              $0.18              $0.16          ($0.05)
</TABLE>

       Presented  below is a summary of the  status of the stock  options in the
       plan and the related  transactions  for the years  ended March 31,  2003,
       2002 and 2001.

<TABLE>
<CAPTION>
                                                      2003                       2002                       2001
                                           ---------------------------------------------------------------------------------
                                                          WEIGHTED                    WEIGHTED                   WEIGHTED
                                                           AVERAGE                    AVERAGE                    AVERAGE
                                                          EXERCISE                    EXERCISE                   EXERCISE
                                              SHARES        PRICE        SHARES        PRICE         SHARES       PRICE
                                           ---------------------------------------------------------------------------------
<S>                                           <C>               <C>      <C>                <C>        <C>            <C>
Options outstanding at beginning of year      1,416,283         $1.54    1,185,748          $2.18      582,090        $3.51
Granted                                         664,048          0.73      361,253           0.89      671,301         1.23
Canceled/Surrendered                          (687,284)        (2.13)     (70,108)         (1.32)            -            -
Exercised                                       (5,000)        (0.42)            -              -            -            -
Forfeited                                      (81,667)        (0.92)     (60,610)         (1.35)     (67,643)       (4.24)
                                           ---------------------------------------------------------------------------------
Options outstanding at end of year            1,306,380         $1.10    1,416,283          $1.93    1,185,748        $2.18
                                           =================================================================================

                                           ---------------------------------------------------------------------------------
Options exercisable at end of year              662,097         $1.33      531,261          $1.54      164,912        $2.18
                                           =================================================================================

</TABLE>

       The  weighted  average  fair  value of stock  options  at date of  grant,
       calculated using the Black-Scholes  option-pricing  model, granted during
       the years ended March 31, 2003, 2002 and 2001 was $0.48, $1.22 and $0.84,
       respectively.

       The  following  table  summarizes  the status of all  Warrantech's  stock
       options outstanding and exercisable at March 31, 2003.

<TABLE>
<CAPTION>
                                                          STOCK OPTIONS                     STOCK OPTIONS
                                                           OUTSTANDING                       EXERCISABLE
                                             --------------------------------------------------------------------
                                                             WEIGHTED     WEIGHTED                    WEIGHTED
                                                             AVERAGE       AVERAGE                     AVERAGE
                                                            REMAINING     EXERCISE                    EXERCISE
  RANGE OF EXERCISE PRICES                      SHARES      LIFE (YRS)      PRICE        SHARES         PRICE
  ------------------------                   --------------------------------------------------------------------
<S>        <C>                                    <C>              <C>         <C>          <C>            <C>
  $0.67 to $0.87                                  909,082          7.90        $0.74        227,019        $0.72
  $1.3125 to $1.50                                436,008          5.63        $1.33        380,713        $1.33
  $2.00                                         4,650,000          3.51        $2.00      3,000,000        $2.00
  $3.25 to $3.375                                 101,290          1.62        $3.35        101,290        $3.27
                                             --------------------------------------------------------------------
  Total at March 31, 2003                       6,096,380          4.52        $1.78      3,709,022        $1.89
                                             ====================================================================
    Total at March 31, 2002                     3,416,283          5.02        $1.97      2,531,257        $1.90
                                             ====================================================================

    Total at March 31, 2001                     1,185,748          6.64        $2.18        264,912        $2.18
                                             ====================================================================
</TABLE>

       OTHER  STOCK  OPTIONS - The Company  may issue  options to  purchase  its
       common stock to officers, non-employees, non-employee directors or others
       as part of settlements in disputes and/or  incentives to perform services
       for the Company. The Company accounts for stock options issued to vendors
       and  non-employees  of the  Company  under SFAS No. 123  "Accounting  for
       Stock-based  Compensation."  In addition to the options  described below,
       during the year ended  March 31,  2003,  the  Company  issued  options to
       purchase  30,000 shares of common stock to vendors at a weighted  average
       exercise price of $0.73 per share and options to  purchase 10,000  shares
       of common stock to  non-employee  vendors at an exercise  price of $0.675
       per share during the fiscal year ended March 31, 2002.  The fair value of
       each  option   grant  is  estimated  on  the  date  of  grant  using  the
       Black-Scholes  option-pricing  model with  weighted  average  assumptions
       identical  to those used for  options  granted to  employees.

                                       46
<PAGE>

       The fair value of Warrantech  stock options used to compute pro forma net
       income and earnings per share disclosures is the estimated value at grant
       date using the  Black-Scholes  option-pricing  model  with the  following
       weighted average assumptions for the years ended March 31, 2003, 2002 and
       2001, respectively: expected dividend yield of 0%; expected volatility of
       30% - 50%; a risk free interest rate of 4.5% - 5.0%; and expected  option
       life of 3 to 5 years.

       On  October  1, 2002, as  part  of  the Agreement between the Company and
       GAIC  to   provide  extended  credit  terms,  GAIC  received  options  to
       purchase  up  to  1,650,000 shares  of common  stock at an exercise price
       of  $2.00  per  share  (the  "GAIC Options"). If  GAIC exercises  all  of
       these  options,  it  would  own   approximately   10.8% of  the Company's
       outstanding   shares.  As  the   options  had    no  value    under   the
       Black-Scholes   option   pricing   model,  no  compensation  expense  was
       recorded  in  the  Company's results of  operations  for  the fiscal year
       ended  March  31,  2003.

       On June 11, 2002,  simultaneously  with the  settlement of the litigation
       with Staples,  the Company granted Staples options to purchase  1,000,000
       shares  of common  stock at an  exercise  price of $2.00  per share  (the
       "Staples  Options").  If Staples  exercises all of the options,  it would
       hold an  equity  position  in  Warrantech  of  approximately  6.5% of the
       Company's   outstanding  shares.

       On August 24, 2001,  simultaneously with the settlement of the litigation
       among Service Guard Insurance Agency, Inc., AIG and related entities, the
       Company granted AIG options to purchase  2,000,000 shares of common stock
       at an  exercise  price of $2.00 per share  (the  "AIG  Options").  If AIG
       exercises  all of the  options,  it would  own  approximately  12% of the
       Company's outstanding common shares. The fair value of the above options,
       as determined under the Black-Scholes option pricing model, of $21,000 in
       fiscal 2003 and $0 in fiscal 2002 was charged to operation.

