UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   (Mark One)

[  X  ]                           FORM 10-K/A
                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
             OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
                    For the fiscal year ended March 31, 1999
                                       OR
[     ]       TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
                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
incorporation or organization                          Identification No.)

300 Atlantic Street, Stamford, Connecticut               __06901___
(Address of Principal Executive Offices)               (Zip Code)

Registrant's telephone number, including area code               (203) 975-1100
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 checkmark  whether the  Registrant (1) has filed all reports 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 [ ].

                        _______________________________

     The  number of  shares  outstanding  of the  Registrant's  common  stock is
15,125,611 as of December 21, 1999.

     The aggregate  market value of the voting stock held by  non-affiliates  of
the Registrant is $11,518,865 as of December 21, 1999.

                                        DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Definitive Proxy Statement for its 1999 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 56
Document contains 61 pages


                                        1
<PAGE>

                                     PART I


     Warrantech Corporation  ("Warrantech" or the "Company") maintains executive
offices  at  300  Atlantic  Street,   Stamford,   Connecticut  06901,  operating
facilities  at 150  Westpark Way and 1441 West Airport  Freeway,  Euless,  Texas
76040, as well as other Texas  locations.  The telephone number of the executive
offices is (203) 975-1100.

Item 1.           Business

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

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

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

     The Company's  service contract  programs  benefit  consumers with expanded
and/or extended  product coverage for a specified period of time (and/or mileage
in the case of automobiles and recreational vehicles),  similar to that provided
by  manufacturers  under the terms of their  product  warranties.  Such coverage
generally provides for the repair or replacement of the product,  or a component
thereof,  in the event of its failure.  The Company's  service contract programs
benefit the dealer/clients by providing enhanced value to the goods and services
they offer. It also provides the  opportunity  for increased  revenue and income
while  outsourcing  the costs and  responsibilities  of  operating  an  extended
warranty program.


                                        2

<PAGE>


Warrantech Automotive Segment

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

     Additionally,  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 such services on either VSC's or
similar products.

     The VSC is a contract between the  dealer/lessor  or Warrantech  Automotive
and the vehicle purchaser/lessee that offers coverage which run from twelve (12)
to eighty-four  (84) months and/or 1,000 to 100,000 miles.  Coverage is afforded
in the event of the  failure  of a broad  range of  mechanical  components  that
occurs  during  the  term  of  the  VSC,  exclusive  of  failures  covered  by a
manufacturers warranty.

     The programs  marketed and  administered by Warrantech  Automotive  require
that the dealer enter into an agreement  whereby  Warrantech  Automotive  is the
provider of services to the dealer.  Among these services is the development and
distribution of marketing  materials,  processing of dealer produced VSC's,  and
the  administration  and payment of claims filed by contract  holders  under the
terms of their VSC.

     Warrantech  Automotive  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 90 agents in 46 states as well as Canada.

     With respect to the VSC programs which  Warrantech  Automotive  markets and
administers,  liability is borne by insurers who have issued insurance  policies
to assume this risk in exchange  for the  payment of agreed  upon  premiums  and
fees. The Company  recently  reached an agreement with Reliance  Insurance Group
(Reliance)  pursuant to which  Reliance  insures  effective  January 1, 1999,  a
portion of the new Warrantech  Automotive VSC programs.  As of November 1, 1999,
all new Warrantech  Automotive programs are insured by Reliance.  Effective from
March 1, 1993 until July 31, 1999 (except  with  respect to certain  reinsurance
contracts  which are  immaterial),  insurance for the Warrantech  Automotive VSC
programs was provided by the New Hampshire  Insurance Company and other American
International Group, Inc. ("AIG") member companies.

     Essential  to the  success  of  Warrantech  Automotive  is its  ability  to
capture,  maintain,  track and analyze  all  relevant  data  regarding a VSC. To
support this  function,  the Company  operates  proprietary  software  developed
internally   that  consists  of  custom  designed   relational   databases  with
interactive  capabilities.   This  configuration  provides  ample  capacity  and
processing  speed for  current  requirements  as well as the  ability to support
significant future growth in this area.


Warrantech Consumer Products Segment

     The Company's  Consumer Product segment  develops,  markets and administers
consumer product extended  warranties on household  appliances,  electronics and
homes and offers call center and technical  computer  services.  These  products
include home appliances,  consumer  electronics,  televisions,  computers,  home
office  equipment  and  homes.  These  products  are  sold  principally  through
retailers,   distributors,   manufacturers,   utility  companies  and  financial
institutions.  Warrantech  also direct  markets  these  products to the ultimate
consumer  through   telemarketing  and  direct  mail  campaigns.   The  extended
warranties  are service  contracts  between the  retailer/dealer  or  Warrantech
Consumer Products and the purchaser that offers coverage which run predominantly
from twelve (12) to sixty (60) months.


                                        3

<PAGE>

     The  Warrantech  Consumer  Product  segment has developed a niche market by
specializing  in the personal  computer  industry.  This segment has expanded to
include some of the premier  retailers and distributors of computer and computer
related   products.   The  call   center  is   staffed  by   technical   service
representatives with extensive training in computers and peripherals.

     The Consumer  Products segment had one significant  customer,  CompUSA Inc.
("CompUSA"),  which accounted for  approximately 58% of revenue of this business
segment.  The Company notified CompUSA in May 1999 of price increases  resulting
from premium  increases  imposed by CIGNA Insurance  Company.  On June 28, 1999,
Warrantech  received formal  notification of termination from CompUSA  effective
July 28,  1999.  The loss of  CompUSA  will  have an  adverse  impact  on future
revenues.

     The  Warrantech  Consumer  Product  segment  also  develops,   markets  and
administers  service contract programs in the United States covering  mechanical
breakdowns  of the working  systems and  components  in homes.  The core program
protects 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 Warrantech Home Service warranty is one
of the  first of its  kind.  It  offers  greater  protection  than what has been
available until now and it provides this security at a lower cost.

     The programs  marketed and  administered  by Warrantech  Consumer  Products
require  that the selling  dealer,  distributor  or  manufacturer  enter into an
agreement with Warrantech  that outlines 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.  Warrantech  has  also  entered  into  service  center  agreements  with
independent third party authorized repair  facilities  located  throughout North
America.

     In exchange for agreed upon  premiums and fees,  the  liability  for claims
incurred by service  contracts  issued by a dealer,  distributor or manufacturer
have been assumed by CIGNA Insurance  Company  (CIGNA).  At the present time, in
addition to CIGNA,  certain programs offered by Warrantech Consumer Products are
being insured by Reliance Insurance Group and certain AIG member companies.

     It is essential to the success of Warrantech  Consumer  Products that it be
able to  capture,  maintain,  and  analyze all  relevant  information  about its
service contracts. To support this function, Warrantech has internally developed
application  programs  that allow the  tracking  of a database  for  millions of
service  contracts.  This  also  allows  for  the  development  of  current  and
historical  statistical  data,  which is used to monitor its  service,  contract
program's performance,  and will also support significant growth of Warrantech's
Consumer Product business.


Warrantech International Segment

     In July 1995, Warrantech International,  Inc. (WII) acquired Home Guarantee
Corporation plc (subsequently renamed Warrantech Europe Plc.), a British company
which markets home warranty  products in the United Kingdom covering  mechanical
breakdowns  of the working  systems and  components  in homes  (e.g.,  furnaces,
electrical  and plumbing  systems,  and major  appliances).  In addition to home
warranty products, Warrantech Europe's business has expanded to include extended
warranties  on  a  wide  range  of  products  including  automobiles,   business
equipment, office and home computers, mobile telephones, and major appliances as
well as credit card enhancement programs similar to those marketed in the United
States. This subsidiary also provides database management,  marketing, training,
brokerage  services,  and customer  care service for clients in the  automotive,
financial,  manufacturing,  retail and service sectors, including other segments
of the Company.


                                        4

<PAGE>

     WII  also  conducts  its  efforts  on a  direct  basis  and  has  developed
relationships  with retailers and distributors  throughout Puerto Rico,  Central
and South America.  The Company is currently  doing  business in Mexico,  Chile,
Peru and Guatemala.

Sales and Marketing

     The sales and  marketing  activities  of  Warrantech  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 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 develops materials
and conducts  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 Euless, Texas administrative offices.
This facility  features the latest in audio/video  technology  that enhances the
training and learning experience.

     Warrantech   also  direct   markets  to  the  ultimate   consumer   through
telemarketing and direct mail campaigns. The direct marketing campaigns generate
sales  through  renewals  of  expiring  contracts  and  second-effort  sales  to
customers who did not buy at the time of purchase.

Significant Customers

     The Company had one  significant  customer,  CompUSA,  which  accounted for
approximately 34%, 34% and 32%, respectively, of consolidated gross revenues for
the years ended March 31, 1999, 1998 and 1997. The Company  notified  CompUSA in
May 1999 of price increases  resulting from premium  increases  imposed by CIGNA
Insurance Company. On June 28, 1999,  Warrantech received formal notification of
termination from CompUSA  effective July 28, 1999. The loss of CompUSA will have
a significant impact on future revenues.


Competition

     Warrantech competes with a number of independent administrators,  divisions
of  distributors  and  manufacturers,   financial   institutions  and  insurance
companies.  While the Company  believes  that it occupies a preeminent  position
among  competitors  in its  field,  it  may  not be  the  largest  marketer  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.


Insurance Coverage

     Liability for performance  under the terms of service contracts and limited
warranties issued by clients/dealers, retailers, distributors, utility companies
or  manufacturers  is  assumed by the  insurer in return for the  payment of the
agreed-upon  premium  for the  assumption  of the risk  from the  insured.  This
coverage provides  indemnification  against loss resulting from service contract
claims and protects the consumer by ensuring that their claim will be paid.


                                        5

<PAGE>



     The insurance protection is provided by highly rated independent  insurance
companies.  This includes  Reliance  Insurance Group and CIGNA Insurance Company
which are rated A - (Excellent)  by A.M. Best Company.  Other programs have been
or are  currently  insured by New  Hampshire  Insurance  Company,  and other AIG
member  companies  and Tokio  Marine & Fire  Insurance  Company each of which is
rated A++ (Superior) by the A.M. Best Company and by Zurich  American  Insurance
Company,  which is rated A+  (Superior)  by A.M.  Best  Company.  Warrantech  is
currently  in the process of  exploring  strategic  relations  with other highly
rated insurance  companies  regarding the Consumer  Products  Services  business
segment.

     In accordance with the insurance  arrangements with these insurers, a fixed
amount is remitted  for each  service  contract or limited  warranty  sold.  The
amount is based upon  actuarial  analysis of data  collected and  maintained for
each type of  coverage  and  contract  term.  The insured or the Company are not
obligated to the insurer if claims exceed the premium remitted.

     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  formulas 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  did not accrue or  receive  any profit
sharing amounts during the 1999, 1998 or 1997 fiscal years.

Federal and State Regulation

     The service  contract  programs  developed  and  marketed by the  Company's
subsidiaries and their related  operations with regard to service  contracts and
limited  warranties,  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 new programs that are developed by the Company.

     Generally  speaking,  these statutes  concern the scope of service contract
coverage and content of the service  contract or limited warranty  document.  In
such instances, the state statute will require that specific wording be included
in the service  contract or limited  warranty  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.  As discussed in the  financial  statements of Part II of
this report,  Warrantech's obligor status has an effect on its method of revenue
recognition.

     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 and its subsidiaries do not believe that they are
insurers and have no intention of filing the  documents  and meeting the capital
and surplus requirements that are necessary to obtain such a license.

     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 any
regulatory bodies that its methods of doing business were not in compliance with
state regulation, the Company has taken the steps necessary to comply.

     If the Company's right to operate in any state is challenged  successfully,
the Company may be required to cease operations in the state and the state might
also impose financial sanctions against the Company. These actions,  should they
occur, could have materially adverse consequences and could affect the Company's
ability to continue operating.  However, within the framework of currently known
statutes, the Company does not feel that this is a present concern.


                                   6

<PAGE>


Trademarks

     The Company holds numerous  registered United States  trademarks,  the most
important of which are the "Warrantech" and its stylized "W" logo service marks.
The  registration  for all service marks are kept current by the Company and its
trademark counsel.  Additional service marks are registered  covering subsidiary
names and product names and descriptions.


Employees

     The Company and its subsidiaries employed  approximately 750 individuals as
of March 31, 1999, an increase of  approximately  50 over the  preceding  fiscal
year.  The  increase  was partly  attributable  to the  conversion  of temporary
employees  as of March 31,  1999 versus the prior year and to the  expansion  of
customer service and claims  representatives  to meet the needs of the Company's
then  expanding  business.  None of the  Company's  employees  are  covered by a
collective  bargaining  agreement.  The Company considers its relations with its
employees to be good. As of December 21, 1999, the Company had approximately 590
employees.  This  reduction  is due  to the  consolidation  and  cost  reduction
initiatives recently instituted by the Company.


Item 2.           Properties

     The  Company's  executive  offices  are  located in leased  premises at 300
Atlantic Street, Stamford,  Connecticut. The premises, which are leased pursuant
to a lease agreement (the "Lease"), consists of approximately 14,317 square feet
for space A and 6,683  square  feet for space B. The  Lease,  which was  renewed
effective on April 1, 1998 and expires on March 31, 2005, provides for remaining
annual base rent payments  ranging from $651,000 to $693,000  respectively.  The
Company initiated the termination of the lease for space B as part of its recent
cost reduction  initiatives.  The termination was effective November 30, 1999 at
no cost to the Company.  The remaining  annual base rental  payments for space A
effective November 30, 1999 range from $443,827 to $472,461.

     The  operating  facilities  are located in leased  premises at 150 Westpark
Way,  Euless,  Texas. The premises,  consisting of  approximately  29,531 square
feet, are leased  pursuant to 3 separate lease  agreements.  These leases expire
through  July 31,  2003 and  provide for  remaining  annual  base rent  payments
ranging from $389,267 to $430,794.

     Effective  beginning  April 15,  1996,  the  Company  signed  leases for an
additional  48,053 square feet at 1441 West Airport  Freeway,  Euless,  Texas to
accommodate the expanding  operations.  These premises are being leased pursuant
to lease  agreements that expire March 31, 2004. These leases provide for annual
base rent payments ranging from $522,132 to $570,185.

     Additional  facilities that supported the direct  marketing  operation were
located at 2701/2705  Brown Trail,  Bedford,  Texas (4,915 square  feet).  These
premises  were leased under the terms of leases (the "Other  Leases")  that were
effective on December 1, 1994, March 1, 1996 and December 1, 1997, respectively,
expiring March 31, 2004,  February 28, 2001 and November 30, 1998  respectively.
The Other Leases provided for annual base rent payments ranging from $255,651 to
$177,162.  The lease which  expired  November  30, 1998 was being  utilized on a
month to month basis.  Effective  November 1999, these leases were terminated at
no cost to the Company as part of its recent  cost  reduction  initiatives.  The
direct marketing operations were moved to the 150 Westpark Way facilities.

     The operating  facilities of Warrantech  Europe, plc were located in leased
premises at 248A Marylebone Road,  London.  These premises,  which totaled 6,000
square feet,  were leased  pursuant to a lease  agreement which expired June 23,
2010 and provided for remaining  annual base rent payments ranging from L 94,050
to L 108,450 through June 2000. Effective June 2000, this lease was to adjust to
fair market  value which the Company  estimated at  approximately  L 200,000 per
year.  Effective  October 1999, the lease for the  Marylebone  Road premises was
terminated   and  the   operating   facilities   were   relocated   to  Watford,
Hertfordshire.  The new lease provides for 16,300 square feet and an annual base
rent of L 300,995 through December 31, 2009. The Company has sublet a portion of
the new premises for approximately L 100,000 per year. The approximate  exchange
rate is L 1 equals $1.60.

     Warrantech  International's  Puerto Rico  operations  are located in leased
premises at 1225 Ponce de Leon Avenue, Santurce, Puerto Rico pursuant to a lease
agreement which expires March 31, 2003. The remaining  annual base rent payments
range from $52,353 to $54,928.


    Item 3.       Legal Proceedings


     The Company is from time to time involved in  litigation  incidental to the
conduct of its  business.  As of December 21, 1999,  the Company is not aware of
any material existing litigation to which it is a party.

     The Oak Agency,  Inc. and The Oak Financial Services,  Inc.  (collectively,
     "Oak") v. Warrantech Dealer Based Services, Inc. ("WDBS").

     Final  judgment in this matter was entered on November 12,  1997.  WDBS was
     directed to pay Oak (i) $1,243,359 which represents  commissions  earned by
     Oak for the period July 1, 1991  through May 31, 1997,  (ii) $28,500  which
     represents  costs  of the  action  recoverable  by Oak,  and  (iii)  future
     commissions  earned on vehicle  service  contracts sold on or after June 1,
     1997 by a  specified  group of  automobile  dealers.  Furthermore,  Oak was
     directed to pay Warrantech Corporation $7,500 which represents Warrantech's
     recoverable  costs of a separate action which previously had been dismissed
     by the Court with prejudice.

     WDBS has made all  payments  described  in  clauses  (i) and (ii) above and
     continues to make those  periodic  payments  described in clause (iii).  No
     further legal action is anticipated and WDBS considers this matter closed.

     Proteva,  Inc. v. Warrantech Help Desk, Inc. v. William Lynch, Civil Action
     No.  499CV162BE (U.S.  District Court,  Northern  District of Texas).  This
     matter arose out of an Agreement, effective as of December 9, 1997, between
     Proteva,  Inc.  ("Proteva") and Warrantech  Help Desk, Inc.  ("Warrantech")
     pursuant to which Warrantech was to provide administration services for the
     warranties  on certain  personal  computers  manufactured  by  Proteva.  In
     December 1998,  Warrantech  determined  that Proteva had failed to report a
     material  number  of  computers  subject  to the  Agreement  and  remit the
     corresponding fees. Therefore,  Warrantech notified Proteva in January 1999
     that it was terminating the Agreement.  Proteva sought injunctive relief in
     the  Illinois  State  courts and  commenced  a lawsuit  against  Warrantech
     alleging  failure to provide service in accordance with the requirements of
     the  Agreement and failure to remit certain  payments.  Warrantech  had the
     litigation  removed  to  Federal  District  Court  in  Chicago  and  it was
     subsequently  transferred to the Northern District of Texas. Following that
     transfer,  Warrantech  counterclaimed  against  Proteva  and its  Chairman,
     William Lynch,  alleging  fraud and breach of the Agreement  arising out of
     the   under-reporting   of   computer   sales  and  the  failure  to  remit
     corresponding  fees.  The parties  have  reached  agreement on a Settlement
     Agreement and Mutual Release which will result in a final dismissal of this
     action.  Warrantech will receive financial and other considerations as part
     of  the   settlement   although   specific   details   are   subject  to  a
     confidentiality agreement among the parties.



