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Warrantech and SEC Resolve Accounting Issues

23 November 1999

Warrantech and SEC Resolve Accounting Issues; SEC Reconsiders Its Position On Warrantech's Revenue Recognition Policy Concerning Dealer - Obligor Service Contracts

    STAMFORD, Conn.--Nov. 22, 1999--Warrantech Corporation (OTC BB: WTEC) announced today that, after three months of discussions, it has received a letter from the Office of Chief Accountant of the Division of Corporation Finance (DCF) of the Securities and Exchange Commission in which the DCF stated that it does not object to Warrantech's revenue recognition policy as it is applied to its dealer - obligor contracts. As a result, on dealer obligor contracts which represent approximately 63% of the company's business, Warrantech will continue to follow the accounting policy which it has applied over the past eight (8) years by recognizing a substantial portion of its administrative fee income in the year in which the service contracts are sold. Furthermore, Warrantech will continue to defer only that portion of the administrative fee income which pertains to administration of claims over the life of the contracts.
    The SEC's Division of Corporation Finance had informed Warrantech in an earlier letter that it believed that the administrative fee income on dealer obligor contracts should be recognized on a straight-line basis over the life of the contracts which it administers. Warrantech requested the Staff to reconsider its position and submitted further information to the Staff to support the revenue recognition policy which the Company had been following. Upon the review of this additional data, the SEC Staff reconsidered its position and issued its letter of no objection, which the Company received on November 19, 1999. The SEC Staff stated in its letter of no objection that it relied on the Company's conclusion and those of its independent auditors.
    With respect to service contracts in which Warrantech is the obligor, the SEC's Division of Corporation Finance informed the Company in an earlier communication that, Warrantech should change its revenue recognition policy to comply with Financial Accounting Standards Board Technical Bulletin 90-1. Warrantech is currently preparing its financial statements to comply with this revenue recognition policy.
    Having received the SEC Staff 's views with respect to the revenue recognition policy for both dealer-obligor and admin.-obligor contracts, Warrantech's independent auditors are now in a position to complete their audit of the Company's financial statements for the fiscal year ended March 31, 1999 and to restate financial statements for prior years.
    When the audit of the Company's financial statements is completed, which is expected shortly, the Company will be in a position to bring its periodic filings with the SEC current. Once its filings are current, the Company can pursue its efforts to have its common stock listed on the Nasdaq National Market.
    Warrantech Corporation's common stock continues to trade on the over-the-counter market. The Company, through its subsidiaries, administers and markets service contracts and after-market warranties on automobiles, automotive components, recreational vehicles, appliances, consumer electronics, homes, computer and computer peripherals for retailers, distributors and manufacturers. The Company continues to expand its domestic and global penetration, and now provides its services in the United States, Canada, Mexico, the United Kingdom, Puerto Rico and Latin America.
    Safe Harbor Statement Pursuant to the Securities Litigation Reform Act of 1995: This release contains forward-looking statements which are subject to risks and uncertainties. The Company's ability to have its common stock traded on the Nasdaq National Market depends on its ability to have the Nasdaq Listing Qualifications Panel reconsider its decision to delist Company's stock, which was based on the delay in the filing of the Company's financial statements. The Company also has the right to appeal the Panel's decision to the Nasdaq Listing and Hearing Review Council. There is no assurance that the Panel's decision will be reversed upon reconsideration or through the appeal. Other risks and uncertainties include, but are not limited to, analysis of the service contracts for the purpose of computing the amount of any revenue which must be deferred, the number of prior period financial results which may have to be restated, the continuation of current levels of business activity, the impact of competitive products, product demand and market acceptance risks, reliance on key strategic alliances, fluctuations in operating results and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. These risks could cause the Company's actual results for the current fiscal year and beyond to differ materially from those expressed in any forward- looking statements made by, or on behalf of, the Company.
    This release and prior releases are available on the KCSA Public Relations Worldwide website at www.kcsa.com.