**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-KSB**


**Annual
      Report pursuant to Section 13 or 15 (d) of the**


**Securities
      Exchange Act of 1934**


**For
      the Fiscal Year Ended December 31, 2005**


**Commission
      File Number 0-26168**





**CAREADVANTAGE,
      INC.**


**(Name
      of Business)**





**** **Delaware**
              
              **52-1849794**(State
                  or other jurisdiction of
              
              (I.R.S.
                  Employerincorporation
                  or organization)
              
              Identification
                  No.)**485-C
                  Route 1 South, Iselin, New
                  Jersey**
              
              **08830**(Address
                  of principal executive
                  office)
              
              (Zip
                  Code)





**Issuer’s
      telephone number, including area code: (732) 362-5000**


**Securities
      registered pursuant to Section 12 (b) of the Exchange Act of 1934:
      NONE**




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





**Common
      Stock $.001 par value**


**(Title
      of Class)**





**Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. [___]**





**Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15 (d) of the Exchange Act during the past 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** **** **Ö** **** **No** ****





**Check
      if there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B 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-KSB or any amendment
      to
      this Form 10-KSB. [__]**





**Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act):**


**Yes
      ___ No** **** **Ö** ****





**The
      Registrant’s revenues for its most recent fiscal year were $
      2,844,000**





**The
      aggregate market value of the voting stock held by non-affiliates of the
      registrant as of February 15, 2006 (assuming solely for purposes of this
      calculation that all directors and executive officers of the Registrant are
      affiliates) was $671,007.**








**The
      number of shares of common stock outstanding as of February 15, 2006 was
      53,417,221.**





**Transitional
      Small Business Disclosure Format Yes** **** **No** **** **Ö** **** **** ****





**PORTIONS
      OF THE FOLLOWING DOCUMENTS HAVE BEEN INCORPORATED BY
      REFERENCE**


**INTO
      THIS ANNUAL REPORT ON FORM 10-KSB: NONE**








**PART
      I**





**Item
      1.**  **Description
      of Business**





**Introduction
      and Background**





CareAdvantage,
      Inc. (“CAI,” “CareAdvantage” or the “Company”) and its direct and indirect
      subsidiaries, CareAdvantage Health Systems, Inc. (“CAHS”) and Contemporary
      HealthCare Management, Inc. (“CHCM”), are in the business of providing
      management and consulting services designed to enable integrated health care
      delivery systems and other care management organizations and self-insured
      employers and unions to reduce the costs, while improving the quality, of
      medical services provided to their subscribers. The management and consulting
      services include care management program enhancement services, executive and
      clinical management services, and training programs. The Company's management
      and consulting services have been provided to integrated health care delivery
      systems and other care management organizations.





CAI
      was
      incorporated in August 1994 as a wholly owned subsidiary of Primedex Health
      Systems, Inc. (“PMDX”), a publicly traded New York corporation. In October 1994,
      the Company acquired CAHS (under its prior corporate name, Advantage Health
      Systems, Inc., (“AHS”)), from PMDX. On June 12, 1995, a stock dividend of all of
      the issued and outstanding shares of common stock of the Company was declared
      effective by PMDX. As a result, the Company commenced trading as a publicly
      traded company on that date.





Initially,
      CAI relied on PMDX to provide the bulk of its working capital. In addition
      to
      transferring all of its AHS stock to the Company, PMDX made a total of
      $9,700,059 in working capital advances to CAI (the last such advance being
      made
      in July 1995). Pursuant to a revised separation agreement between CAI and PMDX
      dated April 20, 1995, PMDX agreed to capitalize all such advances in connection
      with CAI’s separation from PMDX.





On
      February 22, 1996, the Company completed a series of transactions with CW
      Ventures II, L.P. (“CW Ventures”) and with Horizon Blue Cross and Blue Shield of
      New Jersey, formerly known as Blue Cross Blue Shield of New Jersey, Inc.
      (“Horizon BCBSNJ”).