Item 4.       Submission of Matters to 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, 1999.


                                        8

<PAGE>


                                     PART II

Item 5.    Market for Warrantech's Common Equity and Related Stockholder Matters

     The Company's  common stock,  $.007 par value (the "common stock") had been
reported in the National  Association of Securities Dealers Automated  Quotation
System  ("NASDAQ"),  and on NASDAQ's  National Market System ("NMS"),  under the
trading symbol "WTEC". The Company was delisted on September 3, 1999. The Common
Stock  now  trades  over-the-counter  on an  electronic  quotation  service  for
National  Association of Securities  Dealers Market Makers.  It is the Company's
intention to again seek to be listed on NASDAQ if and when the Company satisfies
the requirements for listing.

     As of December 21, 1999, there were 15,125,611  Common Shares  outstanding.
On that date, the closing bid price for the Company's  common stock, as reported
on the OTC was $1.38.

     Following  is a summary of the price range of the  Company's  Common  Stock
during the current, 1999 and 1998 fiscal years:

Common Stock

Quarter of Fiscal 2000

                                                                  High & Low Bid
First                                                    $ 3.81           $ 2.13
Second                                                   $ 2.75          $   .63
Third, through Dec 21, 1999                              $ 1.75          $   .59


Quarter of Fiscal 1999

                                                                  High & Low Bid
First                                                    $ 7.44           $ 3.94
Second                                                   $ 4.31           $ 2.44
Third                                                    $ 4.25           $ 2.44
Fourth                                                   $ 5.00           $ 2.72


Quarter of Fiscal 1998
                                                                  High & Low Bid
First                                                    $12.38           $ 8.88
Second                                                   $12.81           $ 9.25
Third                                                    $13.25           $ 7.88
Fourth                                                   $10.69           $ 5.19


     The number of  stockholders  of record of the Company's  Common Stock as of
December 21, 1999 was 985.

Dividends

     No cash dividends have been paid to holders of Common Stock since inception
of the  Company.  The  Company  anticipates  that,  in the  foreseeable  future,
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.



                                   9

<PAGE>

Item 6 - Selected Financial Data.

The Selected  Financial Data should be read in conjunction with the consolidated
financial  statements and related notes for the years ended March 31, 1999, 1998
and 1997.

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


                                                                  FOR THE YEARS ENDED MARCH 31,
                                      --------------------------------------------------------------------------------------
                                            1999             1998              1997              1996            1995
                                      --------------------------------------------------------------------------------------
Gross revenues                           $148,868,791     $132,797,006        $106,775,745     $70,830,766      $44,833,429
Net (increase) in deferred revenue       (30,640,470)     (21,447,327)        (20,501,768)    (13,885,618)      (7,632,081)
                                      ---------------- ---------------- ------------------- --------------------------------
Net revenues                              118,228,321      111,349,679          86,273,977      56,945,148       37,201,348
                                      ---------------- ---------------- ------------------- --------------------------------
Net income (loss)                        ($7,639,725)       $5,619,823          $2,284,867        $396,606       $1,532,948
                                      ================ ================ =================== ================================

Basic earnings (loss) per common share        ($0.51)            $0.42               $0.18           $0.03            $0.10
                                      ================ ================ =================== ================================
Diluted earnings (loss) per common
    share                                     ($0.51)            $0.36               $0.15           $0.02            $0.09
                                      ================ ================ =================== ================================
Cash dividend declared                      NONE             NONE              NONE              NONE            NONE
                                      ================ ================ =================== ================================
Total assets                             $186,910,270     $152,811,266        $117,120,031     $91,072,027      $65,377,408
                                      ================ ================ =================== ================================
Long-term debt and
   capital lease obligations               $2,420,967       $2,153,286          $2,491,786      $1,124,015         $293,648
                                      ================ ================ =================== ================================

Convertible exchangeable
   preferred stock                           -                -                  -              $6,420,363       $6,396,795
                                      ================ ================ =================== ================================


Common stockholders' equity               $10,400,002      $21,533,883         $14,692,083     $11,576,921      $11,362,009
                                      ================ ================ =================== ================================
Working capital                           $12,183,775      $16,329,259         $13,342,706     $13,003,624      $11,067,983
                                      ================ ================ =================== ================================

</TABLE>

The financial  information for the fiscal years ended March 31, 1998, 1997, 1996
and 1995 has been restated to effect the change in accounting  policy adopted in
the fiscal year ended March 31, 1999 for the  recognition  of revenue of service
contracts.


                                        10

<PAGE>

                     WARRANTECH CORPORATION AND SUBSIDIARIES

Item 7.       Management's Discussion and Analysis of Financial Condition and
              Results of Operations

                                         General

Except for the historical  information  contained herein,  the matters discussed
below or elsewhere in this annual report may contain forward-looking  statements
that involve risks and  uncertainties.  The Company  makes such  forward-looking
statements  under the  provisions  of the "safe  harbor"  section of the Private
Securities Litigation Reform Act of 1995.  Forward-looking  statements are based
on  management's  beliefs  and  assumptions,  as well as  information  currently
available to management.  Such beliefs and assumptions are based on, among other
things, the Company's operating and financial  performance over recent years and
its  expectations  about its  business  for the current  fiscal year and beyond.
Although  the  Company  believes  that  the   expectations   reflected  in  such
forward-looking  statements are  reasonable,  it can give no assurance that such
expectations  will prove to be correct.  Such  statements are subject to certain
risks,   uncertainties  and  assumptions,   including  (a)  prevailing  economic
conditions may  significantly  deteriorate,  thereby reducing the demand for the
Company's  products  and  services,  (b)  unavailability  of  technical  support
personnel  or increases  in the rate of turnover of such  personnel,  reflecting
increased  demand  for such  qualified  personnel,  (c)  changes in the terms or
availability of insurance  coverage for the Company's programs (d) regulatory or
legal changes affecting the Company's business,  or (e) loss of business from or
significant  change in  relationship  with,  any major  customer of the Company.
Should one or more of these or any other risks or uncertainties materialize,  or
should the  underlying  assumptions  prove  incorrect,  actual  results may vary
materially from those anticipated, estimated or expected.


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

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

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

     The Company's  service contract  programs  benefit  consumers with expanded
and/or extended  product coverage for a specified period of time (and/or mileage
in the case of automobiles and recreational vehicles),  similar to that provided
by  manufacturers  under the terms of their  product  warranties.  Such coverage
generally provides for the repair or replacement of the product,  or a component
thereof,  in the event of its failure.  The Company's  service contract programs
benefit the dealer/clients by providing enhanced value to the goods and services
they offer. It also provides the  opportunity  for increased  revenue and income
while  outsourcing  the costs and  responsibilities  of  operating  an  extended
warranty program.


                                        11

<PAGE>

     Effective  with the fiscal year ended March 31, 1999,  the Company  changed
its  accounting  policy with respect to the  recognition  of revenue for service
contracts  sold  where   Warrantech  is  named  as  the  obligor.   Revenue  for
administrative  obligor  contracts is recognized in  accordance  with  Financial
Accounting  Standards Board Technical Bulletin 90-1 ("TB 90-1"),  Accounting for
Separately  Priced  Extended  Warranty and Product  Maintenance  Contracts,  and
Statement of Financial  Accounting Standards No. 60 ("SFAS 60" ), Accounting and
Reporting by  Insurance  Enterprises.  These  accounting  standards  require the
recognition of revenue over the life of the contract on a  straight-line  basis,
unless sufficient, company-specific, historical evidence indicates that the cost
of  performing  services  under  these  contracts  are  incurred on other than a
straight-line  basis.  The  Company is  recognizing  revenue  on  administrative
obligor  contracts based on company specific  historical  claims experience over
the life of the  contract.  In  addition,  the Company has adopted  Statement of
Financial  Accounting  Standards No. 113 ("SFAS 113"),  Accounting and Reporting
for Reinsurance of  Short-Duration  and Long Duration  Contracts.  This requires
that  insurance  premium costs be ratably  expensed over the life of the service
contract.  The financial  statements for the years ended March 31, 1998 and 1997
were  previously  prepared based on the  proportional  performance  method which
recognized  revenues in direct proportion to the costs incurred in providing the
service  contract  programs  to  the  Company's  clients.  Revenues  in  amounts
sufficient  to meet future  administrative  costs and a reasonable  gross profit
thereon were deferred.

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

     The Company has given  retroactive  effect to this new accounting policy by
restating  previously  issued  financial  statements  for the fiscal years ended
March 31, 1998 and 1997. Net income for the fiscal year ended March 31, 1998 was
restated from  $5,261,037 as previously  reported to $5,619,823.  Net income for
the fiscal year ended March 31, 1997 was restated from  $4,794,715 as previously
reported to $2,284,867. In addition,  retained earnings at April 1,1996 reflects
the cumulative  $8,080,010 effect of the restatement through March 31, 1996. The
aggregate cumulative reduction in net income of $10,948,664  represents deferred
revenues  net of  deferred  direct  costs  which  will be  reflected  in  future
operating results. The restatement of the 1998 and 1997 financial statements did
not adversely affect the Company's liquidity or cash flows.

Results of Operations

Fiscal Year Ended March 31, 1999 Compared to the Fiscal Year Ended
March 31, 1998

     Gross revenues for the fiscal year ended March 31, 1999 were  $148,868,791,
an increase of 12.1% or $16,071,785 as compared to  $132,797,006  for the fiscal
year ended March 31, 1998.  This increase is directly  attributable to increased
revenue  with  new  and  existing  customers  resulting  from  continued  market
penetration in the Consumer Products and International business segments.  Gross
revenues in the Consumer  Products business segment increased 17% or $13,142,758
to $90,623,968 from $77,481,210 for the comparable periods. The Consumer Product
business  segment  had  significant  revenue  increases  in  the  Home  warranty
business.  Fiscal year ending  March 31, 1999 was the first year of  significant
revenue  for Home  Warranties.  Gross  revenues  in the  International  business
segment  increased 40.9% or $5,153,384 to $17,746,685  from  $12,593,301 for the
comparable periods.


                                        12

<PAGE>

     The net  increase in deferred  revenues for the fiscal year ended March 31,
1999 amounted to $30,640,470 as compared with a net increase of $21,447,327  for
the fiscal year ended March 31, 1998. These increases are directly  attributable
to the increased number of service  contracts sold with a service period greater
than one year  during the current  year offset in part by the amounts  earned on
expiring  contracts  during the same periods.  This change is also the result of
the increase in deferred revenue for dealer obligor service contracts  necessary
to meet future administrative costs.

     Direct   costs,   which  consist   primarily  of  insurance   premiums  and
commissions,  are those costs directly related to the production and acquisition
of service contracts where Warrantech is named as the obligor.  Direct costs for
the  fiscal  year  ended  March  31,  1999 were  $67,501,088  as  compared  with
$48,663,577  for the fiscal year ended March 31, 1998.  The  increases in direct
costs are  primarily  the result of volume  increases in contracts  sold and the
amortization of previously deferred direct costs being recognized in the current
year.  Direct costs as a percentage  of gross  revenues  increased to 45.3% from
36.6%  compared to last year.  This  increase  is due in part to higher  premium
costs and a $3.1 million refund of prior year  insurance  payments which reduced
premium costs in the fiscal year ended March 31, 1998.

     Service,  selling and general and administrative  expenses ("SG&A") for the
fiscal year ended March 31, 1999 were $55,522,487 as compared to $49,504,178 for
the fiscal year ended March 31,  1998.  This  increase is  primarily  related to
increases in payroll and payroll related costs and  telecommunication  expenses.
SG&A as a  percentage  of gross  revenues  remained  constant  at 37.3%  for the
comparable periods. Beginning the second quarter of the fiscal year, the Company
benefited from several cost cutting and operational efficiency initiatives which
included  the  reengineering  of its call center  process and  consolidation  of
certain  operating and  administrative  functions.  Despite these  efforts,  the
Company  experienced  increased  costs of  operations  relating to the  Consumer
Product  business  segment and its most  significant  customer  during the year,
CompUSA.

     Provision for bad debt expense  increased to $2,288,580 for the fiscal year
ended March 31, 1999 as compared to $910,675 for the fiscal year ended March 31,
1998.  This increase was caused  primarily by the write-off of CompUSA  accounts
receivables and the termination of the Company's relationship with Proteva, Inc.

     Depreciation  and  amortization  amounted to $5,148,370 for the fiscal year
ended March 31, 1999 as compared to  $3,758,213  for the fiscal year ended March
31,  1998.  The  increases  compared  to last  year  reflect  a higher  level of
depreciation  during the year resulting from  additional  assets being placed in
service  during the current and prior  fiscal year.  This  increase in assets is
directly  attributable  to  (i)  the  continued  development  of  the  Company's
information  systems and (ii) the purchase of additional  computer  equipment to
accommodate personnel growth and efficiency of operations.

     Other income  increased to  $1,043,201  for the fiscal year ended March 31,
1999 compared to $819,732 for the fiscal year ended March 31, 1998. Other income
primarily  reflects net  interest.  This increase is primarily the result of the
interest earned on the promissory notes reflecting the obligation resulting from
the  exercise of stock  options by the  Chairman of the Board / Chief  Executive
Officer and two members of Warrantech's Board of Directors.

     The  Company's  pretax net income  (loss) for the fiscal  year ended  March
31,1999 for the Automotive, Consumer Products, International reportable segments
and Other, which includes corporate, was $493,193, ($10,626,187),  ($95,157) and
($960,772), respectively.

     The Automotive  segment's pretax operating results in 1999 were $10,757,000
lower than the prior year.  This reduction is a result of increased net deferred
revenues,  increased general and administrative expenses in the current year and
in 1998  direct  costs  were  reduced  by a  $3,100,000  refund  of prior  years
insurance payments.  The Consumer Products segment's pretax operating results in
1999 were $11,100,000  lower than the prior year. This reduction is the combined
result of increased net deferred revenues,  increased general and administrative
expenses and increased  provision for doubtful accounts by this segment in 1999.
The International  segment's reduced its $2,176,000 operating loss in 1998 to an
operating  loss of $96,000 in the current  period  primarily  through  attaining
higher gross margins in the current year.


                                        13

<PAGE>

     The income tax  provision for the fiscal year ended March 31, 1999 and 1998
differs from the statutory  rate  primarily due to state and local taxes and the
non-deductibility  of goodwill  amortization.  The net  deferred tax asset as of
March  31,  1999  and  1998   contains  a  benefit  of  $136,662  and  $466,503,
respectively,  related to foreign losses. Management expects to realize this tax
benefit,  which has an indefinite  carry-forward period,  against future foreign
income.

     Net loss for the fiscal year ended March 31, 1999 was  $7,639,725  or $0.51
per basic share as compared to net income of  $5,619,283 or $.42 per basic share
for the fiscal year ended March 31,  1998.  This change in net income  (loss) is
the result of the factors listed above.

Fiscal Year Ended March 31, 1998 Compared to the Fiscal Year Ended
March 31,1997

     Gross revenues for the fiscal year ended March 31, 1998 were  $132,797,006,
an increase of 24.4% or $26,021,261 as compared to  $106,775,745  for the fiscal
years ended March 31, 1997. The increase is the result of the Company's  efforts
in expanding its market  penetration in the Automotive and International  market
segments.  Gross revenues in the Automotive  business segment increased 48.2% or
$15,531,773 to $47,787,563  from $32,255,790 for the comparable  periods.  Gross
revenues in the International business segment increased 265.4% or $9,146,844 to
$12,593,301 from $3,446,457 for the comparable periods.

     The net  increase in deferred  revenues for the fiscal year ended March 31,
1998 amounted to $21,447,327 as compared with a net increase of $20,501,768  for
the fiscal year ended March 31, 1997. These increases are directly  attributable
to the increased number of service  contracts sold with a service period greater
than one year  during the current  year offset in part by the amounts  earned on
expiring contracts during the same periods.

     Direct   costs,   which  consist   primarily  of  insurance   premiums  and
commissions,  are those costs directly related to the production and acquisition
of service contracts where Warrantech is named as the obligor.  Direct costs for
the  fiscal  year  ended  March  31,  1998 were  $48,663,577  as  compared  with
$42,704,103  for the fiscal year ended March 31, 1997.  The  increases in direct
costs are  primarily  the result of volume  increases in contracts  sold and the
amortization of previously deferred direct costs being recognized in the current
year. Direct costs as a percentage of gross revenues decreased to 36.6% from 40%
compared to last year.  This decrease is due in part to a $3.1 million refund of
prior year  insurance  payments  which reduced  premium costs in the fiscal year
ended March 31, 1998.

     Service,  selling and general and administrative  expenses ("SG&A") for the
fiscal year ended March 31, 1998 were $49,504,178 as compared to $36,320,524 for
the fiscal year ended March 31, 1997. The increase is directly  attributable  to
increases  in sales  related  costs,  communication  costs,  payroll and payroll
related  costs  arising  from  the  service  requirements  associated  with  the
increased number of service  contracts being sold. SG&A as a percentage of gross
revenues increased to 37.3% compared to 34.0% for the comparable periods.

     Provision  for bad debt  expense  increased to $910,675 for the fiscal year
ended March 31, 1998 as compared to $733,119 for the fiscal year ended March 31,
1997. This is primarily the result of the increase in gross revenues.