       The GAIC,  Staples and AIG Options are each  exercisable  for a period of
       five years.  Warrantech has the right to redeem these options at any time
       if its  shares  trade at a price of $3.00  per  share or more on any five
       consecutive  trading  days.  The  redemption  price is $.001  per  share.
       However,  if Warrantech elects to redeem the options,  GAIC,  Staples and
       AIG will have the right to exercise their respective options  immediately
       prior to the redemption.

       The GAIC  options are  exercisable  no earlier  than  January 1, 2006 nor
       later than December 31, 2006. In the event that  Warrantech's  stock does
       not trade above $2 per share for ten  consecutive  trading  days prior to
       January  1,  2004,  the  exercise  price of the  option is  automatically
       reduced to $1 per share.

       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 an aggregate of 3,000,000 of
       their vested  options to purchase  Warrantech  common  stock.  Promissory
       notes totaling  $8,062,500  were signed with interest  payable over three
       years at an annual  rate of 6%.  The  promissory  notes,  which were with
       recourse and secured by the stock  certificates  issued,  matured July 5,
       2001.  On March  22,  1999,  Joel San  Antonio  delivered  an  additional
       promissory note for $595,634,  payable to the Company,  representing  the
       amounts  funded by the Company for the payroll  taxes payable by him upon
       for the exercise of these  options.  The exercise of these stock  options
       and  the  anticipated  tax  benefit  from  this  transaction  represented
       approximately $10 million.  These amounts are recorded as a contra-equity
       account, which is a reduction of stockholders' equity.

                                       47
<PAGE>

       In February  2000,  the Company  agreed to  restructure  the loans to Mr.
       Tweed and Mr. White by  capitalizing  the interest due and  extending the
       loan maturity  from July 5, 2001 until January 31, 2005.  Interest on the
       restructured  loans accrued  annually at the  applicable  federal rate of
       6.2%. Under the restructuring, interest first became payable on the third
       anniversary of the restructuring and was payable annually thereafter.  In
       July 2002, the Company extended the loan maturity dates until February 1,
       2007 (the "loan extension").  The interest, which accrued on the notes up
       to the time of the loan  extension,  was  added to the  principal  of the
       notes.  The new principal amount of Mr. Tweed's note is $3,189,675 and of
       Mr. White's note is $2,912,430.  The applicable  federal interest rate on
       the notes following the loan extension is 4.6%. Under the loan extension,
       interest  on the notes will  accrue  until  February 1, 2005 and, at that
       time,  the accrued  interest will be added to the principal of the notes.
       Interest on the new principal amounts  thereafter become payable annually
       until maturity.

       In February 2000, the Company also agreed to restructure the two existing
       loans to Mr. San Antonio (as  restructured,  the  "Combined  Loan").  The
       Combined  Loan,  finalized in March 2001, was due on January 31, 2005 and
       accrued interest annually at 5.2%. In July 2002, the Company extended the
       loan  maturity  date until  February  1, 2007 and the  interest  rate was
       changed to the then applicable federal rate of 4.6%. The principal amount
       of Mr. San  Antonio's  note is  $4,165,062.  Interest will be forgiven as
       long as Mr. San Antonio  continues  to be employed  by the  Company.  The
       $200,506,  $330,631  and $230,460 of interest  which  accrued on the note
       during fiscal years 2003, 2002 and 2001,  respectively has been forgiven.
       The interest was charged to operations as additional  compensation in the
       respective fiscal years the interest income was accrued.
       The total amount of the  restructured  loans to Mr. Tweed,  Mr. White and
       Mr. San Antonio, including the capitalized interest, is $10,462,094.

       SAVINGS AND RETIREMENT PLAN

       The Company and its qualified employees also participate in a Savings and
       Retirement  Plan also known as the 401(k) Plan (the  "Plan").  All of the
       Company's  domestic employees who have completed one year of service with
       the  Company  are  eligible  to  participate  in the  Plan.  The  Company
       contributed 33% of an eligible employee's  contribution to the Plan, with
       a  maximum  up  to 4% of  the  employee's  compensation  or  $4,000.  The
       Company's  contribution  for the benefit of the employee,  vests after an
       employee has been  employed by the Company for three  years.  The Company
       contributed $95,819 and $88,762 to the Plan during the fiscal years ended
       March 31, 2003 and 2002, respectively. Beginning in fiscal year 2004, the
       Company   will  begin   contributing   66%  of  an  eligible   employee's
       contribution  to the  Plan,  with a  maximum  up to 4% of the  employee's
       compensation or $4,000.

15.     OTHER INCOME (EXPENSE)

       Other income (expense) consists of the following:
<TABLE>
<CAPTION>
                                                            FOR THE YEARS ENDED MARCH 31,
                                                 -----------------------------------------------------
                                                         2003               2002            2001
                                                         ----               ----            ----
<S>                                                          <C>              <C>          <C>
              Interest and dividend income                   $933,944         $855,877     $1,292,335

              Interest expense                              (275,185)        (217,072)      (234,102)

              Gain (loss) on sale of assets                  (70,463)         (45,018)       (23,258)

              Credit card usage rebate                        453,760          147,735              -

              Miscellaneous income (expense)                   18,790          115,944       (12,463)
                                                 -----------------------------------------------------
                  Total Other Income (expense)             $1,060,846         $857,466     $1,022,512
                                                 =====================================================
</TABLE>


16.     SIGNIFICANT CUSTOMERS

         During the fiscal year ended March 31,  2003,  the Company did not have
         any  customers  which  accounted  for more  than  10% of the  Company's
         consolidated net earned administrative fees. In 2003, 2002 and 2001 net
         earned  administrative  fees  from a  significant  customer  were  $2.7
         million, $4.2 million and $4.5 million,  respectively,  which accounted
         for 7%, 11% and 9% of the  Company's  total net  earned  administrative
         fees,  respectively.  In 2003, 2002 and 2001 net earned  administrative
         fees from  another  customer  were $0  million,  $0  million  and $12.0
         million,  respectively,  which  accounted  for  0%,  0% and  25% of the
         Company's total net earned administrative fees,  respectively.  Because
         Warrantech  could not reach an agreement  with this  customer to extend
         its agreement on terms which would not erode the  profitability  of the
         program, the program expired on February 26, 2001.