Concurrently
      with the February 22, 1996 closing of the transaction with CW Ventures, CAHS
      purchased all of the outstanding capital stock of CHCM from a wholly owned
      Horizon BCBSNJ subsidiary, Enterprise Holding Company, Inc. (“EHC”). Although
      this acquisition was consummated on February 22, 1996, results of operations
      of
      CHCM have been reflected in the Company's financial statements since April
      30,
      1995 pursuant to an Interim Services Agreement between the Company and Horizon
      BCBSNJ (as amended from time to time, the “Services Agreement”) whereby the
      Company had effective control and responsibility of the day-to-day operations
      of
      CHCM pending a sale of CHCM to the Company.





On
      August
      16, 2001, pursuant to a Satisfaction of Debt Agreement dated November 1, 2000,
      among the Company, Horizon BCBSNJ and one of Horizon BCBSNJ’s subsidiaries,
      Horizon Healthcare of New Jersey, Inc., the Company issued 15,777,400 shares
      of
      its Common Stock in exchange for the cancellation of approximately $1.6 million
      owed by it.





The
      foregoing transactions with CW Ventures and Horizon BCBS resulted in CW Ventures
      owning approximately 38% of the outstanding shares of the Company’s common
      stock, par value $.001 per share (“Common Stock”) and Horizon BCBSNJ owning
      approximately 54% of outstanding shares of the Company’s Common
      Stock.





Prior
      to
      January 1, 2003, the Company provided, principally to Horizon BCBSNJ and another
      Blue Cross Blue Shield organization, certain health care cost containment
      services, including utilization review, case management and disease management
      and independent reviews. During 2002, the Company ceased providing these
      services to the other Blue Cross Blue Shield organization, and as of December
      31, 2002, to Horizon BCBSNJ on account of Horizon BCBSNJ’s termination of the
      Services Agreement as of that date. As a result, beginning January 1, 2003,
      the
      Company ceased offering these services to new customers, since it no longer
      maintained the employees and infrastructure necessary to support their delivery.





On
      October 1, 2004, as partial settlement of litigation between the Company and
      Horizon BCBSNJ, Horizon BCBSNJ transferred
      to the Company all of the Company’s common stock then held by it (i.e.,
      53,394,820 shares). On
      October 6, 2004, CW Ventures made a pro rata distribution of all of the
      37,617,420 shares of common stock of the Company that it owned to the partners
      of CW Ventures.




1




The
      Company's executive offices are located at 485-C Route 1 South, Metropolitan
      Corporate Plaza, Iselin, New Jersey 08830 and its telephone number is (732)
      362-5000.





**Industry
      Overview: Consumerism, Health Care Expenditures and Managed
      Care**





The
      American health care market continues to evolve within the environmental
      emphases on consumer choice and confidentiality protections, and still battling
      the double challenge of accelerating costs and an aging population . Employer
      groups are still trying to find a balance, providing health insurance to
      employees in order to attract the highest quality human capital, while
      developing strategies to control escalating costs. In addition to the previous
      considerations, the latest emphasis is shifting towards the principle of data
      transparency on the part of insurers, HMOs and providers.





Data
      transparency has several key characteristics, which include easy accessibility,
      standardized performance metrics, n ationally
      recognized/MD-approved set of rules governing claim coding/grouping procedures,
      a utomated
      data sharing/integration availability via the Internet, an underlying reward
      system using chronic disease in lieu of episodic management/efficiency and
      demonstration of intervention benefits in a credible way. So crucial is this
      factor that all of the major forces within the business, labor and health care
      community have come together in an attempt to provide the elements of structure
      and process that are the underpinnings of data transparency. The
      Consumer-Purchaser Disclosure Project, underwritten by the Robert Wood Johnson
      Foundation has as its goal, “to provide all Americans with publicly reported health
      care performance information by January 1, 2007.”  The “ shared
      vision [of this project] is that Americans will be able to select hospitals,
      physicians, and treatments based on nationally standardized measures for
      clinical quality, consumer experience, equity, and efficiency . ” 1