     Depreciation  and  amortization  amounted to $3,758,213 for the fiscal year
ended March 31, 1998 as compared to  $2,619,981  for the fiscal year ended March
31, 1997. The increases  over a year ago reflect a higher level of  depreciation
during the year resulting from additional  assets being placed in service during
the current fiscal year. This increase in assets is directly attributable to (i)
the  continued  development  of the Company's  information  systems and (ii) the
purchase of additional  computer  equipment to accommodate  personnel growth and
efficiency of operations.


                                   14

<PAGE>

     In  April  1996,  the  Company  and its  joint  venture  partner,  American
International  Group ("AIG"),  agreed to terminate the joint  venture,  Techmark
Services Ltd., effective January 1, 1996. Under the terms of the agreement,  AIG
agreed to purchase the  Company's  forty-nine  percent  (49%)  investment in the
joint venture for $3,762,154. As of March 31, 1996, the Company's carrying value
of the joint venture investment amounted to $1,885,674 which, resulted in a gain
on the sale of the  investment of $1,876,480  recognized in the first quarter of
the fiscal year ended March 31, 1997.  This gain on the sale of  investment  was
offset  during  the fiscal  year  ended  March 31,  1997 by a  $2,274,170  legal
settlement.

     Other income increased to $819,732 for the fiscal year ended March 31, 1998
compared to $324,585  for the fiscal year ended  March 31,  1997.  Other  income
primarily reflects net interest.

     The  Company's  pretax net income  (loss) for the fiscal  year ended  March
31,1998 for the Automotive, Consumer Products, International reportable segments
and Other, which includes corporate, was $11,249,911, $474,285, ($2,175,507) and
($215,921), respectively.

     The income tax  provision for the fiscal year ended March 31, 1998 and 1997
differs from the statutory  rate  primarily due to state and local taxes and the
non-deductibility  of goodwill  amortization.  The net  deferred tax asset as of
March  31,  1998  and  1997   contains  a  benefit  of  $466,503  and  $635,213,
respectively,  related to foreign losses. Management expects to realize this tax
benefit which has an indefinite  carry-forward  period,  against  future foreign
income.

     Net income for the fiscal year ended March 31, 1998  amounted to $5,619,823
or $.42 per basic  share,  compared  to  $2,284,867  or $.18 for the fiscal year
ended March 31, 1997.  This  increase in net income is the result of the factors
listed above.

Liquidity and Capital Resources

     The primary source of liquidity  during the current year was cash generated
by operations.  Funds were utilized for working capital expenditures and capital
expenditures relating to the development of the Company's information systems.

     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,  1999  amounted to  $2,134,097.  In  addition,  the
Company has a revolving credit  agreement with a bank which originally  provided
for maximum  aggregate  borrowings up to $10,000,000 with interest at the bank's
prevailing  prime rate or LIBOR plus 2%.  Subsequent to March 31, 1999, the line
of credit was adjusted to $1,500,000 and currently expires on December 31, 1999.
The Company is presently in negotiations to increase and/or replace this current
line of  credit.  Although  it is  anticipated  that this will be  completed  by
February 2000, no assurances can be given that this will be accomplished. During
the fiscal years ended March 31, 1998,  1999 and through  December 21, 1999, the
Company did not have any borrowings under this line of credit.

     During  the  fiscal  year  ended  March 31,  1999 the  Company  repurchased
1,180,300 shares of Warrantech  Corporation  common stock for treasury purposes.
The aggregate amount of these purchases totaled $3,955,494.  For the period from
April 1, 1999 through  December 21, 1999, the Company  repurchased an additional
100,000  shares at an aggregate  amount of $74,382.  The Board of Directors  has
authorized the repurchase of up to $1,500,000 of additional shares of Warrantech
Corporation common stock as part of its stock repurchase program.

     On  July 6,  1998,  Joel  San  Antonio,  Warrantech's  Chairman  and  Chief
Executive  Officer,  and  William  Tweed  and  Jeff  J.  White,  members  of the
Warrantech's Board of Directors,  exercised 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 interest rate of 6%.
The  promissory  notes,  which  are  with  recourse  and  secured  by the  stock
certificates  issued,  mature July 5, 2001.  An additional  promissory  note was
signed by Joel San Antonio for $595,634 on March 22, 1999 which  represents  the
amounts funded by the Company with respect to his payroll taxes for the exercise
of these options.  The exercise of these stock options and the  anticipated  tax
benefit from this transaction  total  approximately  $10 million.  These amounts
have  been  recorded  as  a  contra-equity  account,  which  is a  reduction  of
stockholders'  equity.  The Company is currently in discussions with the Messrs.
San Antonio,  Tweed and White to renegotiate the payment terms of the notes. The
payment of interest, which was due July 6, 1999, has been deferred until January
6, 2000.


                                   15

<PAGE>

     In connection with the sale of the Company's joint venture interest to AIG,
the Company agreed to repurchase  3,234,697  shares of convertible  exchangeable
preferred stock held by AIG at their redemption value of $6,430,000. This amount
was offset by the amount due the Company for the sale of its  investment  in the
joint  venture,  with the net amount due AIG of $2,395,960  resulting in a three
year,  non-interest  bearing  note  payable.  The note was  payable  in 11 equal
quarterly  installments  of  $205,000  commencing  June 30,  1996,  with a final
installment of $140,960 due March 1999.  All amounts  relating to this note were
paid in full prior to March 31, 1999. Also, as part of the agreement, AIG agreed
to pay the  Company  $1,480,000  related to amounts  due the  Company  under its
profit sharing arrangement.  In connection with this payment, the Company issued
an irrevocable letter of credit for the benefit of AIG through December 31, 2002
which can be drawn against by American  International  Group ("AI ) in the event
that the ultimate  profit sharing amount due the Company is less than the amount
paid.  It is  anticipated  that no amounts  will be due AIG under this letter of
credit.

     The Company believes that internally  generated funds will be sufficient to
finance its current operation for at least the next twelve months.

     The Company's relationship with its most significant customer, CompUSA, was
terminated effective July 28, 1999. The Company is evaluating the effect of this
termination on its operating structure,  financial condition and cash flows. The
Company has  implemented a  restructuring  plan to  consolidate  operations  and
reduce costs. This  restructuring plan includes the reduction of operational and
administrative personnel, consolidation of office space and an overall review of
selling, general and administrative expenses. The loss of the customer will have
an adverse impact on current operating results.

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

New Accounting Pronouncements

     In March of 1998, The American  Institute of Certified  Public  Accountants
issued a  Statement  of  Position  98-1  Accounting  for the  Costs of  Computer
Software Developed or Obtained for Internal Use ("SOP 98-1"),  This SOP provides
guidance on accounting for the costs of computer software  developed or obtained
for internal use which includes:

      -  Definition of computer software costs

      -  Accounting for various stages of development

      -  Accounting for internal and external costs

      -  Need to assess impairment under SFAS 121

      -  Amortization method and period to be utilized

     This SOP is effective for fiscal years  beginning  after  December 15, 1998
and restatement of previously incurred costs is not permitted.

     The Company  believes its current  accounting  policies are consistent with
those  prescribed by SOP 98-1 and does not believe the adoption of this SOP will
have any impact on its results of operations, financial condition or liquidity.

Readiness For Year 2000

     The Company has  addressed the business,  financial,  technical,  legal and
other  implications that arise due to the Year 2000 date issues. A comprehensive
Year 2000 program was put into place during fiscal 1998. The primary goal of the
Year 2000 program was to implement the changes needed to answer functionality in
the Year 2000, as cost effectively and  expeditiously as possible.  Towards that
goal, the Company established the following objectives:


                                        16

<PAGE>

  - Implementation of overall Year 2000 program

  - Develop and implement a methodology for assessment, project planning,
    development, testing and implementation

  - Implement a business partner management framework

  - Develop a risk management approach

Scope

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

IT Assets:

  - Micro-computer software and hardware

  - In-house application software

  - Acquired third-party vendor application software

  - Operating system components

  - Proprietary mid-range computers

  - Network and communication hardware and software

Non-IT assets:

  - Energy management systems

  - Security systems

  - Fire protection systems

  - UPS systems

  - Automated HVAC systems

  - Elevators

  - Vaults

Overall Project Plan

The Year 2000 program was structured into five major phases, with the
overall  objective  to  have  Warrantech  Corporation  Year  2000  compliant  by
September 30, 1999.

<TABLE>
<S>                   <C>                              <C>                      <C>
--------------------------------------------------------------------------------------------------------------------------------
       Phase                        Tasks                 Target Completion                       Objectives

--------------------------------------------------------------------------------------------------------------------------------
Formalize Project      Define:                          November  1997          Communicate issues to management
                         -  Process
                         -  Roles
                         -  Responsibilities            % Complete-100%
                         -  Deliverables

--------------------------------------------------------------------------------------------------------------------------------
Assessment             Inventory of systems affected    January 1998                 Define Scope
                                                                                     Identify resource needs for 1998-99
                                                                                     Set expectations for future impact
                                                        % Complete-100%
--------------------------------------------------------------------------------------------------------------------------------


Strategy Formulation   Develop projects and estimates   March 1998                   Ensure necessary funding is included in the
                                                        % Complete-100%              Annual Operating Plan
--------------------------------------------------------------------------------------------------------------------------------
Execute                  -  Upgrade/Develop new         September  1999              Compliant systems
                         -  Test                        % Complete-100%
                         -  Employment                  (as tested)

--------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                   17

<PAGE>


YEAR 2000 PROGRAM STATUS

Overall,  the  Company  has  reviewed  and  tested  each  of the  following
functional areas:

  -   Business applications
  -   Hardware
  -   Major business partners

Business Applications

     In conjunction  with the Company's  1995  reengineering  and  restructuring
initiatives,  the Company  began a complete  process  redesign  and new system's
architecture  including  desktops,  networking and  development  infrastructure,
which was completed in September  1999.  These new systems,  which are Year 2000
compliant  as  tested,  replaced  substantially  all of the  Company's  critical
business application software.

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

     The total cost of the Year 2000  project was  estimated at $250,000 and was
being funded through operating cash flows.

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

     Compliance statements identifying software product release levels have been
received.  Software  upgrade  implementation  and testing plans were  completed.
Outside  vendors  and  internal  resources  were used to  implement  third-party
software upgrades.

Hardware

     A complete  computer,  telecommunications,  and office  equipment  hardware
inventory has been taken by each functional area.  Manufacturer compliance plans
and timing have been requested.  The Company has installed new/upgraded products
and has tested products for compliance in local environments.

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

Major Business Partners

Customers:

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

                                   18

<PAGE>

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

     Customer letters requesting certification, compliance plans and timing have
been  sent  to all  of the  Company's  major  customers.  As  part  of  system's
development,  data acquisition (electronic data feeds) from major customers have
been redeveloped.  This process has allowed the Company to identify, review, and
compensate for inadequacies in the customer's internal data reporting processes.
The Company has also identified  alternative  reporting  methods should the need
arise.

Insurance Companies:

     Insurance  companies  require  the  Company  to  report  sales  and  claims
information  periodically.  As part of  systems  development,  the  Company  has
developed its data feeds and has successfully  tested Year 2000 compliance as of
September 30, 1999.

RESULTS ON OPERATIONS

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

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

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

Worst Case Scenarios

<TABLE>
<S>                                                                  <C>
-----------------------------------------------------------------------------------------------------------------
                      Scenario I                                            Contingency Plan

-----------------------------------------------------------------------------------------------------------------
     -   External vendors telecommunications systems do not work       Developing vendor redundancy plans to minimize impact
                                                                       on operations

-----------------------------------------------------------------------------------------------------------------
                     Scenario II                                            Contingency Plan

-----------------------------------------------------------------------------------------------------------------
     -   Customers' Point of Sales systems cannot record sales         - Manual entry of contract sales

-----------------------------------------------------------------------------------------------------------------
                     Scenario III                                           Contingency Plan

-----------------------------------------------------------------------------------------------------------------
     -   Internal systems breakdown                                    - Manual operations

-----------------------------------------------------------------------------------------------------------------
                     Scenario IV                                            Contingency Plan

-----------------------------------------------------------------------------------------------------------------
     -   Banking system failure                                         Temporary increase in short-term cash holdings
-----------------------------------------------------------------------------------------------------------------

</TABLE>

                                             19

<PAGE>

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

Common European Currency

     On January 1, 1999,  certain of the member nations of the European Economic
and  Monetary  Union  ("EMU")  adopted a common  currency,  the  Euro.  Once the
national  currencies  are phased out,  the Euro will be the sole legal tender of
each of these nations.  During the transition period,  commerce of these nations
will be transacted in the Euro or in the currently existing national currency.

     The  Company is aware of the issues  with  respect to the phase in and will
consider its impact on Warrantech  International  as its business  expands.  Any
costs  associated with the adoption of the Euro will be expensed as incurred and
the Company does not expect  these to be material to its results of  operations,
financial condition or liquidity.


Item 7A.   Quantitative and Qualitative Disclosures About Market Risk

     As of March 31, 1999,  the Company does not have any  derivatives,  debt or
hedges outstanding. In addition, the risk of foreign currency fluctuation is not
material  to the  Company's  financial  position or results of  operations.  The
Company's  available line of credit requires interest on outstanding  borrowings
at various rates.  Therefore,  the Company is not subject to interest rate risk,
but could be subject to fluctuating cash flows on outstanding borrowings.


                                        20

<PAGE>

Item 8.   Financial Statements and Supplementary Data


                 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
                          FINANCIAL STATEMENT SCHEDULES


                                                                        Page No.
Reports of Independent Auditors.............................................. 22

Consolidated Financial Statements:
     Balance Sheets as of March 31, 1999 and 1998............................ 23

     Statements of Operations and Comprehensive Income
     For the Fiscal Years Ended March 31, 1999, 1998 and 1997................ 24

     Statements of Common Stockholders' Equity
     For the Fiscal Years Ended March 31, 1999, 1998 and 1997................ 25

     Statements of Cash Flows
     For the Fiscal Years Ended March 31, 1999, 1998 and 1997 ............... 26

Notes to Consolidated Financial Statements ............................... 27-42
Consolidated Financial Statement Schedules
Schedule VIII - Valuation and Qualifying Accounts................ ........... 43



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.


                                   21

<PAGE>


                      WEINICK SANDERS LEVENTHAL & CO., LLP


                        REPORTS 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,  1999 and 1998 and its  related
consolidated   statements  of  operations  and  comprehensive   income,   common
stockholders'  equity and cash flows for the fiscal  years ended March 31, 1999,
1998 and 1997. 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 audit.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  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,  1999 and 1998 and the
consolidated results of their operations and comprehensive income and their cash
flows for the years ended March 31,  1999,  1998 and 1997,  in  conformity  with
generally  accepted  accounting  principles.  Also, in our opinion,  the related
consolidated  financial statement schedules,  when considered in relation to the
basic financial  statements taken as a whole,  presents fairly,  in all material
respects, the information set forth therein.

     The consolidated  financial statements for the fiscal years ended March 31,
1998 and 1997  have  been  restated  as  described  in Note 2.

                              Weinick  Sanders Leventhal & Co., LLP

New York, NY
December 10, 1999


                                   22

<PAGE>

                     WARRANTECH CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<S>                                                  <C>                <C>
                                     A S S E T S
                                                                  March 31,
                                                      --------------------------------
                                                            1999            1998
                                                      ---------------- ---------------
Current assets:
Cash and cash equivalents                                 $15,032,473     $24,062,052

Investments in marketable securities                        2,961,602         537,924

Accounts receivable, (net of allowances of
  $1,115,285 and $1,223,173, respectively)                 39,275,404      27,878,335

Other receivables, net                                      5,924,332       2,197,405
Income tax receivable                                       1,147,324         -
Deferred income taxes                                       1,419,854         503,282
Prepaid expenses and other current assets                   1,537,633       1,775,316
                                                      ---------------- ---------------
   Total current assets                                    67,298,622      56,954,314
                                                      ---------------- ---------------




Property and equipment, net                                16,277,473      13,639,921

Other assets:
Excess of cost over fair value of assets
  acquired (net of accumulated amortization
  of $4,882,009 and $4,212,956, respectively)               3,276,524       3,945,577
Deferred income taxes                                       9,603,277       8,121,666
Deferred direct costs                                      86,107,696      65,354,341
Investments in marketable securities                        1,321,019       1,967,817
Restricted cash                                               800,000         800,000
Split dollar life insurance policies                        1,370,010       1,054,045
Notes receivable                                              477,767         654,068
Collateral security fund                                      199,389         199,389
Other assets                                                  178,493         120,128
                                                      ---------------- ---------------
   Total other assets                                     103,334,175      82,217,031

                                                      ---------------- ---------------
                    Total Assets                         $186,910,270    $152,811,266
                                                      ================ ===============

                        LIABILITIES AND STOCKHOLDERS' EQUITY
                                                                 March 31,
                                                      --------------------------------
                                                            1999            1998
                                                      ---------------- ---------------
Current liabilities:
Current maturities of long-term debt and capital lease
     obligations                                           $1,558,447      $2,371,662
Insurance premiums payable                                 36,585,920      22,269,589
Income taxes payable                                         -              2,073,284
Accounts and commissions payable                            8,524,040       7,698,948
Legal settlements payable                                     100,000         200,000
Accrued expenses and other current liabilities              8,346,440       6,011,572
                                                      ---------------- ---------------
   Total current liabilities                               55,114,847      40,625,055
                                                      ---------------- ---------------

Deferred revenues                                         118,497,564      87,890,306

Long-term debt and capital lease obligations                2,420,967       2,153,286

Deferred rent payable                                         476,890         608,736
                                                      ---------------- ---------------
   Total liabilities                                      176,510,268     131,277,383

Commitments and contingencies

Stockholders' equity:
   Preferred stock - $.0007 par value authorized
      - 15,000,000 Shares Issued  - none at
      March 31, 1999 and March 31, 1998                          -                -
   Common stock - $.007 par value authorized -
      30,000,000 Shares Issued  - 16,501,786 shares
      at March 31, 1999 and 13,449,382 shares
      at March 31, 1998                                       115,513          94,146
   Additional paid-in capital                              23,728,881      14,124,700
   Loans to directors and officers                        (9,006,699)         -
   Accumulated other comprehensive income, net of taxes      (93,534)          85,608
   Retained earnings                                          105,154       7,744,879
                                                      ---------------- ---------------
                                                           14,849,315      22,049,333
Less:  Deferred compensation                                 -               (21,631)
         Treasury stock - at cost, 1,280,300 shares
          at March 31, 1999                               (4,449,313)       (493,819)
          and 100,000 shares  at March 31, 1998
                                                      ---------------- ---------------
Total Stockholders' Equity                                 10,400,002      21,533,883