                                       48
<PAGE>

17.      EARNINGS PER SHARE

       The  computations  of  earnings  per share for the years  ended March 31,
2003, 2002 and 2001 are as follows:

<TABLE>
<CAPTION>

                                                                    FOR THE YEARS ENDED MARCH 31,
                                                        -------------------------------------------------------
                                                              2003                2002              2001
                                                        -----------------    ---------------   ----------------
<S>                                                           <C>                <C>                  <C>
    Numerator:
       Net income applicable to common stock                  $2,861,279         $2,694,682           $312,388
                                                        =================    ===============   ================
    Denominator:
        Average  outstanding  shares  used  in  the
        computation  of  per  share earnings:
          Common Stock issued-Basic shares                    15,317,881         15,259,437         15,265,114
          Stock Options (treasury method)                         81,029              2,007              6,104
                                                        -----------------    ---------------   ----------------
          Diluted shares                                      15,398,910         15,261,444         15,271,218
                                                        =================    ===============   ================
    Earnings Per Common Share:
       Basic                                                       $0.19              $0.18              $0.02
                                                        =================    ===============   ================
       Diluted                                                     $0.19              $0.18              $0.02
                                                        =================    ===============   ================

</TABLE>

18.     ACCUMULATED OTHER COMPREHENSIVE INCOME

       The components of accumulated other comprehensive  income, net of related
       tax, for the years ended March 31, 2003, 2002 and 2001 are as follows:


<TABLE>
<CAPTION>
                                                                    FOR THE YEARS ENDED MARCH 31,
                                                        -------------------------------------------------------
                                                             2003                2002                2001
                                                        ----------------    ---------------     ---------------
<S>                                                             <C>                 <C>                <C>
         Unrealized gain/(loss) on investments                  $18,046             $4,333             $13,269
         Accumulated translation adjustments                  (215,020)           (56,361)            (45,218)
                                                        ----------------    ---------------     ---------------
         Accumulated other comprehensive income              ($196,974)          ($52,028)           ($31,949)
                                                        ================    ===============     ===============
</TABLE>



19.     SEGMENT INFORMATION

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

                                       49
<PAGE>




<TABLE>
<CAPTION>
                                                  CONSUMER                      REPORTABLE
YEAR ENDED                       AUTOMOTIVE       PRODUCTS     INTERNATIONAL     SEGMENTS         OTHER        TOTAL
------------------------------ ---------------  -------------  --------------  -------------   -----------  --------------
MARCH 31, 2003
<S>                                <C>            <C>            <C>            <C>            <C>            <C>
Earned administrative fee          $18,517,389    $13,765,514    $3,181,849     $35,464,752    $2,691,162     $38,155,914
Profit (loss) from operations       10,608,684      (182,128)        94,101      10,520,657   (7,493,181)       3,027,476
Pretax income (loss)                 4,368,822    (1,222,451)        88,121       3,234,492       313,131       4,088,322
Net interest income (expense)         (47,769)          1,935         8,680        (37,154)       695,913         658,759
Depreciation/amortization              382,361      1,688,070        86,885       2,157,316     1,727,738       3,885,054
Total assets                        41,323,629     20,618,836     2,914,806      64,857,271     9,998,857      74,856,128

MARCH 31, 2002
Earned administrative fee          $19,346,137    $16,711,092    $2,353,491      38,410,720     (410,445)     $38,000,275
Profit (loss) from operations       12,510,319    (1,184,711)     (578,137)      10,747,471   (7,171,646)       3,575,825
Pretax income (loss)                 8,055,756    (3,357,851)     (907,600)       3,790,305       642,986       4,433,291
Net interest income                     95,080         55,526        26,477         177,083       461,722         638,805
Depreciation/amortization              398,229      1,674,238        79,999       2,152,466     2,327,976       4,480,442
Total assets                        38,883,561     28,185,333     3,418,178      70,487,072     6,168,946      76,656,018

MARCH 31, 2001
Earned administrative fee          $15,989,590    $29,872,227    $1,815,700      47,677,517     (361,475)     $47,316,042
Profit (loss) from operations        8,373,347      9,304,313   (2,106,859)      15,570,801  (15,492,211)          78,590
Pretax income (loss)                 4,260,439      1,559,033     1,392,294       7,211,766   (6,110,664)       1,101,102
Loss on abandonment of assets                                     1,029,731       1,029,731   (1,029,731)               -
                                             -              -
Net interest income                     68,219         52,383      (16,851)         103,751       954,482       1,058,233
Depreciation/amortization              831,016      1,871,897       768,762       3,471,675     2,945,440       6,417,115
Total assets                        44,955,804     41,218,599     2,879,066      89,053,469     7,403,053      96,456,522

</TABLE>



                                       50
<PAGE>



                     WARRANTECH CORPORATION AND SUBSIDIARIES
                      SUPPLEMENTAL QUARTERLY FINANCIAL DATA
                                   (UNAUDITED)

        The following fiscal 2003 and 2002 quarterly  financial  information for
        each of the three month  periods ended June 30,  September 30,  December
        31, 2002 and 2001 and March 31, 2003 and 2002 is unaudited.  However, in
        the  opinion  of  management,  all  adjustments  (consisting  of  normal
        recurring  adjustments)  necessary  to  present  fairly  the  results of
        operations  for such periods have been made for a fair  presentation  of
        the results shown.