                                                      ---------------- ---------------
        Total Liabilities and Stockholders' Equity       $186,910,270    $152,811,266
                                                      ================ ===============

</TABLE>

See independent  auditors'  report and  accompanying  notes to consolidated
financial statements


                                        23

<PAGE>

                     WARRANTECH CORPORATION AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME


<TABLE>
<S>                                          <C>               <C>              <C>
                                                        For the Years Ended March 31,
                                              ---------------  ---------------  ----------------
                                                   1999             1998              1997
                                              ---------------  ---------------  ----------------
Gross revenues                                  $148,868,791     $132,797,006      $106,775,745
Net increase in deferred revenues               (30,640,470)     (21,447,327)      (20,501,768)
                                              ---------------  ---------------  ----------------
Net revenues                                     118,228,321      111,349,679        86,273,977

Costs and expenses:
   Direct costs                                   67,501,008       48,663,577        42,704,103
   Service, selling, and general and
     administrative                               55,522,487       49,504,178        36,320,524
   Provision for bad debt expense                  2,288,580          910,675           733,119
   Depreciation and amortization                   5,148,370        3,758,213         2,619,981
                                              ---------------  ---------------  ----------------
Total costs and expenses                         130,460,445      102,836,643        82,377,727
                                              ---------------  ---------------  ----------------

Income (loss) from operations                   (12,232,124)        8,513,036         3,896,250
                                              ---------------  ---------------  ----------------

Legal settlements                                    -                -             (2,274,170)
Gain on sale of equity joint venture                 -                -               1,876,480
Other income                                       1,043,201          819,732           324,585
                                              ---------------  ---------------  ----------------

Income (loss) before provision for income taxes (11,188,923)        9,332,768         3,823,145
Provision (benefit) for income taxes             (3,549,198)        3,712,945         1,538,278
                                              ---------------  ---------------  ----------------

Net income (loss)                               ($7,639,725)       $5,619,823        $2,284,867
                                              ===============  ===============  ================

Earnings per share:
Basic                                                ($0.51)            $0.42             $0.18
                                              ===============  ===============  ================
Diluted                                              ($0.51)            $0.36             $0.15
                                              ===============  ===============  ================

Weighted average number of shares outstanding:
Basic                                             15,098,242       13,259,964        13,054,611
                                              ===============  ===============  ================
Diluted                                           15,098,242       15,617,350        15,394,869
                                              ===============  ===============  ================



COMPREHENSIVE INCOME

                                                        For the Years Ended March 31,
                                              --------------------------------------------------
                                                   1999             1998              1997
                                              ---------------  ---------------  ----------------
Net income (loss)                               ($7,639,725)       $5,619,823        $2,284,867
Other comprehensive income, net of tax:
   Foreign currency translation adjustments        (179,539)           62,009            27,064
   Unrealized gain on investments                        397            8,618            13,468
                                              ---------------  ---------------  ----------------
Comprehensive Income                            ($7,818,867)       $5,690,450        $2,325,399
                                              ===============  ===============  ================


                                                        For the Years Ended March 31,
                                              --------------------------------------------------
Accumulated other comprehensive income:            1999             1998              1997
                                              ---------------  ---------------  ----------------
    Unrealized gain(loss) gain on investments         $7,452           $7,055          ($1,563)
    Accumulated translation adjustments            (100,986)           78,553            16,544
                                              ---------------  ---------------  ----------------
Accumulated other comprehensive income             ($93,534)          $85,608           $14,981
                                              ===============  ===============  ================


</TABLE>

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

                                        24

<PAGE>


                     WARRANTECH CORPORATION AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY

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

                                                          For the Years Ended March 31,
                                            --------------------- -----------------------------------
                                                    1999                 1998              1997
                                            --------------------- ------------------ ----------------
Common Stock Outstanding (shares):
Balance, beginning of year                            13,449,382         13,261,636       13,082,181
Exercise of common stock options                       3,010,000            142,262          175,251
Issuance of common stock                                  42,404             45,484            4,204
                                            --------------------- ------------------ ----------------
Balance, end of year                                  16,501,786         13,449,382       13,261,636
                                            ===================== ================== ================
Common Stock
Balance, beginning of year                               $94,146            $90,911          $89,375
Exercise of unrestricted common stock options                 70                996            1,227
Exercise of restricted common stock options               21,000          -                 -
Issuance of common stock                                     297              2,239              309
                                            --------------------- ------------------ ----------------
Balance, end of year                                    $115,513            $94,146          $90,911
                                            ===================== ================== ================
Additional paid-in capital
Balance, beginning of year                           $14,124,700        $13,033,185      $12,212,641
Exercise of unrestricted common stock options             49,930            697,355          709,653
Exercise of restricted common stock options            9,314,588          -                 -
Issuance of common stock                                 239,663            394,160          110,891
                                            --------------------- ------------------ ----------------
Balance, end of year                                 $23,728,881        $14,124,700      $13,033,185
                                            ===================== ================== ================
Loans to directors and officers
Balance, beginning of year                                    $0                 $0               $0
Loans for exercise of restricted common
 stock options and accrued interest                  (9,006,699)          -                 -
                                            --------------------- ------------------ ----------------
Balance, end of year                                ($9,006,699)                 $0               $0
                                            ===================== ================== ================
Accumulated other comprehensive income
Balance, beginning of year                               $85,608            $14,981        ($25,551)
Unrealized gain (loss) on investments                  (179,142)             70,627           40,532
                                            --------------------- ------------------ ----------------
Balance, end of year                                   ($93,534)            $85,608          $14,981
                                            ===================== ================== ================
Retained earnings
Balance, beginning of year                            $7,744,879         $2,125,056       ($236,678)
Net income (loss)                                    (7,639,725)          5,619,823        2,284,867
Imputed interest on preferred stock                   -                   -                   76,867
                                            --------------------- ------------------ ----------------
Balance, end of year                                    $105,154         $7,744,879       $2,125,056
                                            ===================== ================== ================
Deferred compensation
Balance, beginning of year                             ($21,631)          ($78,231)        ($70,116)
Issuance of common stock                              -                   -                 (47,197)
Amortization of deferred compensation                     21,631             56,600           39,082
                                            --------------------- ------------------ ----------------
Balance, end of year                                          $0          ($21,631)        ($78,231)
                                            ===================== ================== ================
Common stock in treasury (shares)
Balance, beginning of year                             (100,000)          (100,000)         (93,000)
Purchase of treasury shares                          (1,180,300)          -                  (7,000)
                                            --------------------- ------------------ ----------------
Balance, end of year                                 (1,280,300)          (100,000)        (100,000)
                                            ===================== ================== ================
Common stock in treasury (amount)
Balance, beginning of year                            ($493,819)         ($493,819)       ($392,750)
Purchase of treasury shares                          (3,955,494)          -                (101,069)
                                            --------------------- ------------------ ----------------
Balance, end of year                                ($4,449,313)         ($493,819)       ($493,819)
                                            ===================== ================== ================
Total Stockholders' Equity                           $10,400,002        $21,533,883      $14,692,083
                                            ===================== ================== ================

</TABLE>

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

                                        25

<PAGE>



                     WARRANTECH CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

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

                                                                 For the Years Ended March 31,
                                                      -------------------------------------------------
                                                             1999            1998            1997
                                                      ------------------ -------------- ---------------
Cash flows from operating activities:
  Net income (loss)                                        ($7,639,725)     $5,619,823      $2,284,867
                                                      ------------------ -------------- ---------------
  Adjustments to reconcile net income (loss) to net cash
     provided by operating activities:
     Depreciation and amortization                            5,148,370      3,758,213       2,619,981
     Provision for bad debt                                   2,288,580        910,675         733,119
     Deferred revenues                                       30,640,470     21,447,327      20,501,768
     Deferred income taxes                                  (2,398,183)      (657,828)     (1,441,811)
     Gain on sale of investment in joint venture              -                -           (1,876,480)
     Other                                                       14,074         81,900        (79,049)
     Increase (decrease) in cash flows as a result of
     changes in asset and liability balances:
        Deferred direct costs                              (20,753,355)   (20,198,990)    (15,188,907)
        Accounts receivable                                (11,767,393)    (5,511,145)     (7,862,945)
        Other receivables                                   (5,645,183)      1,677,046       4,736,468
        Income taxes                                        (3,220,608)      1,928,886     (1,868,208)
        Prepaid expenses and other current assets               237,683      (141,617)       (644,763)
        Split dollar life insurance policies                  (315,965)      (188,503)       (181,649)
        Other assets                                           (58,365)         52,312          24,431
        Insurance premiums payable                           14,316,331      2,667,299       3,355,043
        Accounts and commissions payable                        825,092      2,437,081         452,340
        Legal settlements payable                             (100,000)    (1,435,000)       1,635,000
        Accrued expenses and other current liabilities        2,334,868      1,879,459       2,409,568
        Deferred rent payable                                 (131,846)       (93,497)         167,613
                                                      ------------------ -------------- ---------------
  Total adjustments                                          11,414,570      8,613,618       7,491,519
                                                      ------------------ -------------- ---------------
Net cash provided by operating activities                     3,774,845     14,233,441       9,776,386
Cash flows from investing activities:
  Property and equipment purchased                          (4,870,260)    (4,609,623)     (3,379,104)
  Net cash paid for acquired business                         -              (888,541)         -
  Purchase of marketable securities                         (3,307,886)      (360,324)     (1,313,356)
  Proceeds from sales of marketable securities                1,542,586        184,225       1,055,934
                                                      ------------------ -------------- ---------------
Net cash (used in) investing activities                     (6,635,560)    (5,674,263)     (3,636,526)
                                                      ------------------ -------------- ---------------
Cash flows from financing activities:
    (Increase) decrease in notes receivable                     176,301      (611,992)          45,684
    Exercise of unrestricted common stock options
      and grants                                                289,960      1,094,750         822,080
    Purchase treasury stock                                 (3,955,494)        -             (101,069)
    Repayments, notes and capital leases                    (2,679,631)    (2,011,809)     (1,734,117)
                                                      ------------------ -------------- ---------------
Net cash (used in) financing activities                     (6,168,864)    (1,529,051)       (967,422)
                                                      ------------------ -------------- ---------------
Net increase (decrease) in cash and cash equivalents        (9,029,579)      7,030,127       5,172,438

Cash and cash equivalents at beginning of year               24,062,052     17,031,925      11,859,487
                                                      ------------------ -------------- ---------------
Cash and cash equivalents at end of year                    $15,032,473    $24,062,052     $17,031,925
                                                      ------------------ -------------- ---------------

Supplemental Cash Flow Information:
Cash payments for: Interest                                    $458,598       $378,812        $410,109
                                                      ------------------ -------------- ---------------
                          : Income taxes                     $1,109,616     $2,428,590      $4,879,377
                                                      ------------------ -------------- ---------------

Non-Cash Investing and financing activities:
    Purchase of preferred stock                               -                -            $6,420,363
    Note issued in connection with purchase of
      preferred stock                                         -                -            $2,395,960
    Property and equipment financed through
      capital leases                                         $2,134,097     $2,047,136      $1,989,136
    Exercise of restricted common stock options               9,335,588        -               -
    Increase in loans to officers and directors             (9,006,699)        -               -

</TABLE>


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

                                   26

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

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

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

     The Company's  service contract  programs  benefit  consumers with expanded
     and/or  extensions  of  product  coverage  for a  specified  period of time
     (and/or  mileage in the case of  automobiles  and  recreational  vehicles),
     similar to that provided by manufacturers  under the terms of their product
     warranties.  Such coverage generally provides for the repair or replacement
     of the product,  or a component thereof,  in the event of its failure.  The
     Company's service contract programs benefit the dealer/clients by providing
     enhanced  value to the goods and services they offer.  It also provides the
     opportunity  for increased  revenue and income while  outsourcing the costs
     and responsibilities of operating an extended warranty program.

     Basis of Presentation  and Principles of  Consolidation - The  accompanying
     consolidated  financial  statements  have  been  prepared  on the  basis of
     generally  accepted  accounting  principles  ("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  generally   accepted   accounting   principles   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 - The Company's revenue  recognition policy is
     segregated  into two distinct  methods  depending on whether the Company or
     the  retailer/dealer  is designated as the obligor on the service  contract
     sale. In either case, a highly rated independent  insurance company assumes
     all  claims  liabilities  of  the  service  contracts  administered  by the
     Company.

                                   27

<PAGE>

     Dealer obligor service contracts are sales in which the  retailer/dealer is
     designated as the obligor.  For these  service  contract  sales,  using the
     proportional  performance method, the Company recognizes revenues in direct
     proportion to the costs incurred in providing the service contract programs
     to the  Company's  clients.  Revenues in amounts  sufficient to meet future
     administrative  costs and a reasonable  gross profit  thereon are deferred.
     Sales of dealer obligor  service  contracts are reflected in gross revenues
     net of premiums paid to insurance companies.

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

     The financial statements for the fiscal years ended March 31, 1998 and 1997
     have been  restated to  retroactively  reflect the  adoption of a change in
     accounting policy. (See note 2.)

     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 did not accrue
     or receive any profit  sharing  amounts in the fiscal years ended March 31,
     1999, 1998 or 1997.

     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  -During  the fiscal  year ended  March 31,  1998,  the
     Company  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 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,
     1999 and 1998.

     The Company had on deposit $12,521,188 and $22,245,565 of cash in excess of
     federally insured limits at March 31, 1999 and 1998, respectively.

     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.


                                        28

<PAGE>

     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 assets ranging between 3 and 7 years.

     Advertising  Costs -The  Company  expenses  advertising  costs as incurred.
     Advertising expenses for the years ended March 31, 1999, 1998 and 1997 were
     $790,070, $780,945 and $696,398, respectively.

     Excess of Cost Over Fair Value of Assets Acquired - The excess of cost over
     fair value of the assets  acquired 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 and is being  amortized on a  straight-line  basis over 15, 10
     and 4.5 years, respectively. Amortization expense charged to operations for
     the years  ended  March  31,  1999,  1998 and 1997  amounted  to  $669,053,
     $594,364 and $467,144, respectively.

     Stock Based Compensation -The Company applies  Accounting  Principles Board
     Opinion statement 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 value 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.  Such  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  taxes 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 U.S.  dollars in accordance  with
     Statement  of  Financial  Accounting  Standards  No. 52  "Foreign  Currency
     Translation".  The  functional  currency for the Company's  United  Kingdom
     operations is the British pound. 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.

     Comprehensive  Income - On April 1, 1998 the Company  adopted  Statement of
     Financial  Accounting  Standards No. 130 "Reporting  Comprehensive  Income"
     ("FAS No. 130").  FAS No. 130  establishes  new rules for the reporting and
     display of comprehensive  income and its components;  however, the adoption
     of  this   Statement   had  no  impact  on  the  Company's  net  income  or
     stockholders' equity. FAS 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  the   stockholders'   equity,   to  be  included  in  other
     comprehensive   income.   Prior  years   financial   statements  have  been
     reclassified to conform to the requirements of FAS No. 130.

     New Accounting Pronouncements - In March of 1998, The American Institute of
     Certified   Public   Accountants   issued  a  Statement  of  Position  98-1
     "Accounting  for the Costs of Computer  Software  Developed or Obtained for
     Internal Use" ("SOP 98-1"),  This SOP provides  guidance on accounting  for
     the costs of computer software developed or obtained for internal use which
     includes:

               -  Definition of computer software costs
               -  Accounting for various stages of development
               -  Accounting for internal and external costs
               -  Need to assess impairment under SFAS 121
               -  Amortization method and period to be utilized

     This SOP is effective for fiscal years  beginning  after  December 15, 1998
     and restatement of previously incurred costs is not permitted.

                                   29

<PAGE>


     The Company  believes its current  accounting  policies are consistent with
     those  prescribed by SOP 98-1 and does not believe the adoption of this SOP
     will have any impact on its results of operations,  financial  condition or
     liquidity.

     Reclassification   -  Certain  amounts  from  the  prior  years  have  been
     reclassified to conform with the current year's presentation.


2.      CHANGE IN ACCOUNTING POLICY

     Effective  with the fiscal year ended March 31, 1999,  the Company  changed
     its  accounting  policy  with  respect to the  recognition  of revenue  for
     service  contracts sold where  Warrantech is named as the obligor.  Revenue
     for  administrative  obligor  contracts is recognized  in  accordance  with
     Financial  Accounting  Standards Board Technical Bulletin 90-1 ("TB 90-1"),
     Accounting for Separately Priced Extended Warranty and Product  Maintenance
     Contracts,  and Statement of Financial  Accounting  Standards No. 60 ( SFAS
     60"), Accounting and Reporting by Insurance  Enterprises.  These accounting
     standards  require the recognition of revenue over the life of the contract
     on a straight-line basis, unless sufficient,  company-specific,  historical
     evidence  indicates  that  the  cost of  performing  services  under  these
     contracts are incurred on other than a straight-line  basis. The Company is
     recognizing  revenue on  administrative  obligor contracts based on company
     specific  historical  claims  experience over the life of the contract.  In
     addition,  the  Company  has  adopted  Statement  of  Financial  Accounting
     Standards No. 113 ("SFAS 113"), Accounting and Reporting for Reinsurance of
     Short-Duration  and Long Duration  Contracts.  This requires that insurance
     premium costs be ratably  expensed  over the life of the service  contract.
     The financial  statements  for the years ended March 31, 1998 and 1997 were
     previously  prepared  based on the  proportional  performance  method which
     recognized  all  revenues  in direct  proportion  to the costs  incurred in
     providing the service contract programs to the Company's clients.  Revenues
     in amounts sufficient to meet future  administrative costs and a reasonable
     gross profit thereon were deferred.


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


     The Company has given  retroactive  effect to this new accounting policy by
     restating  previously  reported  financial  statements for the fiscal years
     ended March 31, 1998 and 1997. In addition,  retained  earnings at April 1,
     1996 reflects the cumulative  $8,080,010 effect of the restatement  through
     March 31, 1996.


                                   30

<PAGE>

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

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

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

Common stockholders' equity           $21,533,883        $31,764,955         $14,692,083           $25,281,941
                                  ================= ================= ===================== ===================
Working capital                       $16,329,259        $16,551,543         $13,342,706           $13,602,168
                                  ================= ================= ===================== ===================
</TABLE>
3.      RESTRICTED CASH

     At March 31,  1999 and 1998 cash in the  amount of  $800,000  is on deposit
     with a Florida regulatory agency to comply with its state insurance laws.

4.      INVESTMENTS IN MARKETABLE SECURITIES

     At March 31, 1999,  investments  in marketable  securities are comprised of
     the following:
<TABLE>
<S>                       <C>             <C>          <C>        <C>           <C>            <C>
                                                                   Aggregate
                            Amortized       Gross Unrealized          Fair          Carrying Amount
                              Cost         Gains     (Losses)        Value      Short Term   Long Term
                          -------------------------------------- -------------------------------------------
Municipal Bonds             $4,264,244      $18,513      ($136)     $4,282,621    $2,961,602     $1,321,019
Total Investments in
                          -------------------------------------- -------------------------------------------
Marketable Securities       $4,264,244      $18,513      ($136)     $4,282,621    $2,961,602     $1,321,019
                          ====================================== ===========================================

     At March 31, 1998,  investments  in marketable  securities are comprised of
     the following:

                                                                   Aggregate
                            Amortized       Gross Unrealized          Fair            Carrying Amount
                              Cost         Gains     (Losses)        Value      Short Term   Long Term
                          -------------------------------------- -------------------------------------------
Municipal Bonds             $2,156,472      $13,919    ($1,816)     $2,168,575      $200,758     $1,967,817
Money Market                   337,166       -           -             337,166       337,166       -
Total Investments in
                          -------------------------------------- -------------------------------------------
Marketable Securities       $2,493,638      $13,919    ($1,816)     $2,505,741      $537,924     $1,967,817
                          ====================================== ===========================================

</TABLE>

     All of the above  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.

     The amortized  cost and estimated fair value of marketable  securities,  by
     contractual maturity date as of March 31, 1999, are listed below.  Expected
     maturities may differ from contracted maturities because borrowers may have
     the right to call or prepay obligations with or without penalties.


                                        31

<PAGE>

                                                                    Aggregate
                                                     Amortized         Fair
                                                        Cost          Value
                                                   -------------- --------------
           Investments available for sale:
              Due in one year or less                $2,958,087     $2,961,602
              Due after one year through five years   1,306,157      1,321,019
                                                   -------------- --------------
                                                     $4,264,244     $4,282,621
                                                   ============== ==============

5.  OTHER RECEIVABLES, NET

     The nature and amounts of other  receivables,  net as of March 31, 1999 and
     1998 are as follows:

                                                        March 31,
                                         ---------------------------------------
                                                1999                 1998
                                         ---------------------------------------
Due from Insurance companies                    $4,337,277           $1,540,895
Due From Dealers                                 2,103,012                 -
Employee/Agent Advances                            530,910              305,945
Other                                              871,389              350,565
                                         ------------------   ------------------
                                                 7,842,588            2,197,405
Allowance for doubtful accounts                (1,918,256)            -
                                         ------------------   ------------------
                                                $5,924,332           $2,197,405
                                         ==================   ==================

6.      PROPERTY AND EQUIPMENT

         Property and equipment are summarized as follows:
                                                        March 31,
                                     -------------------------------------------
                                             1999                   1998
                                     --------------------   --------------------
Automobiles                                     $277,304               $304,693
Equipment, furniture and fixtures              7,423,893              7,618,978
Leasehold improvements                         1,290,543                978,557
Software development costs                    11,281,344              7,604,440
                                     --------------------   --------------------
                                              20,273,084             16,506,668
Less:  Accumulated depreciation
  and amortization                             8,474,162              6,792,809
                                     --------------------   --------------------
                                              11,798,922              9,713,859
                                     --------------------   --------------------
Assets under capital leases:
  Cost                                         8,980,018              7,408,056
  Less:  Accumulated amortization              4,501,467              3,481,994
                                     --------------------   --------------------
                                               4,478,551              3,926,062
                                     --------------------   --------------------

Total Property and equipment, net            $16,277,473            $13,639,921
                                     ====================   ====================


     Amortization  expense on assets  under  capital  leases for the years ended
     March 31, 1999,  1998 and 1997 was  $1,573,695,  $1,188,173  and  $764,263,
     respectively.  Depreciation  expense on property and  equipment  other than
     under capital leases for the years ended March 31, 1999,  1998 and 1997 was
     $2,883,991, $1,939,858, and $1,361,559, respectively.

     The Company  capitalized  $3,676,904  and  $2,380,879  for the fiscal years
     ended March 31, 1999 and 1998, respectively, of costs consisting of amounts
     paid  to  independent   consultants   related  to  the  implementation  and
     enhancement  of  its  proprietary   relational   database  and  interactive
     operating  software.  The Company is  amortizing  the cost of this software
     over its estimated useful life not to exceed five years.


                              32

<PAGE>

7.      COLLATERAL SECURITY FUND

     At March 31, 1999 and 1998 an  insurance  carrier of the Company is holding
     $199,389  in escrow  accounts  as  collateral  for the  performance  of the
     administrative runoff of outstanding contracts. Such amounts are returnable
     to the Company when the contracts expire under this policy.

8.      SPLIT DOLLAR LIFE INSURANCE POLICIES

     As of March 31, 1999 and 1998,  the Company  made  payments on split dollar
     insurance  policies on the lives of ten and six  officers  of the  Company,
     respectively.  The cash surrender value of these policies is $1,370,010 and
     $1,054,045  as of March 31, 1999 and 1998,  respectively.  The Company will
     receive a refund of all split-dollar premiums advanced.  The Company is the
     beneficiary  of any  proceeds of the  policies up to the amount of premiums
     paid.

 9.     LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

     Long-term debt and capital lease obligations consist of the following:
<TABLE>
<S>                                                              <C>                        <C>
                                                                                    March 31,
                                                                  ---------------------------------------------
                                                                          1999                      1998
                                                                  ---------------------------------------------

Capital lease obligations - for property and
   equipment  payable monthly with interest
   rates ranging from 6.9% to 15.3% through 2005                            $3,979,414               $3,563,988
Installment note - AIG, effective interest rate of 8.25%                    -                           960,960
                                                                  ---------------------     --------------------
                                                                             3,979,414                4,524,948
Less: Current maturities                                                     1,558,447                2,371,662
                                                                  ---------------------     --------------------
Long-term portion                                                           $2,420,967               $2,153,286
                                                                  =====================     ====================


</TABLE>

         The aggregate amounts of maturities at March 31, 1999 are as follows:

Fiscal Year                               Minimum Future
                                          Lease Payments
                                        -----------------------
2000                                      $1,866,555
2001                                       1,293,382
2002                                         659,727
2003                                         366,175
2004                                         250,682
Thereafter                                   187,110
                                        -----------------------
                                          $4,623,631
Less amount representing interest            644,217
                                        -----------------------
Net                                       $3,979,414
                                        =======================

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


                              33

<PAGE>

10.     INCOME TAXES

     A  reconciliation  of the income tax provision to the amount computed using
     the federal statutory rate is as follows:

<TABLE>
<S>                                     <C>            <C>           <C>           <C>       <C>            <C>
                                                              For the Years Ended March 31,
                                     -------------------------------------------------------------------------------
                                           1999                        1998                      1997
                                     ---------------------------  ------------------------  ------------------------

Federal statutory rate                  ($3,804,232)     -34.0%       $3,212,327    34.0%       $1,299,905    34.0%

State tax effect                            (88,135)      -0.8%           83,597     0.9%          105,537     2.8%

Goodwill                                     178,919       1.6%          147,186     1.6%          110,269     2.9%

Other                                        164,250       1.5%          269,835     3.3%           22,567     0.5%

                                     ---------------------------  ------------------------  ------------------------
Provision for income taxes              ($3,549,198)     -31.7%       $3,712,945    39.8%       $1,538,278    40.2%
                                     ===========================  ========================  ========================

</TABLE>

       The components of tax expense are as follows:

<TABLE>
<S>                                  <C>                         <C>                        <C>
                                                                                               Provision
For the Year Ended March 31, 1999:       Current                     Deferred                  (Benefit)
                                     ----------------             ---------------           ---------------
Federal                                 ($1,495,460)                ($2,408,382)              ($3,903,842)
State                                        303,795                   (351,636)                  (47,841)
Foreign                                                                  402,485                   402,485
                                     ----------------             ---------------           ---------------
Total                                   ($1,191,665)                ($2,357,533)              ($3,549,198)
                                     ================             ===============           ===============


For the Year Ended March 31, 1998:       Current                     Deferred                  Provision
                                     ----------------             ---------------           ---------------
Federal                                   $4,059,160                ($1,071,248)                $2,987,912
State                                        312,934                     276,451                   589,385
Foreign                                                                  135,648                   135,648
                                     ----------------             ---------------           ---------------
Total                                     $4,372,094                  ($659,149)                $3,712,945
                                     ================             ===============           ===============


For the Year Ended March 31, 1997:       Current                     Deferred                  Provision
                                     ----------------             ---------------           ---------------
Federal                                   $2,709,821                ($1,318,684)                $1,391,137
State                                        236,486                     133,882                   370,368
Foreign                                                                (223,227)                 (223,227)
                                     ----------------             ---------------           ---------------
Total                                     $2,946,307                ($1,408,029)                $1,538,278
                                     ================             ===============           ===============

</TABLE>

                                        34

<PAGE>


Deferred  income  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 deferred tax asset are as follows:


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

                                                                  March 31,
                                                    ------------------ ----------------
                                                          1999             1998
                                                    ------------------ ----------------
Deferred Tax Assets
     Deferred revenue                                   $41,912,394        $31,463,274
     Deferred rent                                          166,525            215,652
     Provision for doubtful accounts                      1,076,093            431,876
     Reserve for customer refunds                            99,435             70,049
     Accrued bonus                                          194,796          -
     Litigation Reserve                                      39,940          -
     Depreciation                                                               63,418
     Foreign loss benefit                                   136,662            466,503
     Net state operating loss C/F benefit                   332,367
     Other                                                   42,642             76,475
                                                    ------------------ ----------------
          Total assets                                   44,000,854         32,787,247
Deferred Tax Liabilities
     Deferred direct costs                             (30,465,376)       (23,444,669)
     Depreciation                                         (415,302)          -
     Section 174 expense                                (1,892,630)          (717,630)

                                                    ------------------ ----------------
          Total liabilities                            (32,773,308)       (24,162,299)

                                                    ------------------ ----------------
Net deferred tax asset                                   11,227,546          8,624,948
  Less:  Valuation allowance                              (204,415)
                                                    ------------------ ----------------
     Net deferred tax asset                             $11,023,131         $8,624,948
                                                    ================== ================

</TABLE>

Management  believes  that it is more likely than not that the net  deferred tax
asset will be realized  and  therefore  only a minimal  valuation  allowance  is
considered  necessary.  Section 174 expense represents research and experimental
expenses  related to the  development of a proprietary  relational  database and
interactive software.

11.     COMMITMENTS AND CONTINGENCIES

     Operating Lease Commitments - The Company leases office and warehouse space
     under noncancellable  operating leases. These leases include scheduled rent
     increases over their  respective  terms.  In some cases,  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 charged to operations for the years ended
     March 31, 1999, 1998 and 1997 was $2,305,598,  $2,187,174,  and $1,907,694,
     respectively.

     Future minimum lease commitments as at March 31, 1999 are as follows:

2000                                            $2,086,979
2001                                             2,041,584
2002                                             2,012,033
2003                                             2,023,227
2004                                             1,699,670
2005 and thereafter                                965,942
                                           ----------------
                                               $10,829,435
                                           ================

                                   35

<PAGE>

     Employment  Contracts - Employment  contracts exist between the Company and
     its  officers  and  certain  key  employees  which  provide for annual base
     compensation  of  $2,564,225.   Certain  agreements  call  for  (i)  annual
     increases (ii) cost of living increases, and (iii) additional compensation,
     but  only  if  certain  defined  performance  levels  are  attained.   This
     additional  compensation  is to be paid in the form of cash and/or  Company
     common stock.

     Bank Line of Credit - The Company has a revolving  credit  agreement with a
     bank which  originally  provided  for  maximum  aggregate  borrowing  up to
     $10,000,000 with interest at the bank's prevailing prime rate or LIBOR plus
     2%.  Subsequent  to March 31,  1999,  the line of credit  was  adjusted  to
     $1,500,000  and  currently  expires on December  31,  1999.  The Company is
     currently in  negotiations  to increase  and/or replace the current line of
     credit.  Although it is anticipated that this will be completed by February
     2000, no assurances can be given that this will be accomplished. During the
     fiscal years ended March 31, 1998, 1999 and through  December 21, 1999, the
     Company did not have any borrowings under this line of credit.

     Litigation -

     The Company is from time to time involved in  litigation  incidental to the
     conduct of its business.  As of December 21, 1999, the Company is not aware
     of any material existing litigation to which it is a party.

     The Oak Agency,  Inc. and The Oak Financial Services,  Inc.  (collectively,
     "Oak") v. Warrantech Dealer Based Services, Inc. ("WDBS").

     Final  judgment in this matter was entered on November 12,  1997.  WDBS was
     directed to pay Oak (i) $1,243,359 which represents  commissions  earned by
     Oak for the period July 1, 1991  through May 31, 1997,  (ii) $28,500  which
     represents  costs  of the  action  recoverable  by Oak,  and  (iii)  future
     commissions  earned on vehicle  service  contracts sold on or after June 1,
     1997 by a  specified  group of  automobile  dealers.  Furthermore,  Oak was
     directed to pay Warrantech Corporation $7,500 which represents Warrantech's
     recoverable  costs of a separate action which previously had been dismissed
     by the Court with prejudice.

     WDBS has made all  payments  described  in  clauses  (i) and (ii) above and
     continues to make those  periodic  payments  described in clause (iii).  No
     further legal action is anticipated and WDBS considers this matter closed.

     Proteva,  Inc. v. Warrantech Help Desk, Inc. v. William Lynch, Civil Action
     No.  499CV162BE (U.S.  District Court,  Northern  District of Texas).  This
     matter arose out of an Agreement, effective as of December 9, 1997, between
     Proteva,  Inc.  ("Proteva") and Warrantech  Help Desk, Inc.  ("Warrantech")
     pursuant to which Warrantech was to provide administration services for the
     warranties  on certain  personal  computers  manufactured  by  Proteva.  In
     December 1998,  Warrantech  determined  that Proteva had failed to report a
     material  number  of  computers  subject  to the  Agreement  and  remit the
     corresponding fees. Therefore,  Warrantech notified Proteva in January 1999
     that it was terminating the Agreement.  Proteva sought injunctive relief in
     the  Illinois  state  courts and  commenced  a lawsuit  against  Warrantech
     alleging  failure to provide service in accordance with the requirements of
     the  Agreement and failure to remit certain  payments.  Warrantech  had the
     litigation  removed  to  Federal  District  Court  in  Chicago  and  it was
     subsequently  transferred to the Northern District of Texas. Following that
     transfer,  Warrantech  counterclaimed  against  Proteva  and its  Chairman,
     William Lynch,  alleging  fraud and breach of the Agreement  arising out of
     the   under-reporting   of   computer   sales  and  the  failure  to  remit
     corresponding  fees.  The parties  have  reached  agreement on a Settlement
     Agreement and Mutual Release which will result in a final dismissal of this
     action.  Warrantech will receive financial and other considerations as part
     of  the   settlement   although   specific   details   are   subject  to  a
     confidentiality agreement among the parties.


                                        36

<PAGE>


12.     STOCK OPTION PLAN

     At March 31, 1999, Warrantech has one stock option plan, which is described
     below. The Company applies APB 25 and related interpretations in accounting
     for its plan. Accordingly, no compensation cost has been recognized for its
     fixed stock option plan, except for stock options granted to non-employees.
     The   compensation   cost  that  has  been  charged   against   income  for
     non-employees  awarded stock options,  was $0 for fiscal 1999,  $92,400 for
     fiscal 1998 and $64,000  for fiscal  1997.  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 FAS 123,  the  Company's  net income and  earnings per share
     would have been reduced to the pro forma amounts indicated below.


                                                 For the Years Ended March 31,
                                       -----------------------------------------
                                             1999          1998         1997
                                       -----------------------------------------
    Net Income (loss) as reported         ($7,639,725)   $5,619,823   $2,284,867
    Pro Forma net income (loss)            (8,663,980)    5,280,271    1,914,836

    Basic Earnings Per Share as reported       ($0.51)        $0.42        $0.18
    Basic Pro Forma EPS                        ($0.57)        $0.40        $0.15


     The fair value of  Warrantech  stock  options used to compute pro forma net
     income and earnings per share disclosures is the estimated present value at
     grant date using the Black-Scholes  option-pricing model with the following
     weighted average assumptions for 1999, 1998 and 1997: expected dividends of
     0%;  expected  volatility of 50%; a risk free  interest  rate of 6.5%;  and
     expected life of 5 years.

     Stock  Options and Stock Option Plan - Under the Employee  Incentive  Stock
     Option Plan (the "Plan"),  there are options for up to 1,200,000  shares of
     the Company's  common stock  reserved for issuance to employees  (including
     officers).  On October 27, 1998 the stockholders authorized for issuance an
     increase of 600,000 shares,  to the current  aggregate of 1,200,000 shares.
     The 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 Plan will terminate in August 2008 unless sooner terminated
     by the Board of Directors.