<TABLE>
<CAPTION>
                                    QUARTER ENDED              QUARTER ENDED             QUARTER ENDED           QUARTER ENDED
                                       JUNE 30,                SEPTEMBER 30,              DECEMBER 31,              MARCH 31,
                                  2002          2001        2002          2001         2002         2001        2003        2002

<S>                            <C>          <C>          <C>          <C>          <C>          <C>         <C>         <C>
Net earned administrative fees $9,034,136   $9,395,865   $9,938,266   $9,434,205   $9,342,901   $8,718,197  $9,840,611  $10,452,008
Income from operations            808,674       95,876   1,021,851,    1,008,683    1,102,852      586,419      94,098    1,884,848
Income before provision for
income taxes                    1,038,631      288,865    1,358,403    1,156,689    1,331,753      924,045     359,535    2,063,691
Net income                       $712,359     $240,825     $890,524     $657,849   $1,024,330     $600,806    $234,066   $1,195,202

Earnings per share
Basic                               $0.05        $0.02        $0.06        $0.04        $0.07        $0.04       $0.01        $0.08
Fully Diluted                       $0.05        $0.02        $0.06        $0.04        $0.07        $0.04       $0.01        $0.08

</TABLE>

                                       51
<PAGE>


                     WARRANTECH CORPORATION AND SUBSIDIARIES
                          FINANCIAL STATEMENT SCHEDULE
                 SCHEDULE VIII-VALUATION AND QUALIFYING ACCOUNTS


<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------------------
                   Column                 Column                     Column                     Column            Column
                      A                      B                          C                          D                 E
-------------------------------------------------------------------------------------------------------------------------------
                                        Balance at                  Additions                 Deductions-       Balance at
Description                              Beginning     Charged to Costs  Charged to Other                         End of
                                          of Year         and Expense    Accounts-Describe   Describe (a)          Year
-------------------------------------------------------------------------------------------------------------------------------
<S>                  <C>                      <C>                <C>             <C>             <C>               <C>
Year Ended March 31, 2003
    Allowance for doubtful accounts:
              Trade A/R                       $256,019          $150,444                            $176,399          $230,064
              Other A/R                              -                 -                                   -                 -

Year Ended March 31, 2002
    Allowance for doubtful accounts:
              Trade A/R                     $1,079,946                 -                             823,927          $256,019
              Other A/R                         45,500                 -                              45,500                 -

Year Ended March 31, 2001
    Allowance for doubtful accounts:
              Trade A/R                     $1,164,125            15,067                              99,246        $1,079,946
              Other A/R                      1,168,891                 -                           1,123,391            45,500

</TABLE>


(a) Amount of receivables charged to the allowance during the year.

See  independent   auditor's  report  and  accompanying  notes  to  consolidated
financial statements


                                       52

<PAGE>


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

         None.
                                    PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

See Security  Ownership of Certain  Beneficial  Owners and Management,  which is
incorporated herein by reference to the Company's Definitive Proxy Statement for
its 2003 Annual Meeting of  Shareholders  to be filed pursuant to Regulation 14A
promulgated  under the  Securities  and  Exchange  Act of 1934,  as amended (the
"Proxy Statement").

ITEM 11.   EXECUTIVE COMPENSATION

See Compliance with Section 16(a) of the Securities  Exchange Act of 1934 in the
Proxy Statement, which is incorporated herein by reference.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

See Security  Ownership of Certain Beneficial Owners and Management in the Proxy
Statement, which is incorporated herein by reference.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See Certain Relationships and Related Transactions in the Proxy Statement, which
is incorporated herein by reference.

ITEM 14. CONTROLS AND PROCEDURES

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

INTERNAL CONTROLS
To meet  their  responsibility  for  financial  reporting,  the CEO and CFO have
established  internal controls and procedures,  which they believe, are adequate
to provide  reasonable  assurance  that the Company's  assets are protected from
loss.  These internal  controls are reviewed by the  independent  accountants to
support their audit work. In addition,  the Company's Audit Committee,  which is
composed entirely of outside directors,  meets regularly with management and the
independent  accountants to review  accounting,  auditing and financial matters.
This Committee and the independent  accountants  have free access to each other,
with or without management being present.

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

                                       53
<PAGE>

ITEM 15.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
             -----------------------------------------------------------------

         (a)      1.  and  2.  Financial   Statements  and  Financial  Statement
                  Schedule:  see accompanying Index to Financial  Statements and
                  Financial Statement Schedule, page 25.

         (b)      Reports on Form 8-K during the last quarter:

                  None.

         (c)      Exhibits

Exhibits not  incorporated  herein by reference to a prior filing are designated
by an asterisk (*) and are filed  herewith;  all exhibits not so designated  are
incorporated  herein  by  reference  as  indicated.   Management   contracts  or
compensatory  plans,  contracts or  arrangements  with  directors  and executive
officers of the Company appear in Exhibits 10(p) through 10(z).


<TABLE>
<CAPTION>
EXHIBIT                                          DESCRIPTION
-------                                          -----------

<S>             <C>
3(a)            Certificate of Incorporation  filed June 22, 1983.  Incorporated by reference
                to the Company's  Registration  Statement on Form S-18, filed on November 23,
                1983, Registration No. 2-88097-NY.

3(b)            Certificate of Amendment of Certificate  of  Incorporation  filed October 24,
                1983.  Incorporated by reference to the Company's  Registration  Statement on
                Form S-18, filed on November 23, 1983, Registration No. 2-88097-NY.

3(c)            Certificate  of  Amendment of  Certificate  of  Incorporation  dated June 29,
                1987.  Incorporated  by  reference to the  Company's  Form 8 Amendment to the
                Company's  Annual  Report on Form 10-K for the fiscal  year  ended  March 31,
                1987, file no. 0-13084.

3(d)            Certificate  of  Designation  of Warrantech  Corporation  with respect to the
                Preferred  Stock as filed with the  Secretary of State of Delaware on October
                12, 1993.  Incorporated  by reference  to the  Company's  Report on Form 10-K
                for the fiscal year ended March 31, 1994, file no. 0-13084.

3(e)            By-laws of Warrantech Corporation,  as amended.  Incorporated by reference to
                the  Company's  Quarterly  Report on Form 10-Q for the fiscal  quarter  ended
                September 10, 1988, file no. 0-13084.

10(a)           Form  of  Sales  Distributor  Agreement.  Incorporated  by  reference  to the
                Company's  Annual  Report on Form 10-K for the fiscal  year  ended  March 31,
                1985, file no. 0-13084.

10(b)           Form  of  Service  Center   Agreement.   Incorporated  by  reference  to  the
                Company's  Annual  Report on Form 10-K for the fiscal  year  ended  March 31,
                1985, file no. 0-13084.
</TABLE>

                                       54
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT                                          DESCRIPTION
-------                                          -----------

<S>             <C>
10(c)           Form of Dealer  Agreement.  Incorporated by reference to the Company's Annual
                Report on Form 10-K for the  fiscal  year  ended  March  31,  1985,  file no.
                0-13084.

10(d)           Form of Sales Agent  Agreement.  Incorporated  by reference to the  Company's
                Registration Statement on Form S-1, filed on September 5, 1986,  Registration
                No. 3-8517.

10(e)           General Agency  Agreement  between  American  International  Group,  Inc. and
                Warrantech  Automotive,  Inc.  Incorporated  by reference to Exhibit 10(o) to
                the Company's  Annual Report on Form 10-K for the fiscal year ended March 31,
                1996, file no. 0-13084.

10(f)           Master Agreement  between American  International  Group, Inc. and Warrantech
                Corporation.  Incorporated  by  reference to Exhibit  10(q) to the  Company's
                Annual  Report on Form 10-K for the fiscal  year ended March 31,  1996,  file
                no. 0-13084.

10(g)           Insurance  policy  among  Warrantech  Consumer  Product  Services,  Inc.  and
                Warrantech  Carribean LTD and Great American  Insurance Company pertaining to
                Service Plan  Agreement.  Incorporated  by reference to Exhibit  10(u) to the
                Company's  Quarterly  Report on Form 10-Q for the quarter ended  December 31,
                2001, file no. 0-13084.

10(h)           Schedule  10(g)  identifying  contracts  that are  substantially  similar  to
                Exhibit  10(h),  the  Insurance  policy  among  Warrantech  Consumer  Product
                Services,  Inc. and  Warrantech  Carribean LTD and Great  American  Insurance
                Company  pertaining  to Service  Plan  Agreement,  in all  material  respects
                except as to the parties thereto,  the dates of execution,  or other details.
                Incorporated by reference to Exhibit 10(v) to the Company's  Quarterly Report
                on Form 10-Q for the quarter ended December 31, 2001, file no. 0-13084.

10(i)           Obligor  Agreement  between Butler  Financial  Solutions,  LLC and Warrantech
                Corporation  dated April 1, 2000.  Incorporated by reference to Exhibit 10(u)
                to the Company's Annual Report on Form 10-K, file no. 0-13084.

10(j)           Master  Agreement  between  Butler  Financial  Solutions,  LLC and Warrantech
                Corporation  dated  November 21, 2001.  Incorporated  by reference to Exhibit
                10(v) to the Company's Annual Report on Form 10-K, file no. 0-13084.

10(k)           Security  Agreement  between   Warrantech   Corporation  and  Great  American
                Insurance  Company  dated  October  1, 2002.  Incorporated  by  reference  to
                Exhibit 10(e) to the Company's  Quarterly Report on Form 10-Q for the quarter
                ended September 30, 2002, file no. 0-13084.
</TABLE>

                                       55
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT                                          DESCRIPTION
-------                                          -----------
<S>             <C>
10(l)           Support   Agreement  between   Warrantech   Corporation  and  Great  American
                Insurance  Company  dated  October  1, 2002.  Incorporated  by  reference  to
                Exhibit 10(f) to the Company's  Quarterly Report on Form 10-Q for the quarter
                ended September 30, 2002, file no. 0-13084.


10(m)           Summary of building lease dated July 10, 2002 between Warrantech  Corporation
                and 121 Airport  Centre II, LP.  Incorporated  by reference to Exhibit  10(d)
                to the  Company's  Quarterly  Report  on  Form  10-Q  for the  quarter  ended
                September 30, 2002, file no. 0-13084.

10(n)           Option  Agreement dated August 22, 2001, by and among Warrantech Corporation,
                American  International  Group,  Inc. and others. Incorporated  by  reference
                to  Exhibit  10(b)  to  the  Company's Quarterly  Report on Form 10-Q for the
                quarter ended December 31,  2001, file no. 0-13084.

10(o)           Stock  Option  Agreement  dated  June  4,  2002,  by and  between  Warrantech
                Corporation and Staples,  Inc.  Incorporated by reference to Exhibit 10(a) to
                the  Company's  Quarterly  Report on Form 10-Q for the quarter ended June 30,
                2002, file no. 0-13084.

10(p)           Warrantech  Corporation  1998  Employee  Incentive   Stock  Option  Plan,  as
                amended  and   restated,   effective   September  25,  2001. Incorporated  by
                reference  to Exhibit   10(a) to the Company's Quarterly  Report on Form 10-Q
                for the quarter  ended  September  30, 2001, file no. 0-13084.

10(q)           Amendment  No. 2,  dated  October  8,  2002,  to the  Warrantech  Corporation
                1998  Employee  Incentive  Stock  Option   Plan,  as  amended  and  restated,
                effective September 25, 2001. Incorporated by reference  to Exhibit  4(a)  to
                the   Company's  Quarterly  Report  on  Form  10-Q  for  the  quarter   ended
                September 30, 2002, file no.  0-13084.

10(r)           Employment  Agreement dated April 1, 1998 between Warrantech  Corporation and
                Joel San Antonio.  Incorporated  by reference to the Company's  Annual Report
                on Form 10-K for the fiscal year ended March 31, 1999, file no. 0-13084.

10(s)           Employment  Agreement dated April 16, 1998, as amended April 6, 2002, between
                Warrantech  Corporation  and Richard F. Gavino.  Incorporated by reference to
                Exhibit  10(n) to the  Company's  Annual  Report on Form 10-K for the  fiscal
                year ended March 31, 2001, file no. 0-13084.

10(t)           Employment  Agreement between Warrantech  Corporation and James F. Morganteen
                dated  January 1, 2002.  Incorporated  by reference  to Exhibit  10(g) to the
                Company's  Quarterly  Report on Form 10-Q for the quarter ended September 30,
                2002, file no. 0-13084.