     On April 16, 1992 the  Company's  Board of Directors  and  subsequently  on
     October 22,  1992 the  stockholders  of the  Company at the annual  meeting
     voted to approve stock options to three directors (two of whom are officers
     and one is a former officer of the Company).  The stock options entitle the
     three  Directors  to  purchase  an  aggregate  of  3,000,000  shares of the
     Company's  common  stock at an  exercise  price of $2.6875  per share,  the
     market  price at the date of  grant.  The term of the  options  is five (5)
     years from the date on which they become  exercisable  or thirty days after
     termination of employment,  whichever occurs earlier.  Of the total options
     granted,  fifty percent (50%) may be exercised beginning one year following
     October 22, 1992 in increments of 10% per year for a five-year period.  The
     portions  of the  options  that  are  based  upon the  Company's  earnings,
     consisting  of fifty percent  (50%) of the total  options  granted,  became
     exercisable on October 22, 1995.

     On  July 6,  1998,  Joel  San  Antonio,  Warrantech's  Chairman  and  Chief
     Executive  Officer,  and William  Tweed and Jeff J.  White,  members of the
     Warrantech's  Board of  Directors,  exercised  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
     interest  rate of 6%. The  promissory  notes,  which are with  recourse and
     secured  by  the  stock  certificates  issued,  mature  July  5,  2001.  An
     additional  promissory  note was signed by Joel San Antonio for $595,634 on
     March 22,  1999 which  represents  the amounts  funded by the Company  with
     respect  to his  payroll  taxes  for the  exercise  of these  options.  The
     exercise of these stock options and the  anticipated  tax benefit from this
     transaction  represent  approximately $10 million.  These amounts have been
     recorded as a contra-equity  account, which is a reduction of stockholders'
     equity.  The Company is  currently  in  discussions  with the  Messrs.  San
     Antonio, Tweed and White to renegotiate the payment terms of the notes. The
     payment of interest,  which was due July 6, 1999,  has been deferred  until
     January 6, 2000.

                                        37
<PAGE>


     Presented  below is a summary  of the status of the stock  options  and the
     related transactions for the years ended March 31, 1999, 1998 and 1997.

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

                                                    1999                             1998                           1997
                                      ------------------------------- -------------------------------- -----------------------------
                                                         Weighted                        Weighted                        Weighted
                                                         Average                          Average                         Average
                                                         Exercise                        Exercise                        Exercise
                                           Shares         Price            Shares          Price            Shares         Price
                                      ----------------------------------------------------------------------------------------------
Options outstanding at beginning of year    3,295,534          $2.95        3,484,553           $3.01        3,218,024         $2.89
Granted                                       996,837           4.54           92,147            7.27          369,129          5.06
Canceled                                    (197,615)         (5.93)        (138,904)          (5.40)          (7,600)        (6.70)
Exercised                                 (3,010,000)         (2.70)        (142,262)          (4.91)         (95,000)        (6.55)
Forfeited                                    (70,531)         (7.59)
                                      ----------------------------------------------------------------------------------------------
Options outstanding at end of year          1,014,225              $4.36    3,295,534           $2.95        3,484,553         $3.01
                                      ==============================================================================================

                                      ----------------------------------------------------------------------------------------------
Options exercisable at end of year            114,587          $4.47        3,132,374           $2.84        3,193,024         $2.89
                                      ==============================================================================================

</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,  1999,  1998 and 1997 is $2.82,  $3.08,  and $2.08
     respectively.

     The Company recognized costs of $21,631,  $56,599 and $39,082 for the years
     ended  March  31,  1999,  1998  and  1997,  respectively,  for  stock-based
     compensation to employees.

     The following  table  summarizes the status of  Warrantech's  stock options
     outstanding and exercisable at March 31, 1999.

<TABLE>
<S>                                                 <C>           <C>               <C>             <C>            <C>
                                                                  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
                                                 -------------------------------------------------------------------------------
    $3.25 to $3.50                                        592,794            6.1          $3.35             -               -
    $4.31 to $5.25                                        116,491            6.6           4.48          114,587          $4.47
    $6.13 to $6.50                                        304,940            9.1           6.28             -               -
                                                 -------------------------------------------------------------------------------
    Total                                               1,014,225            7.0          $4.36          114,587          $4.47
                                                 ===============================================================================

 </TABLE>


                                        38

<PAGE>

13.      OTHER INCOME (EXPENSE)


<TABLE>
<S>                             <C>                           <C>                           <C>
                                                                Year Ended March 31,
                                           1999                       1998                    1997
                              ------------------------------   -------------------    --------------------
Interest and dividend income                     $1,303,410            $1,120,701                $722,560
Interest expense                                  (458,598)             (378,812)               (433,990)
Gain on sale of assets                              103,988             -                      -
Miscellaneous                                        94,401                77,843                  36,015
                              ------------------------------   -------------------    --------------------
                                                 $1,043,201              $819,732                $324,585
                              ==============================   ===================    ====================

</TABLE>

14.      JOINT VENTURE AGREEMENT AND SALE

In July 1993, the Company and American  International Group Inc. ("AIG") formed
a corporate  joint  venture,  Techmark  Services Ltd.  ("Techmark" or the "Joint
Venture") owned fifty-one  percent (51%) by AIG and forty-nine  percent (49%) by
the Company.

In conjunction with the foregoing alliance, in October, 1993, AIG purchased, for
a price of $6,430,000,  options and a special issue of preferred stock which was
convertible into an issue of new shares of common stock which, subsequent to its
issuance,  would be equivalent to twenty  percent (20%) of the Company's  issued
and outstanding common stock. Under the terms of the purchase agreement, AIG had
the right to purchase an  increased  interest  in the  Company,  to a maximum of
thirty percent (30%) of the Company's  issued and  outstanding  common stock, if
certain operating goals were achieved by the Company.

On April  18,  1996,  the  Company  and AIG  consummated  an  agreement  for the
termination of the Techmark Joint Venture (the "Agreement").  Under the terms of
the  Agreement,  AIG agreed to purchase the Company's  forty-nine  percent (49%)
interest in the joint venture for approximately $3.8 million and for the Company
to repurchase the 3,234,697  shares of convertible  preferred  stock held by AIG
for its original  redemption  value of $6,430,000 and further  relinquish  their
rights  to other  options  under  the  original  agreement.  As a result of this
transaction,  the Company no longer has any  investment  in or  liability to the
Joint  Venture  and will no longer  record any equity in the  operations  of the
Joint  Venture.  The  redemption  value was offset by the amount due the Company
from  the sale of its  investment,  with the net  amount  due AIG of  $2,395,960
resulting  in a three  year,  non-interest  bearing  note  payable  in 11  equal
quarterly  installments  of  $205,000  commencing  June  30,  1996  with a final
installment of $140,960 due March 1999.  All amounts  relating to this note were
paid in full prior to March 31, 1999.  The effective  interest rate of this note
is 8.25%.  In the event of default by the Company  under the note  payable,  the
Company  would be required to reissue to AIG  preferred  stock for the remaining
amount due at the default date.

At March 31, 1996, the Company's  carrying  value of its investment  amounted to
$1,885,674 which resulted in a gain on the sale of the investment of $1,876,480,
for the excess of the proceeds over the carrying value,  which was recognized in
the first quarter of fiscal 1997.

Also,  as part of the  agreement,  AIG paid the  Company  $1,480,000  related to
amounts  due the  Company  as of  March  31,  1996,  under  its  profit  sharing
arrangement.  In connection with this payment, the Company issued an irrevocable
letter of credit to the benefit of AIG through  December 2002 which can be drawn
upon by AIG in the event the ultimate  profit  sharing amount due the Company is
less than the amount  previously paid. It is anticipated that no amounts will be
due AIG under the letter of credit.

                                   39

<PAGE>

15.      ACQUISITION

In  July  1995,   Warrantech   International,   Inc.,  acquired  Home  Guarantee
Corporation Plc (subsequently renamed Warrantech Europe Plc.) a British Company,
which markets home warranty  products as well as other warranty products similar
to those  marketed  by the Company in the United  States.  The  acquisition  was
accounted for as a purchase and the resultant  goodwill amounting to $695,800 is
being  amortized over a 10 year period.  In October 1997,  the Company  acquired
certain assets of  Distributors & Dealers Service Co., Inc. for $888,541 and the
resulting goodwill is being amortized over 4.5 years.

16. SIGNIFICANT CUSTOMERS

The  Company  has  one  significant  customer,   CompUSA,  which  accounted  for
approximately 34%, 34% and 32%, respectively, of consolidated gross revenues for
the years ended March 31, 1999, 1998 and 1997. The Company  notified  CompUSA in
May 1999 of price increases  resulting from premium  increases  imposed by CIGNA
Insurance  Company . On June 24, 1999,  CompUSA publicly  announced as part of a
major corporate  restructuring  their intentions to leverage their internal call
center  capabilities by taking over customer contact regarding extended warranty
repair  calls.  On June 28, 1999  Warrantech  received  formal  notification  of
termination from CompUSA  effective July 28, 1999. The loss of CompUSA will have
an adverse impact on future revenues.

17. EARNINGS PER SHARE

The  computations of earnings per share for the years ended March 31, 1999, 1998
and 1997 are as follows:

<TABLE>
<S>                                              <C>              <C>             <C>
                                                        For the Years Ended March 31,
                                                    1999             1998             1997
                                                ---------------- --------------  ---------------
Numerator:
   Net income (loss) applicable to common stock   ($7,639,725)      $5,619,823       $2,284,867
                                                ================ ==============  ===============
Denominator:
    Average outstanding shares used in the
    computation of per share earnings:
      Common Stock issued-Basic shares              15,098,242      13,259,964       13,054,611
      Stock Options (treasury method)                 -              2,357,386        2,340,258
                                                ---------------- --------------  ---------------
      Diluted shares                                15,098,242      15,617,350       15,394,869
                                                ================ ==============  ===============
Earnings Per Common Share:
   Basic                                               ($0.51)           $0.42            $0.18
                                                ================ ==============  ===============
   Diluted                                             ($0.51)           $0.36            $0.15
                                                ================ ==============  ===============
</TABLE>

18. COMPREHENSIVE INCOME

The components of accumulated other  comprehensive  income,  net of related tax,
for the years ended March 31, 1999, 1998 and 1997 are as follows:

<TABLE>
<S>                                                         <C>                 <C>                  <C>
                                                                          For the Years Ended March 31,
                                                            -----------------   -----------------    ----------------
                                                                  1999                1998                 1997
                                                            -------------------------------------    ----------------
              Unrealized gain/(loss) on investments                   $7,452              $7,055            ($1,563)
              Accumulated translation adjustments                  (100,986)              78,553              16,544
                                                            -----------------   -----------------    ----------------
              Accumulated other comprehensive income               ($93,534)             $85,608             $14,981
                                                            =================   =================    ================

</TABLE>

                                        40

<PAGE>

19. SEGMENT INFORMATION

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

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

                                                    Consumer                      Reportable
Year ended                           Automotive     Products     International     Segments         Other           Total
                                   --------------  -------------  -------------- --------------  -------------  --------------
March 31,1999
Revenues                             $47,298,852    $90,623,968     $17,746,685   $155,669,505    ($6,800,714)   $148,868,791
Segment Profit (Loss) from
   operations                          2,966,588    (3,422,670)         692,245        236,163    (12,468,287)   (12,232,124)
Pretax Income (Loss)                     493,193   (10,626,187)        (95,157)   (10,228,151)       (960,772)   (11,188,923)
Net Interest Income                       37,063        102,633          25,978        165,674         679,138        844,812
Depreciation/Amortization                717,677      1,343,881         482,245      2,543,803       2,604,567      5,148,370
Total Assets                          63,002,934     96,477,403       9,962,523    169,442,860      17,467,410    186,910,270

March 31,1998
Revenues                             $47,787,563    $77,481,210     $12,593,301   $137,862,074    ($5,065,068)   $132,797,006
Segment Profit (Loss) from
    operations                        13,509,718      7,991,812         785,111     22,286,641    (13,773,605)      8,513,036
Pretax Income (Loss)                  11,249,911        474,285     (2,175,507)      9,548,689       (215,921)      9,332,768
Net Interest Income                       32,276         98,567          53,561        184,404         557,486        741,890
Depreciation/Amortization                685,308        879,167         297,696      1,862,171       1,896,042      3,758,213
Total Assets                          51,564,970     69,345,686      12,537,080    133,447,736      19,363,530    152,811,266

March 31,1997
Revenues                             $32,255,790    $80,191,560      $3,446,457   $115,893,807    ($9,118,062)   $106,775,745
Segment Profit (Loss) from
   operations                          2,302,259     10,521,992       (235,379)     12,588,872     (8,692,622)      3,896,250
Pretax Income (Loss)                   (956,885)      5,145,008       (728,070)      3,460,053         363,092      3,823,145
Net Interest Income                       29,069        146,964           7,163        183,196         105,374        288,570
Depreciation/Amortization                584,236        822,415         175,873      1,582,524       1,037,457      2,619,981
Total Assets                          46,951,209     61,064,870       4,128,074    112,144,153       4,975,878    117,120,031

</TABLE>

NOTE: Other includes  intersegment  eliminations of revenues and receivables and
net unallocated Corporate expenses.


                                   41

<PAGE>

20.   Quarterly Financial Data (Unaudited)

The following fiscal 1999 and 1998 quarterly  financial  information for each of
the three month periods ended June 30,  September 30, December 31, 1998 and 1997
and March 31, 1999 and 1998 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>
<S>                     <C>          <C>         <C>          <C>          <C>            <C>            <C>            <C>
                             Quarter Ended             Quarter Ended              Quarter Ended                 Quarter Ended
                                June 30,               September 30,              December 31,                    March 31,
                           1998        1997         1998         1997          1998          1997           1999            1998

Net revenues            $24,134,146  $31,849,146 $31,529,664   $26,993,458  $30,272,681    $28,684,296     $32,291,830   $23,822,778

Income from operations  (3,943,437)    2,496,348 (1,331,354)     2,784,080  (1,814,579)      1,622,037     (5,142,754)     1,610,571

Income (loss)
before provision for
income taxes            (3,773,477)    2,693,727   (984,093)     2,982,612  (1,503,362)      1,875,892     (4,927,991)     1,780,537


Net income (loss)       (1,790,040)    1,782,200 (1,081,041)     1,857,662  (1,239,524)      1,165,879     (3,529,120)       814,082

Earnings (loss) per Share

Basic                       ($0.13)        $0.14     ($0.07)         $0.14      ($0.08)          $0.09         ($0.23)         $0.05
Diluted                     ($0.13)        $0.11     ($0.07)         $0.12      ($0.08)          $0.07         ($0.23)         $0.05

</TABLE>

Amounts  restated to reflect the effect of the  reversal  of  $2,600,000  of net
revenue on the portfolio transfer of Computer City by CompUSA. The effect on net
income was $1,529,000 or $.10 per share.

                                   42

<PAGE>


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

<TABLE>
<S>                                     <C>        <C>              <C>           <C>          <C>
----------------------------------------------------------------------------------------------------------------
                 Column                    Column              Column              Column          Column
                   A                          B                  C                    D              E
----------------------------------------------------------------------------------------------------------------
                                         Balance at          Additions           Deductions-
                                                    ----------------------------
Description                              Beginning   Charged to  Charged to Other                  Balance at
                                                     Costs and   Accounts -                         End of
                                         of Year     Expense     Describe)        Describe(b)        Year
----------------------------------------------------------------------------------------------------------------
Year Ended March 31, 1999
        Allowance for doubtful accounts:
              Trade A/R                   $1,223,173     $370,324       -            $478,212        $1,115,285
              Other A/R                       -         1,918,256       -             -               1,918,256
              Profit Sharing                  -           -             -             -              -

Year Ended March 31, 1998
        Allowance for doubtful accounts:
              Trade A/R                      300,328    1,035,675       -             112,830         1,223,173
              Other A/R                       -           -             -             -              -
              Profit Sharing                  -           -             -             -              -

Year Ended March 31, 1997
        Allowance for doubtful accounts:
             Trade A/R                       450,092       28,000       -             177,764           300,328
             Other A/R                       242,112      -             -             242,112        -
             Profit Sharing                1,720,000      -             -           1,720,000        -

</TABLE>

(a)  Bad debt expense  charged  directly to  operations  pertaining  to accounts
     receivable  was  $705,119  for the fiscal  year ended March 31,  1997.

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

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


                                        43

<PAGE>


Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
          Financial Disclosures


         N/A


                                        44

<PAGE>


                                                              PART III


Item 10.  Directors And Executive Officers Of The Registrant


     A Board of Directors consists of five directors.  All directors hold office
until the next annual  meeting and until their  successors  are duly elected and
qualified.

<TABLE>
<S>                                          <C>         <C>                                                  <C>
                                                                                                              Director
Name                                           Age        Positions with Company                               Since

Joel San Antonio                               47         Chairman of the Board, Chief Executive Officer
                                                          and Director                                          1983

William Tweed                                  59         Director                                              1983

Jeff J. White                                  48         Director                                              1983

Lawrence Richenstein                           46         Director                                              1993

Gordon A. Paris                                46         Director                                              1998

</TABLE>

     No family relationships exist among any of the Company's executive officers
or directors,  except that Randall San Antonio,  President of Warrantech Direct,
Inc., a subsidiary of the Company, is the brother of Joel San Antonio.

     The business experience of each of the Company's directors and nominees for
election to the Board of Directors is as follows:

     Joel San Antonio, 47, one of the Company's founders, was a director,  Chief
Executive  Officer and  President  of the  Company  from  incorporation  through
February 1988.  Since  February 1988 Mr. San Antonio has been a director,  Chief
Executive Officer and Chairman of the Board of Directors and since October 1989,
he has also been Chairman and Chief Executive Officer of the Company's principal
operating subsidiaries. In 1975, Mr. San Antonio founded and, thereafter through
August 1982, served as President of Little Lorraine,  Ltd., a company engaged in
the  manufacturing of women's apparel.  Mr. San Antonio is currently a member of
the  Southwestern  Connecticut Area Commerce & Industry  Association,  the World
Forum,  the  Connecticut  Business and Industry  Association,  the  Metropolitan
Museum of Art, and the Young Presidents' Organization,  Inc. Mr. San Antonio was
a director of Corniche  Group  Incorporated,  a company in the insurance  and/or
insurance-related  businesses  based  in  Euless,  Texas  from  May  1998  until
September 1999.