10(u)           Schedule  10(u)  identifying  contracts  that are  substantially  similar  to
                Exhibit 10(t), the Employment  Agreement between  Warrantech  Corporation and
                James F.  Morganteen,  in all  material  respects  except  as to the  parties
                thereto, the dates of execution, or other details,  incorporated by reference
                to  Exhibit  10(h) to the  Company's  Quarterly  Report  on Form 10-Q for the
                quarter ended December 31, 2002, file no. 0-13084.
</TABLE>

                                       56
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT                                          DESCRIPTION
-------                                          -----------
<S>             <C>
10(v)           Employment  Agreement  dated  April 1, 2000  between  Warrantech  Corporation
                and  Richard  Rodriguez. Incorporated  by  reference to  Exhibit 10(w) to the
                Company's  Annual Report on Form 10-K for the year ended March 31, 2002, file
                no. 0-13084.

10(w)           Employment  Agreement dated April 1, 2003 between Warrantech  Corporation and
                Randall San Antonio.

10(x)           Promissory  Note and Pledge  Agreement,  as amended  July 24,  2002,  between
                Warrantech  Corporation  and William  Tweed,  incorporated  by  reference  to
                Exhibit 10(a) to the Company's  Quarterly Report on Form 10-Q for the quarter
                ended December 31, 2002, file no. 0-13084.

10(y)           Promissory  Note and Pledge  Agreement,  as amended,  July 24, 2002,  between
                Warrantech  Corporation  and Joel San Antonio,  incorporated  by reference to
                Exhibit 10(b) to the Company's  Quarterly Report on Form 10-Q for the quarter
                ended December 31, 2002, file no. 0-13084.

10(z)           Promissory  Note and Pledge  Agreement,  as amended  July 24,  2002,  between
                Warrantech  Corporation  and Jeff J.  White.  Incorporated  by  reference  to
                Exhibit 10(c) to the Company's  Quarterly Report on Form 10-Q for the quarter
                ended December 31, 2002, file no. 0-13084.

*21             Subsidiaries of the Company.

*99.1           Certification by the Chief Executive  Officer  pursuant to 18 U.S.C.  Section
                1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*99.2           Certification by the Chief Financial  Officer  pursuant to 18 U.S.C.  Section
                1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
</TABLE>



                                       57

<PAGE>


                                   SIGNATURES

         PURSUANT TO THE  REQUIREMENTS OF SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED THERETO DULY AUTHORIZED.

                                    WARRANTECH CORPORATION


Dated: June 23, 2003
                                    By: Joel San Antonio

                                     /s/ Joel San Antonio
                                    ---------------------------
                                    Joel San Antonio,
                                    Chairman of the Board and
                                    Chief Executive Officer


Dated: June 23, 2003                By: Richard F. Gavino
                                    ----------------------------
                                    /s/ Richard F. Gavino
                                    Richard F. Gavino,
                                    Executive Vice President and
                                    Chief Financial Officer


                                       58
<PAGE>


         PURSUANT TO THE  REQUIREMENTS  OF THE SECURITIES  EXCHANGE ACT OF 1934,
THIS  REPORT HAS BEEN  SIGNED  BELOW BY THE  FOLLOWING  PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED ON JUNE 23, 2003.


<TABLE>
<CAPTION>
<S>                             <C>
/s/ Joel San Antonio            Chairman, Chief Executive Officer and Director
----------------------------     (Principal Executive Officer)
Joel San Antonio


/s/ Richard F. Gavino            Executive Vice President and Chief Financial Officer
----------------------------    (Principal Accounting and Financial Officer)
Richard F. Gavino


/s/ William Tweed                Vice Chairman and Director
----------------------------
William Tweed


/s/ Lawrence Richenstein         Director
----------------------------
Lawrence Richenstein


/s/ Gordon Paris                 Director
----------------------------
Gordon Paris


/s/ Jeff J. White                Director
----------------------------
Jeff J. White


/s/ Ronald Glime                 Director
----------------------------
Ronald Glime

/S/ Richard Rodriguez            Director
----------------------------
    Richard Rodriguez
</TABLE>

                                       59
<PAGE>


                  CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, Joel San Antonio, certify that:

I have reviewed the annual report on Form 10-K of  Warrantech  Corporation  (the
"Registrant") for the period ended March 31, 2003 (the "Annual Report").

Based on my knowledge,  this Annual Report does not contain any untrue statement
of a  material  fact or omit to  state a  material  fact  necessary  to make the
statements made, in light of the circumstances  under which such statements were
made, not misleading with respect to the period covered by this Annual Report.

Based on my knowledge, the financial statements, and other financial information
included in this Annual  Report,  fairly  present in all  material  respects the
financial  condition,  results of operations and cash flows of the Registrant as
of, and for, the periods presented in this Annual Report.

The  Registrant's   other   certifying   officers  and  I  are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

         (a) Designed  such  disclosure  controls and  procedures to ensure that
material  information  relating to the  Registrant,  including its  consolidated
subsidiaries, is made known to us by others within those entities,  particularly
during the period in which this AnnualReport is being prepared;

         (b) Evaluated the effectiveness of the Registrant's disclosure controls
and  procedures  as of a date  within 90 days prior to the  filing  date of this
Annual Report (the "Evaluation Date"); and

         (c)  Presented  in  this  Annual  Report  our  conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date.

The Registrant's  other certifying  officers and I have disclosed,  based on our
most recent evaluation,  to the Registrant's auditors and the audit committee of
Registrant's board of directors (or persons performing the equivalent function):

         All  significant  deficiencies  in the design or  operation of internal
controls  which  could  adversely  affect  the  Registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
Registrant's auditors any material weaknesses in internal controls; and

         Any fraud,  whether or not material,  that involves management or other
employees who have a significant role in the Registrant's internal controls.

                                       60
<PAGE>

The Registrant's  other certifying  officers and I have indicated in this Annual
Report whether or not there were significant  changes in internal controls or in
other factors that could  significantly  affect internal controls  subsequent to
the date of our most recent  evaluation,  including any corrective  actions with
regard to significant deficiencies and material weaknesses.

Date: June 23, 2003                      /s/ Joel San Antonio
                                         --------------------------------------
                                         Joel San Antonio
                                         Chairman, Chief Executive Officer and
                                         Director


                                       61
<PAGE>





                  CERTIFICATION BY THE CHIEF FINANCIAL OFFICER
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, Richard Gavino, certify that:

I have reviewed the annual report on Form 10-K of  Warrantech  Corporation  (the
"Registrant") for the period ended March 31, 2003 (the "Annual Report").

Based on my knowledge,  this Annual Report does not contain any untrue statement
of a  material  fact or omit to  state a  material  fact  necessary  to make the
statements made, in light of the circumstances  under which such statements were
made, not misleading with respect to the period covered by this Annual Report.

Based on my knowledge, the financial statements, and other financial information
included in this Annual  Report,  fairly  present in all  material  respects the
financial  condition,  results of operations and cash flows of the Registrant as
of, and for, the periods presented in this quarterly report.

The  Registrant's   other   certifying   officers  and  I  are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

         (a) Designed  such  disclosure  controls and  procedures to ensure that
material  information  relating to the  Registrant,  including its  consolidated
subsidiaries, is made known to us by others within those entities,  particularly
during the period in which this AnnualReport is being prepared;

         (b) Evaluated the effectiveness of the Registrant's disclosure controls
and  procedures  as of a date  within 90 days prior to the  filing  date of this
Annual Report (the "Evaluation Date"); and

         (c)  Presented  in  this  Annual  Report  our  conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date.

The Registrant's  other certifying  officers and I have disclosed,  based on our
most recent evaluation,  to the Registrant's auditors and the audit committee of
Registrant's board of directors (or persons performing the equivalent function):

         All  significant  deficiencies  in the design or  operation of internal
controls  which  could  adversely  affect  the  Registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
Registrant's auditors any material weaknesses in internal controls; and

         Any fraud,  whether or not material,  that involves management or other
employees who have a significant role in the Registrant's internal controls.

The Registrant's  other certifying  officers and I have indicated in this Annual
Report whether or not there were significant  changes in internal controls or in
other factors that could  significantly  affect internal controls  subsequent to
the date of our most recent  evaluation,  including any corrective  actions with
regard to significant deficiencies and material weaknesses.

Date: June 23, 2003                             /s/ Richard Gavino
                                                -------------------------------
                                                Richard Gavino
                                                Executive Vice President,
                                                Chief Financial Officer,
                                                Chief Accounting Officer, and
                                                Treasurer


                                       62
<PAGE>


                                  EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT                                          DESCRIPTION
-------                                          -----------
<S>             <C>
3(a)            Certificate of Incorporation  filed June 22, 1983.  Incorporated by reference
                to the Company's  Registration  Statement on Form S-18, filed on November 23,
                1983, Registration No. 2-88097-NY.

3(b)            Certificate of Amendment of Certificate  of  Incorporation  filed October 24,
                1983.  Incorporated by reference to the Company's  Registration  Statement on
                Form S-18, filed on November 23, 1983, Registration No. 2-88097-NY.

3(c)            Certificate  of  Amendment of  Certificate  of  Incorporation  dated June 29,
                1987.  Incorporated  by  reference to the  Company's  Form 8 Amendment to the
                Company's  Annual  Report on Form 10-K for the fiscal  year  ended  March 31,
                1987, file no. 0-13084.

3(d)            Certificate  of  Designation  of Warrantech  Corporation  with respect to the
                Preferred  Stock as filed with the  Secretary of State of Delaware on October
                12, 1993.  Incorporated  by reference  to the  Company's  Report on Form 10-K
                for the fiscal year ended March 31, 1994, file no. 0-13084.

3(e)            By-laws of Warrantech Corporation,  as amended.  Incorporated by reference to
                the  Company's  Quarterly  Report on Form 10-Q for the fiscal  quarter  ended
                September 10, 1988, file no. 0-13084.

10(a)           Form  of  Sales  Distributor  Agreement.  Incorporated  by  reference  to the
                Company's  Annual  Report on Form 10-K for the fiscal  year  ended  March 31,
                1985, file no. 0-13084.

10(b)           Form  of  Service  Center   Agreement.   Incorporated  by  reference  to  the
                Company's  Annual  Report on Form 10-K for the fiscal  year  ended  March 31,
                1985, file no. 0-13084.
</TABLE>


                                       63
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT                                          DESCRIPTION
-------                                          -----------
<S>             <C>
10(c)           Form of Dealer  Agreement.  Incorporated by reference to the Company's Annual
                Report on Form 10-K for the  fiscal  year  ended  March  31,  1985,  file no.
                0-13084.

10(d)           Form of Sales Agent  Agreement.  Incorporated  by reference to the  Company's
                Registration Statement on Form S-1, filed on September 5, 1986,  Registration
                No. 3-8517.

10(e)           General Agency  Agreement  between  American  International  Group,  Inc. and
                Warrantech  Automotive,  Inc.  Incorporated  by reference to Exhibit 10(o) to
                the Company's  Annual Report on Form 10-K for the fiscal year ended March 31,
                1996, file no. 0-13084.

10(f)           Master Agreement  between American  International  Group, Inc. and Warrantech
                Corporation.  Incorporated  by  reference to Exhibit  10(q) to the  Company's
                Annual  Report on Form 10-K for the fiscal  year ended March 31,  1996,  file
                no. 0-13084.

10(g)           Insurance  policy  among  Warrantech  Consumer  Product  Services,  Inc.  and
                Warrantech  Carribean LTD and Great American  Insurance Company pertaining to
                Service Plan  Agreement.  Incorporated  by reference to Exhibit  10(u) to the
                Company's  Quarterly  Report on Form 10-Q for the quarter ended  December 31,
                2001, file no. 0-13084.

10(h)           Schedule  10(h)  identifying  contracts  that are  substantially  similar  to
                Exhibit  10(g),  the  Insurance  policy  among  Warrantech  Consumer  Product
                Services,  Inc. and  Warrantech  Carribean LTD and Great  American  Insurance
                Company  pertaining  to Service  Plan  Agreement,  in all  material  respects
                except as to the parties thereto,  the dates of execution,  or other details.
                Incorporated by reference to Exhibit 10(v) to the Company's  Quarterly Report
                on Form 10-Q for the quarter ended December 31, 2001, file no. 0-13084.