     William  Tweed,  59, one of the Company's  founders,  was a director,  Vice
President and Secretary of the Company from incorporation through February 1988.
From February  1988 until April 1996,  Mr. Tweed was a director and President of
the  Company.  From April  1996 to March  1998,  Mr.  Tweed was  Executive  Vice
President  of European  Operations  and  director  for the  Company.  Mr.  Tweed
relinquished  his  title of Vice  President  on April 1,  1998.  From  July 1976
through August 1982, he was Vice President of Little  Lorraine,  Ltd.  Mr.Tweed
served as a director of Nationwide  Extended Warranty  Service,  Inc. from on or
about October 1981 through on or about January 1983.

     Jeff J. White,  48, one of the Company's  founders,  has been a director of
the Company from its inception. Mr. White was Vice President of the Company from
its  inception  until June 1988 and  Treasurer of the Company from its inception
until October 1990. In September 1982, Mr. White, with two partners, established
Marchon Eyewear,  Inc. a leading  international  distributor and manufacturer of
eyewear and sunwear,  including such worldwide well-known  collections as Calvin
Klein,   Fendi,   Disney,   and  Flexon,   their  patented  frames  utilizing  a
state-of-the-art  metal with a "memory".  He is  Co-President  of Marchon (along
with his two partners) and is responsible for internal  operations,  information
systems,  and interfacing with counsel on patent,  trademark,  and general legal
matters.  Mr.  White also  serves as an  associate  trustee  of the North  Shore
University Hospital Health System.


                                   45

<PAGE>

     Lawrence Richenstein, 46, has been a director of the Company since 1993. In
early 1997, Mr. Richenstein formed Laral Group LLC. Laral Group  manufacturers a
line of wireless  audio/video and computer  accessories under its Unwired brand.
It is also an OEM  supplier of wireless  multimedia  products to the  automotive
market.  Mr.  Richenstein has been President and Chief Executive Officer of Peak
Ventures, Inc., since May 1996. Peak Ventures, Inc., located in Farmingdale, New
York, provides services to the consumer  electronics  industry.  Mr. Richenstein
also has been a managing member of Long Hall  Technologies,  L.L.C.  since 1994.
Long Hall  Technologies,  L.L.C.  is a consumer  electronics  company located in
Farmingdale,  New York. Long Hall Technologies  manufactures  products under the
Nickelodeon  brand under license from MTV  Networks.  From 1985 until July 1996,
Mr.   Richenstein  was  President  and  Chief  Executive   Officer  of  Lodestar
Technologies,  Ltd., a consumer  electronics company located in Hicksville,  New
York. Lonestar Technologies,  Ltd. filed for Chapter 11 bankruptcy protection on
January 22,  1996.  The  proceeding  was  subsequently  converted to a Chapter 7
bankruptcy  liquidation  effective July 2, 1996. In addition to having sales and
marketing  experience,  Mr. Richenstein is involved in product development.  Mr.
Richenstein  is an  attorney  admitted  to  practice in New York and has, in the
past, served as a director of two public companies,  both of which were involved
in the electronics industry.

     Gordon A. Paris,  46, has been a director of the Company  since April 1998.
Mr.  Paris is Managing  Director  and Group Head of High Yield  Origination  and
Capital  Markets and Mergers and  Acquisitions  at TD  Securities  (USA) Inc., a
subsidiary  of The  Toronto-Dominion  Bank since March  1996.  From June 1994 to
March 1996,  Mr. Paris was a Managing  Director in the  Leveraged  Finance Group
with CS First  Boston.  From March 1991 to June 1994,  Mr.  Paris was a Managing
Director at Lehman Brothers in charge of the High Yield and Restructuring Group.


Other Executive Officers and Key Employees

     Michael  A.  Basone,  41,  has been Vice  President  and Chief  Information
Officer  since  joining the Company in August 1994 and Chief  Operating  Officer
since January 1997 and Executive Vice President  since April 1998.  From 1986 to
1994,   Mr.   Basone  held  various   management   positions   with   Pepsi-Cola
International, ultimately serving as Director of Management Information Systems.

     Desiree Kim Caban,  34, has been  Secretary of the Company  since July 1993
and Senior Vice President of Human Resources since April 1998. From October 1996
to March 1998,  Ms. Caban was the Vice  President of Human  Resources.  Prior to
October  1996  and  since  1989,  Ms.  Caban  served  as the  Director  of Human
Resources,  Executive  Assistant to the Chairman and the Office Services Manager
for the Company.  She has been employed by the Company since May 1986. Ms. Caban
is currently a member of the National  Association  for Female  Executives and a
member of the Society for Human Resource Professionals.  Ms. Caban resigned from
the company effective December 1999.

     Jeanine Folz, 34, has been the Senior Vice President of Insurance  Services
since April 1998 and has been  Assistant  Secretary of the Company since January
1995.  From  October  1995 to March  1998 Ms.  Folz  was the Vice  President  of
Insurance Services.  Ms. Folz joined the Company in 1987. From 1987 to 1995, Ms.
Folz held various positions  including  Director of Insurance Services and other
customer service and project analyst positions. She is currently a member of the
Risk and Insurance  Management  Society and the National  Association for Female
Executives.

     Christopher  Ford, 51, has been President of Warrantech  Automotive Inc., a
wholly owned  subsidiary of the Company,  since May 1999.  From 1994 until 1999,
Mr. Ford held various  executive  positions  with American  International  Group
(AIG) in Japan  and  Australia.  From 1968  until  1979 Mr.  Ford  held  various
management  positions  with The Ford Motor  Company  and  American  Motors  Jeep
Corporation.  From 1989 to 1994 he held  several key  marketing  and  management
positions within the vehicle service contract industry.

     Richard F. Gavino,  52, has been Executive Vice President,  Chief Financial
Officer and Treasurer  since April 1998. From 1995 to March 1998, Mr. Gavino was
Chief  Financial  Officer at Maxon Auto  Group,  one of the  largest  automobile
retailers  in New  Jersey.  From  1993 to  1995,  Mr.  Gavino  was a  turnaround

                                        46

<PAGE>

consultant.  From 1984 to 1993,  Mr. Gavino was Senior Vice  President and Chief
Financial Officer of Tops Appliance City, a publicly traded consumer electronics
and appliance superstore chain.

     Ronald Glime, 54, has been President of U.S. and Canadian  Operations since
March  1999.  From  October  1992 to  March  1999 Mr.  Glime  was  President  of
Warrantech  Automotive,  Inc., a wholly owned  subsidiary of the Company.  Prior
thereto he was Regional  Sales Manager for  Warrantech  Automotive,  Inc.  (then
known as  Warrantech  Dealer Based  Services,  Inc.) from  February 1991 through
October 1992.  From 1983 through  February  1991,  Mr. Glime was an  independent
insurance  agent for various  insurance  companies.  From 1978 through 1982, Mr.
Glime was  employed  by  American  Warranty  Corp.,  a company  in the  warranty
administration  business.  He resigned as its President in 1982. Mr. Glime was a
director of  Corniche  Group  Incorporated,  a company in the  insurance  and/or
insurance-related  businesses  based in  Euless,  Texas,  from  May  1998  until
September 1999.

     Sean Hicks,  32, has been Chief Operating  Officer for Warrantech  Consumer
Product  Services,  Inc.  and  Warrantech  Help  Desk  Inc.  since  May 1999 and
President of Warrantech  Home Service  Company  since  January  1999.  Mr. Hicks
joined Warrantech Home Service Company in 1997 as Vice President  Operations and
was later appointed to Senior Vice  President,  Marketing and has served in that
capacity  until  January  1999.  With over 10 years  experience  in the  service
industry,  Mr. Hicks  previously was Director of Product  Services at Montgomery
Ward and held various positions with Sears, Roebuck & Co., Inc.

     Andrew  Impavido,   57,  has  been  Senior  Vice  President  of  Warrantech
Motivation a Corporate  Division  which  consists of Training  and  Development,
Multimedia Services, and Corporate Communications since April 1998. Mr. Impavido
joined the Company in 1991 as Director of Training  and has held the position of
Vice President of Training and Development prior to his present position.  Prior
thereto,  Mr.  Impavido  had spent over 25 years in the retail  industry and has
held various  management and training  positions,  with industry leaders such as
Sears, Montgomery Ward, and the 350 store Belk Chain.

     James F.  Morganteen,  49, has been General  Counsel for the Company  since
April 1997 and Senior Vice President  since February 1998. Mr.  Morganteen  most
recently  served  as a  Vice  President  for  Bankers  Trust  of New  York  with
responsibility  for counseling  its OTC risk  management  operations.  From 1987
through  1994,  Mr.  Morganteen  served as Senior  Counsel to Xerox  Corporation
managing the legal function of Xerox Credit Corporation,  the financial services
unit of Xerox Corporation.

     Richard  Rodriguez,  45, has been  President of  Warrantech  International,
Inc., a wholly owned subsidiary of the Company,  since May 1999. From April 1998
until May 1999,  Mr.  Rodriguez  was President of  Warrantech  Consumer  Product
Services,  Inc., a wholly owned  subsidiary  of the Company.  From December 1996
until March 1998, Mr. Rodriguez has been Vice President and Managing Director of
Warrantech  International,  Inc.  From February 1992 until  December  1996,  Mr.
Rodriguez  served as Chief  Operating  Officer of the Company's  Texas operating
facilities.  From 1987 until 1992,  Mr.  Rodriguez  served in various  executive
positions with the Company.  Prior to 1987, Mr. Rodriguez served as an executive
and/or  consultant  to  retailers  and  manufacturers  of  consumer   electronic
products.

     Randall San Antonio,  45, has been President of Warrantech Direct,  Inc., a
wholly owned  subsidiary  of the  Company,  since June 1996 and from May 1994 to
June 1996 served as that subsidiary's Vice President and General Manager.  Prior
thereto he was Vice  President of Finance of Castle Hill  Productions  Inc. from
June 1984.

     Judith M. Thomas,  45, has been President of Warrantech Help Desk,  Inc., a
wholly owned  subsidiary of the Company,  since April 1997.  Ms. Thomas has been
President  of Unlimited  Business  Services,  Inc.,  a  consulting  company that
specializes in the improvement of operational,  financial and revenue streams of
major  retailers,  including  the  development  and  implementation  of  service
contract  programs  since 1993.  From 1970 until 1993 Ms. Thomas was employed by
Highland  Superstores,  holding various positions during her tenure,  ending her
employment with that Company as Corporate Vice President-Operations.  Ms. Thomas
resigned from the company effective November 1999.


                                   47

<PAGE>

Information Concerning Meetings of the Board of Directors

     During the fiscal year ended March 31, 1999,  the Board of  Directors  held
seven meetings.  All such meetings were fully attended. The Company has an Audit
Committee consisting of Messrs. Paris, Richenstein and White. Such committee met
3 times during the 1999 fiscal year.  The Company has a  Compensation  Committee
consisting of Messrs.  Paris,  Richenstein and White.  This committee met 1 time
during the 1999 fiscal year.


                                   48

<PAGE>


Item 11.  Executive Compensation

Summary Compensation Table

     The  following  table  provides  information  for the years ended March 31,
1999,  1998 and 1997,  concerning the annual and long-term  compensation  of the
Chief Executive Officer and the next four highest paid executive officers of the
Company for the fiscal year ended March 31, 1999.

<TABLE>
<S>                             <C>      <C>           <C>        <C>           <C>                <C>             <C>
                                                                                    Long Term Compensation
                                            Annual Compensation                             Awards (1)
                                 ----------------------------------------------  --------------------------------

                                                                Other Annual    Restricted Stock  Stock Option      All Other
Name of Principal Positions      Year       Salary      Bonus    Compensation(2) (Shares) Awards   (Shares) Awards   Compensation(3)

Joel San Antonio                 1999       $590,430      $1,600     $29,750         $ -                400,000      $2,245
Chairman of the Board            1998        557,865     211,941      28,104           -                     -        1,070
and Chief Executive Officer      1997        507,150     193,089      26,525           -                     -           -

Ronald Glime                     1999       $200,000     $52,951      $9,523         $ -                 70,816      $1,547
President of U.S. and Canadian   1998        160,385     110,903       7,837           -                     -        1,972
Operations                       1997        137,404      60,500       4,034           -                 24,749          -

Richard F. Gavino                1999       $182,308     $25,000      $9,587      $25,000                92,308        $ -
Executive Vice President, Chief  1998             -           -           -            -                     -           -
Financial Officer and Treasurer  1997             -           -           -            -                     -           -

Judith M. Thomas(4)              1999       $171,154      $2,999     $15,985      $50,000                24,490        $702
President of Warrantech Help     1998        150,000      45,050      30,230           -                     -          455
Desk, Inc.                       1997             -           -           -            -                     -           -

Michael A. Basone                1999       $193,269        $400     $12,677         $ -                 32,653      $1,106
Executive Vice President, Chief  1998        158,939      43,277      12,318           -                     -        2,341
Information Officer and          1997        159,940      25,100      15,343           -                 11,600          -
Chief Operating Officer

</TABLE>

(1)  (The 1998 Stock Option Plan is the Company's only long-term incentive plan.

(2)  Included in Other Annual  Compensation  are auto  allowances  given to each
     officer in fiscal  1997,  1998 and 1999,  life  insurance  premiums for the
     years 1997,  1998 and 1999,  and  relocation  expenses  paid Mr.  Basone in
     fiscal 1997 and Ms. Thomas in fiscal 1998.

(3)  Represents  amounts  contributed  by the  Company  in  accordance  with the
     Company's 401(K) Plan.

(4)  Ms. Thomas is also President of Unlimited  Business  Services,  Inc., which
     was paid $328,690 in 1999 pursuant to a representative agreement.


                                        49

<PAGE>


Option Grants in Last Fiscal Year


     The following table sets forth certain  information with respect to options
to purchase  Common Stock granted during the fiscal year ended March 31, 1999 to
each of the named executive officers.

<TABLE>
<S>                        <C>                  <C>            <C>          <C>          <C>            <C>
                                                                                           Potential Realizable Value
                                                                                           At Assumed Annual Rates
                                                                                           Of Stock Price Appreciation
__________________________________Individual Grants__________________________              ___For Option Term_(1)_

                            Number of            % of Total
                            Securities           Options/SARs
                            Underlying           granted to     Exercise or
                            Options/SARs         Employee in    Base Price   Expiration
                            Granted              Fiscal Year    Per Share    Date          5%($)             10%($)

Joel San Antonio              400,000              43.2%          3.370       08/24/03    1,627,514           2,053,722
Ronald Glime                   40,816               4.4%          6.125       04/26/08      211,954             337,501
                               30,000               3.2%          3.500       03/14/09      155,787             248,066
Richard F. Gavino              92,308              10.0%          3.250       04/26/08      479,348             763,281
Judith M. Thomas               24,490               2.6%          6.125       04/26/08      127,175             202,504
Michael A. Basone              32,653               3.5%          6.125       04/26/08      169,564             270,003


</TABLE>

(1)  Based upon the  Company's  price per share of $3.188,  as  reported  on
     NASDAQ National Market System on March 31, 1999.

     Note:  The closing bid price for the Company's  common stock as reported on
     the OTC was $1.38 as of December 21, 1999.



                                        50

<PAGE>

Options Exercised and Holdings


     The following table sets forth  information with respect to the individuals
listed in the Summary Compensation Table above,  concerning  unexercised options
held as of the end of the 1999 fiscal year.

<TABLE>
<S>                  <C>             <C>              <C>              <C>              <C>                     <C>
                     Shares Acquired                  Number of Unexercised Options        Value of Unexercised In-the-Money Options
          Name       On Exercise      Value Realized  at Fiscal Year-End (#)                at Fiscal Year-End ($)(1)
------------------------------------------------------------------------------------------------------------------------------------
                                                      Exercisable      Unexercisable        Exercisable              Unexercisable
                                                     -------------------------------------------------------------------------------

Joel San Antonio       1,204,080     $ 4,515,300            -            400,000          $          -              $          -
Ronald Glime                  -               -         24,749            70,816                     -                         -
Richard F. Gavino             -               -             -             92,308                     -                         -
Judith M. Thomas              -               -             -             24,490                     -                         -
Michael A. Basone             -               -         14,458            34,557                     -                         -

</TABLE>

(1)  Based  upon the  Company's  price per share of $3.188, as  reported  on the
     NASDAQ National Market System on March 31, 1999.

Note:  The closing bid price for the Company's common stock as reported on the
       OTC was $1.38 as of December 21, 1999.

                                               51

<PAGE>

Employment Agreements

     On August  25,  1998,  the  Company  entered  into a five  year  employment
agreement,  effective April 1, 1998,  with Joel San Antonio.  Under the terms of
the  agreement,  Mr. San  Antonio's  initial base  compensation  is $585,000 per
annum,  subject to an increase of 5% per annum beginning January 1, 1999 through
the term of the agreement.  Mr. San Antonio is entitled to be reimbursed for all
ordinary,  reasonable and necessary  expenses incurred by him in the performance
of his duties,  including  an  automobile  allowance  of $12,000 per annum.  The
Company  provides Mr. San Antonio with a comprehensive  medical dental insurance
policy as well as disability  coverage and a life insurance death benefit policy
in excess of $1,000,000. Mr. San Antonio is entitled to an incentive bonus equal
to 2% of the net  after tax  profits  of the  Company.  In  connection  with his
entering  into such  agreement,  the Board  awarded Mr. San  Antonio  options to
purchase an  aggregate  of 400,000  shares of the  Company's  common stock at an
exercise  price of $3.37 (fair  market  value on the date of grant plus 10%) per
share, all of which options vest contingent upon the Company  achieving  certain
specified  performance goals. The employment  agreement  continues in full force
and effect for  additional  one year periods  unless either party  terminates by
giving 90 days written  notice prior to the end of any term or renewal term. Mr.
San Antonio also entered into an agreement not to compete for two years with the
Company  which may be exercised by the Company  upon the  expiration  or earlier
termination  of the  employment  agreement  by delivery to Mr. San Antonio of an
aggregate of 100,000 shares of the Company's common stock.