10(i)           Obligor  Agreement  between Butler  Financial  Solutions,  LLC and Warrantech
                Corporation  dated April 1, 2000.  Incorporated by reference to Exhibit 10(u)
                to the Company's Annual Report on Form 10-K, file no. 0-13084.

10(j)           Master  Agreement  between  Butler  Financial  Solutions,  LLC and Warrantech
                Corporation  dated  November 21, 2001.  Incorporated  by reference to Exhibit
                10(v) to the Company's Annual Report on Form 10-K, file no. 0-13084.

10(k)           Security  Agreement  between   Warrantech   Corporation  and  Great  American
                Insurance  Company  dated  October  1, 2002.  Incorporated  by  reference  to
                Exhibit 10(e) to the Company's  Quarterly Report on Form 10-Q for the quarter
                ended September 30, 2002, file no. 0-13084.

10(l)           Support   Agreement  between   Warrantech   Corporation  and  Great  American
                Insurance  Company  dated  October  1, 2002.  Incorporated  by  reference  to
                Exhibit 10(f) to the Company's  Quarterly Report on Form 10-Q for the quarter
                ended September 30, 2002, file no. 0-13084.
</TABLE>

                                       64
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT                                          DESCRIPTION
-------                                          -----------
<S>             <C>
10(m)           Summary of building lease dated July 10, 2002 between Warrantech  Corporation
                and 121 Airport  Centre II, LP.  Incorporated  by reference to Exhibit  10(d)
                to the  Company's  Quarterly  Report  on  Form  10-Q  for the  quarter  ended
                September 30, 2002, file no. 0-13084.

10(n)           Option  Agreement dated August 22, 2001, by and among Warrantech Corporation,
                American  International  Group,  Inc. and others. Incorporated  by  reference
                to  Exhibit  10(b)  to  the   Company's  Quarterly  Report  on  Form 10-Q for
                the quarter ended December 31,  2001, file no. 0-13084.

10(o)           Stock  Option  Agreement  dated  June  4,  2002,  by and  between  Warrantech
                Corporation and Staples,  Inc.  Incorporated by reference to Exhibit 10(a) to
                the  Company's  Quarterly  Report on Form 10-Q for the quarter ended June 30,
                2002, file no. 0-13084.

10(p)           Warrantech Corporation 1998 Employee Incentive Stock Option Plan, as  amended
                and restated,  effective September 25, 2001.  Incorporated  by  reference  to
                Exhibit 10(a) to the Company's Quarterly Report on Form  10-Q for the quarter
                ended September 30, 2001, file no. 0-13084.

10(q)           Amendment No. 2, dated October 8, 2002, to the  Warrantech  Corporation  1998
                Employee  Incentive  Stock Option Plan,  as amended and  restated,  effective
                September  25,  2001.  Incorporated  by  reference  to  Exhibit  4(a)  to the
                Company's  Quarterly  Report on Form 10-Q for the quarter ended September 30,
                2002, file no. 0-13084.

10(r)            Employment  Agreement dated April 1, 1998 between Warrantech  Corporation and
                Joel San Antonio. Incorporated by reference to the Company's Annual Report on
                Form 10-K for the fiscal year ended March 31, 1999, file no. 0-13084.

10(s)           Employment  Agreement dated April 16, 1998, as amended April 6, 2002, between
                Warrantech  Corporation  and Richard F. Gavino.  Incorporated by reference to
                Exhibit  10(n) to the  Company's  Annual  Report on Form 10-K for the  fiscal
                year ended March 31, 2001, file no. 0-13084.

10(t)           Employment  Agreement between Warrantech  Corporation and James F. Morganteen
                dated  January 1, 2002.  Incorporated  by reference  to Exhibit  10(g) to the
                Company's  Quarterly  Report on Form 10-Q for the quarter ended September 30,
                2002, file no. 0-13084.

10(u)           Schedule  10(u)  identifying  contracts  that are  substantially  similar  to
                Exhibit 10(t), the Employment  Agreement between  Warrantech  Corporation and
                James F.  Morganteen,  in all  material  respects  except  as to the  parties
                thereto, the dates of execution, or other details,  incorporated by reference
                to  Exhibit  10(h) to the  Company's  Quarterly  Report  on Form 10-Q for the
                quarter ended December 31, 2002, file no. 0-13084.
</TABLE>

                                       65
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT                                          DESCRIPTION
-------                                          -----------
<S>             <C>

10(v)           Employment  Agreement  dated  April 1, 2000  between  Warrantech  Corporation
                and Richard Rodriguez.  Incorporated by reference  to   Exhibit  10(w) to the
                Company's  Annual Report on Form 10-K for the year ended March 31, 2002, file
                no. 0-13084.

*10(w)          Employment  Agreement dated April 1, 2003 between Warrantech  Corporation and
                Randall San Antonio.

10(x)           Promissory  Note and Pledge  Agreement,  as amended  July 24,  2002,  between
                Warrantech  Corporation  and William  Tweed,  incorporated  by  reference  to
                Exhibit 10(a) to the Company's  Quarterly Report on Form 10-Q for the quarter
                ended December 31, 2002, file no. 0-13084.

10(y)           Promissory  Note and Pledge  Agreement,  as amended,  July 24, 2002,  between
                Warrantech  Corporation  and Joel San Antonio,  incorporated  by reference to
                Exhibit 10(b) to the Company's  Quarterly Report on Form 10-Q for the quarter
                ended December 31, 2002, file no. 0-13084.

10(z)           Promissory  Note and Pledge  Agreement,  as amended  July 24,  2002,  between
                Warrantech  Corporation  and Jeff J.  White.  Incorporated  by  reference  to
                Exhibit 10(c) to the Company's  Quarterly Report on Form 10-Q for the quarter
                ended December 31, 2002, file no. 0-13084.

*21             Subsidiaries of the Company.

*99.1           Certification by the Chief Executive  Officer  pursuant to 18 U.S.C.  Section
                1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*99.2           Certification by the Chief Financial  Officer  pursuant to 18 U.S.C.  Section
                1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
</TABLE>

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