     Effective January 1, 1998 the Company entered into an employment  agreement
with Michael Basone to serve as the Company's  Executive Vice  President,  Chief
Information  Officer  and  Chief  Operating  Officer.  Under  the  terms of such
Agreement,  Mr.  Basone's  current  salary is  $225,000,  subject  to  automatic
increases of 5% after the first fifteen  months and annually  thereafter  during
the term of the  Agreement.  Mr. Basone was granted stock options in April 1998,
pursuant to the  Agreement,  to purchase  $200,000 of the Company's  stock which
vest  equally  over a three year  period.  In  addition  he will be  entitled to
receive  cash  bonuses  based upon the  Company and its  subsidiaries  achieving
certain  revenue and  operating  goals.  The Company  provides  Mr.  Basone with
medical and dental  insurance,  an automobile  allowance of $6,000 per annum and
life  insurance  benefits  similar to that provided by the Company to certain of
its other executives.

     Effective  January  1, 1998  Warrantech  Automotive,  Inc.  entered  into a
five-year employment agreement with Ronald Glime, its President. Under the terms
of such  Agreement  Mr.  Glime is entitled  to an initial  annual base salary of
$200,000 subject to automatic increases of 5% after the first fifteen months and
annually  thereafter  during the term of the Agreement.  Mr. Glime's annual base
salary,  in  conjunction  with his new role as  President  of U.S.  and Canadian
Operations,  is  $295,000.  Mr. Glime was granted  stock  options in April 1998,
pursuant to the  Agreement,  to purchase  $250,000 of the Company's  stock which
vest equally over a five year period.  Mr. Glime was also granted  stock options
in August 1999 to purchase an aggregate of 50,000 shares of the Company's common
stock which vest over a three year  period.  Mr.  Glime is entitled to receive a
cash bonus based upon a percentage of the Company's operating  performance.  The
Company  provides  Mr. Glime with medical and dental  insurance,  an  automobile
allowance  of $6,000  per  annum and life  insurance  benefits  similar  to that
provided by the Company to certain of its other executives.

     Effective  April 16, 1998, the Company entered into a three year employment
agreement  with Mr.  Richard F. Gavino to serve as the Company's  Executive Vice
President,  Chief  Financial  Officer  and  Treasurer.  Under  the terms of such
Agreement,  Mr. Gavino is entitled to an initial  annual base salary of $200,000
subject to annual  increases  of 5%. Mr.  Gavino  received a $25,000  bonus upon
signing of the  employment  agreement.  Mr.  Gavino was granted  stock  options,
pursuant to the Agreement, to purchase $25,000 of the Company's stock which vest
at the end of the first year and to  purchase  $300,000 of the  Company's  stock
which vest equally over a three year period. Mr. Gavino is entitled to receive a
cash bonus based upon a  percentage  of  Company's  operating  performance.  The
Company  provides Mr.  Gavino with medical and dental  insurance,  an automobile
allowance  of $6,000  per  annum and life  insurance  benefits  similar  to that
provided by the Company to certain of its other executives.

     Effective  April 1, 1997, the Company  entered into a five year  employment
agreement with Judith Thomas,  its President.  Under the terms of such Agreement
Ms. Thomas is entitled to an initial  annual base salary of $150,000  subject to
automatic  increases of 5% annually.  Effective April 1, 1998, Ms Thomas' annual
base salary was adjusted to $175,000.  Ms. Thomas received a $50,000 stock bonus
upon signing of the employment  agreement.  The stock was granted in April 1998.
Ms.  Thomas is  entitled to receive a cash bonus  equal to a  percentage  of her
current base salary upon the attainment of certain  operating goals  established
for Warrantech Help Desk, Inc. The Company  provides Ms. Thomas with medical and
dental insurance,  relocation  benefits,  an automobile  allowance of $6,000 per
annum and life  insurance  benefits  similar to that  provided by the Company to
certain  of its other  executives.  Ms.  Thomas  resigned  from the  Company  in
November 1999.


                                        52
<PAGE>

Other Incentives and Compensation

     The Company  has  provided  executives  equity-based  long-term  incentives
through its 1998  Employee  Incentive  Stock Option Plan,  which was designed to
award key management  personnel and other  employees of the Company with bonuses
and stock options based on the Company's and the employee's performance.

     The Company provides executive officers with an incentive bonus plan, which
provides cash and/or stock bonuses upon meeting certain performance criteria.

     The Company  provides an  incentive  bonus plan for all  employees  for the
referral  of  potential  new  employees  for  employment  by the Company who are
subsequently hired by the Company.  The amount of the bonus is predicated on the
skill and professional level of the new employee.

     Additionally, the Company provides an incentive bonus to existing employees
who  are  claims  adjusters  for  obtaining  and  maintaining  certification  as
professionals in their field.


Compliance with Section 16(a) of the Securities Exchange Act of 1934

     Section  16(a) of the  Securities  Exchange Act of 1934  requires  that the
Company's  executive officers and directors and persons who own more than 10% of
a registered class of the Company's equity  securities file reports of ownership
and changes in  ownership  with the  Securities  and  Exchange  Commission  (the
"Commission").  Officers,  directors  and  greater  than  10%  stockholders  are
required by  Commission  regulation  to furnish  the Company  with copies of all
Section  16(a)  forms they file.  Based on a review of the  reports,  during the
fiscal year ended March 31, 1999, all Section 16 filing requirements  applicable
to its officers,  directors and greater than 10% beneficial owners were complied
with.


Non-Management Directors' Compensation

     Effective  January 1, 1998,  each  non-employee  director  is  entitled  to
receive  compensation  of $2,500 plus 250 shares of Company  stock per  calendar
quarter of board  service.  Committee  service is  compensated at $500 plus 62.5
shares of Company stock per calendar quarter.  During fiscal 1999, the following
cash amounts were paid:

                           William Tweed                               $10,000
                           Jeff J. White                                14,000
                           Lawrence Richenstein                         14,000
                           Gordon A. Paris                              12,000

     No  directors'  fees are payable to  employees  of the Company who serve as
directors.


                                        53

<PAGE>


Item 12.    Security Ownership of Certain Beneficial Owners and Management

     The following  table sets forth  information as of July 6, 1999  concerning
shares of Common Stock,  par value $.007 per share,  the  Company's  only voting
securities,  owned beneficially by each of the Company's  directors and nominees
for the Board of  Directors,  by each  person who is known by the Company to own
beneficially  more than 5% of the outstanding  voting  securities of the Company
and by the Company's executive officers and directors as a group.

<TABLE>
<S>                                                    <C>                                        <C>
                                                       Amount and Nature of                        Percent
Name and Addess of Beneficial Owner                    Beneficial Ownership                         of Class

    Joel San Antonio                                      3,201,648 shares(1)                       21.03%
    300 Atlantic Street
    Stamford, Connecticut 06901

    William Tweed                                         1,841,236 shares(2)                       12.10%
    300 Atlantic Street
    Stamford, Connecticut 06901

    Jeff J. White                                         1,591,910 shares(3)                       10.46%
    35 Hub Drive
    Melville, New York 11747

    Lawrence Richenstein                                      12,750 shares                           .08%
    500 Eastern Parkway
    Farmingdale, New York  11735

    Gordon A. Paris                                             1,625 shares                           -
    31 West 52nd Street, 22nd floor
    New York, New York  10019-6101

All directors and executive officers
as a group (17 persons)
                                                              6,960,210 shares(1,2,3,4)             45.09%

</TABLE>
__________________

(1)  Includes  5,000 shares held by Mr. San Antonio as  custodian  for two minor
     children.  Includes  10,800  shares owned by Mr.San  Antonio's  wife as to
     which he disclaims  beneficial  ownership.  Does not include  13,354 shares
     owned by Mr. San Antonio's brother and sister-in-law and 5,000 shares owned
     by his mother as to which he disclaims any beneficial interest. Includes an
     aggregate of 200,000  shares held in trusts for his children,  of which Mr.
     San  Antonio's  wife is a trustee  as to which Mr.  San  Antonio  disclaims
     beneficial ownership.

(2)  Includes  23,000 shares held by Mr.Tweed as custodian for one child.  Does
     not include an  aggregate of 7,500  shares held by  Mr.Tweed's  mother and
     sister.  Includes  1,500 shares held by Mr. Tweed's wife, and 25,000 shares
     held in trust for the benefit of Mr.  Tweed's  granddaughter,  of which Mr.
     Tweed's  wife is the  trustee,  as to which  he  disclaims  any  beneficial
     interest.

(3)  Does not include an aggregate of 90,000 shares owned by Mr.White's  mother
     and sister as to which he disclaims any beneficial interest.

(4)  Includes  options held by executive  officers of the Company to purchase an
     aggregate of 214,706 shares, which are presently exercisable.


                                   54

<PAGE>

Item 13.  Certain Relationships and Related Transactions

                 Certain Relationships and Related Transactions

     On April 1, 1996 Michael  Salpeter,  former  President  and Director of the
Company,  and William  Tweed,  former  President of the Company  entered into an
Agreement  whereby  Mr.  Tweed  granted to Mr.  Salpeter  an option to  purchase
487,000 shares of common stock owned by Mr. Tweed.  The options are  exercisable
at various  prices in whole or in part,  and expire on October 22, 2000.  In May
1998, such Agreement was modified,  pursuant to which Mr. Salpeter  relinquished
his rights with respect to 125,000  shares,  leaving an option  exercisable  for
362,000 shares.  In March 1999, 62,000 shares were purchased under the Agreement
leaving an option exercisable for 300,000 shares.

     On  July 6,  1998,  Joel  San  Antonio,  Warrantech's  Chairman  and  Chief
Executive  Officer,  and  William  Tweed  and  Jeff  J.  White,  members  of the
Warrantech's Board of Directors,  exercised 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 interest rate of 6%.
The  promissory  notes,  which  are  with  recourse  and  secured  by the  stock
certificates  issued,  mature July 5, 2001.  An additional  promissory  note was
signed by Joel San Antonio for $595,634 on March 22, 1999 which  represents  the
amounts funded by the Company with respect to his payroll taxes for the exercise
of these options.  The exercise of these stock options and the  anticipated  tax
benefit from this transaction  total  approximately  $10 million.  These amounts
have  been  recorded  as  a  contra-equity  account,  which  is a  reduction  of
stockholders'  equity.  The Company is currently in discussions with the Messrs.
San Antonio,  Tweed and White to renegotiate the payment terms of the notes. The
payment of interest, which was due July 6, 1999, has been deferred until January
6, 2000.

     Warrantech Consumer Product Services, Inc. and Warrantech Direct, Inc. have
made commission payments to Unlimited Business Services,  Inc. totaling $328,690
for the fiscal year 1999 pursuant to Representative  Agreements.  Judith Thomas,
President of Warrantech Help Desk,  Inc. is the President of Unlimited  Business
Services, Inc.



                                        55

<PAGE>


PART IV


Item 14.       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 21.

(b)     Reports on Form 8-K during the last quarter: None.

(c)     Exhibits

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.

(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.

(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.

(d)   - Certificate  of  Designation  of  the  Company  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.

(e)   - By-laws of the Company,  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.

(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.

(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.

(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.

(e)   - 1998 Employee Incentive Stock Option Plan of the Company.

(f)   - Employment  Agreement dated April 1, 1995 between the Company and Joel
        San Antonio.


                                   56

<PAGE>

(g)   - Insurance  policy  between the Company and Houston  General  Insurance
        Company  pertaining to service  contracts issued by Inacom  Corporation.
        Incorporated  by reference to the Company's  Report on Form 10-K for the
        fiscal year ended March 31, 1992, file no. 0-13084.

(h)   - Insurance  policy  between the Company and Houston  General  Insurance
        Company   pertaining  to  service   contracts   issued  by  Damark  Inc.
        Incorporated  by reference to the Company's  Report on Form 10-K for the
        fiscal year ended March 31, 1992, file no. 0-13084.

(i)   - Insurance  policy  between the Company and Houston  General  Insurance
        Company  pertaining  to service  contracts  written in all states except
        Florida.

(j)   - Insurance  policy  between the Company and Houston  General  Insurance
        Company pertaining to service contracts issued by CompUSA.

(k)   - Insurance  policy  between the Company and Houston  General  Insurance
        company pertaining to service contracts written by WCPS of Florida, Inc.
        (excluding Inacom Corporation).

(l)   - Insurance  policy  between the Company and Houston  General  Insurance
        company pertaining to service contracts written by WCPS of Florida, Inc.
        through CompUSA.

(m)   - Settlement and Runoff Agreement between the Company,  its wholly owned
        subsidiaries  Warrantech  Dealer Based  Services,  Inc.  and  Warrantech
        Consumer Product  Services,  Inc. and American Hardware Mutual Insurance
        Company  ("AHM")  regarding  termination  of insurance  coverage by AHM.
        (This document has been omitted and accorded  confidential  treatment by
        the  Securities  and Exchange  Commission  pursuant to an Order Granting
        Application  Pursuant to Rule 24b-2 Under the Securities Exchange Act of
        1934, As Amended,  Respecting  Confidential  Treatment of Exhibits 10(v)
        and 10(w) Contained in Registrant's  Form 10-K for the fiscal year ended
        March 31, 1992, issued by the Division of Corporation Finance.)

(n)   - Revolving Loan Agreement between the Company and Peoples Bank.

(o)   - Administrator  Agreement - Consumer Products,  between Houston General
        Insurance Company and Warrantech  Consumer Product Services,  Inc. (This
        document  has  been  omitted  and has  been  filed  separately  with the
        Securities and Exchange Commission pursuant to a Confidential  Treatment
        Request.)

(p)   - General Agency Agreement  between American  International  Group, Inc.
        and Warrantech Automotive,  Inc. (This document has been omitted and has
        been  filed  separately  with the  Securities  and  Exchange  Commission
        pursuant to a Confidential Treatment Request.)

(q)   - Master Agreement  between American  International  Group, Inc. and the
        Company  (Section  1.6 of this  document  has been  omitted and has been
        filed separately with the Securities and Exchange Commission pursuant to
        a Confidential Treatment Request.)

                                   57

<PAGE>

21.   - Subsidiaries of the Company.

27.   - Financial Data Schedule.

28.   - Stipulation  and Consent Order of Illinois.  Incorporated by reference
        to the Company's  Quarterly  Report on Form 10-Q for the fiscal  quarter
        ended December 31, 1988, file no. 0-13084.


                                        58

<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: December 23, 1999                        By: /s/ Joel San Antonio
                                                    _________________________
                                                    Joel San Antonio
                                                    Chairman of the Board and
                                                    Chief Executive Officer


Dated: December 23, 1999                        By: /s/ Richard F. Gavino
                                                    ___________________________
                                                    Richard F. Gavino,
                                                    Chief Financial Officer



                                   59

<PAGE>

                                  Exhibit List



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.

(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.

(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.

(d)  -  Certificate  of  Designation  of  the  Company  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.

(e)   - By-laws of the Company,  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.

(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.

(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.

(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.

(e)   - 1998 Employee Incentive Stock Option Plan of the Company.

(f)   - Employment  Agreement dated April 1, 1995 between the Company and Joel
        San Antonio.

(g)   - Insurance  policy  between the Company and Houston  General  Insurance
        Company  pertaining to service  contracts issued by Inacom  Corporation.
        Incorporated  by reference to the Company's  Report on Form 10-K for the
        fiscal year ended March 31, 1992, file no. 0-13084.

(h)   - Insurance  policy  between the Company and Houston  General  Insurance
        Company   pertaining  to  service   contracts   issued  by  Damark  Inc.
        Incorporated  by reference to the Company's  Report on Form 10-K for the
        fiscal year ended March 31, 1992, file no. 0-13084


                                        60

<PAGE>

(i)   - Insurance  policy  between the Company and Houston  General  Insurance
        Company  pertaining  to service  contracts  written in all states except
        Florida.

(j)   - Insurance  policy  between the Company and Houston  General  Insurance
        Company pertaining to service contracts issued by CompUSA.

(k)   - Insurance  policy  between the Company and Houston  General  Insurance
        company pertaining to service contracts written by WCPS of Florida, Inc.
        (excluding Inacom Corporation).

(l)   - Insurance  policy  between the Company and Houston  General  Insurance
        company pertaining to service contracts written by WCPS of Florida, Inc.
        through CompUSA.

(m)   - Settlement and Runoff Agreement between the Company,  its wholly owned
        subsidiaries  Warrantech  Dealer Based  Services,  Inc.  and  Warrantech
        Consumer Product  Services,  Inc. and American Hardware Mutual Insurance
        Company  ("AHM")  regarding  termination  of insurance  coverage by AHM.
        (This document has been omitted and accorded  confidential  treatment by
        the  Securities  and Exchange  Commission  pursuant to an Order Granting
        Application  Pursuant to Rule 24b-2 Under the Securities Exchange Act of
        1934, As Amended,  Respecting  Confidential  Treatment of Exhibits 10(v)
        and 10(w) Contained in Registrant's  Form 10-K for the fiscal year ended
        March 31, 1992, issued by the Division of Corporation Finance.)

(n)   - Revolving Loan Agreement between the Company and Peoples Bank.

(o)   - Administrator  Agreement - Consumer Products,  between Houston General
        Insurance Company and Warrantech  Consumer Product Services,  Inc. (This
        document  has  been  omitted  and has  been  filed  separately  with the
        Securities and Exchange Commission pursuant to a confidential  Treatment
        Request.)

(p)   - General Agency Agreement  between American  International  Group, Inc.
        and Warrantech Automotive,  Inc. (This document has been omitted and has
        been  filed  separately  with the  Securities  and  Exchange  Commission
        pursuant to a Confidential Treatment Request.)

(q)   - Master Agreement  between American  International  Group, Inc. and the
        Company  (Section  1.6 of this  document  has been  omitted and has been
        filed separately with the Securities and Exchange Commission pursuant to
        a Confidential Treatment Request.)

21.   - Subsidiaries of the Company.

27.   - Financial Data Schedule.

28.   - Stipulation  and Consent Order of Illinois.  Incorporated by reference
        to the Company's  Quarterly  Report on Form 10-Q for the fiscal  quarter
        ended December 31, 1988, file no. 0-13084.


                         61