The
      above
      focus of the marketplace points to an increased emphasis on health care quality
      and cost-benefit. Tools that provide clear and defensible information that
      is
      based on best practice and express results based on the relative severity of
      disease of the underlying population provide full and accurate disclosure.
      The
      Gartner Group has stated, “Without severity adjusted data, no comparison can be
      made between entities within any stakeholder category (e.g. hospital vs.
      hospital or MCO vs. MCO) because all differences may be completely attributable
      to variations among the types and intensities of diseases underlying the
      data.”2 Increasingly
      consumers, purchasers, insurers and providers will need tools that provide
      severity-adjusted data in order to provide a clear and accurate picture of
      health care quality attributable to different health plans and
      groups.





**Services
      and Products**


The
      Company is a management consulting firm specializing in the improvement of
      health care delivery and quality while reducing unnecessary cost. The Company
      has a proven track record for detecting and reducing unnecessary utilization
      while optimizing program performance and quality of care. Program performance
      and quality of care are measured not only on the basis of reduced costs but
      also
      using the context of a population’s relative disease burden/severity and the
      rate at which the interventions of particular provider and programs have an
      impact on the rate of progression.




CareAdvantage
      clients include health plans, employer, hospital systems, providers and other
      purchaser groups. For the past ten years, the Company has worked with many
      leading health plans to develop effective, affordable and timely data-driven
      strategies that improve case, disease and utilization, as well as operations
      and
      network management. These strategies have helped CareAdvantage clients to more
      effectively:





· Identify
      and quantify disease burden and associated risk for their entire population
      and
      sub-populations


· Improve
      member care quality through the defensible evaluation of health care providers
      and facilities


· Facilitate
      provider cooperation and collaboration based on case mix and severity-adjusted
      data


· Forecast
      resource consumption based on disease burden


· Optimize
      allocation of resource





Recently,
      the Company has also assisted health plan clients with respect to further
      validating the value that they bring to purchasers and have had a demonstrable
      impact on sales retention and attraction of new sales.




_________________________________


1 www.healthcaredisclosure.org


2 The
      Gartner Report - The Gartner Group - 1999






2




In
      addition, this expertise has been applied to help employers assess the
      efficiency and effectiveness of their present health care insurers, carriers
      and
      supporting vendors. CareAdvantage achieves this by empowering employers with
      the
      information, skills and guidance necessary to facilitate future purchasing
      decisions and optimize managerial and administrative practices.





In
      order
      to deliver these solutions, CareAdvantage utilizes experienced health plan
      executives and medical directors as well as a wide range of care management
      operations, clinical data analysis and information technology (IT)
      subject-matter experts. It is this vast array of experience that enables
      CareAdvantage to benefit clients with objective and quantifiable insight to
      develop the strategies and tactical initiatives that combine care management
      processes with a deep understanding of medical and health care insurance-related
      best practices.





**Operations**




The
      Company utilizes a multi-disciplinary team approach in providing its management
      and consulting services. The Company, through its employees and independent
      contractors, assesses care management operations, systems resources, integration
      and outcomes. Typically, assessment occurs on the client’s site, through
      interviews and data analysis. At the center of CareAdvantage’s data-driven
      analyses is RightPath ® Navigator (RPNavigator), the next generation software solution and an element
      of
      the Company’s RightPath ® Care
      Management product suite. RPNavigator categorizes and quantifies a population’s
      disease burden and provides a clear picture of the health status and severity
      associated with its clients’ member populations. RPNavigator’s underlying
      infrastructure incorporates a classification methodology from 3M Health
      Information Systems along with various analytical techniques to stratify the
      population and describe the individual member’s associated risks in intuitive
      ways. It also enables the valid assessment of existing health care quality
      and
      cost as well as projection of future risk from a resource consumption, disease
      progression and mortality perspective.





RPNavigator
      utilizes this information to stratify its clients’ members, groups and providers
      through the use of a wide range of clinical and demographic descriptors to
      quantify their risk as well as evaluate the impact of key interventions and
      programs. These descriptors and the underlying logic increase the associated
      transparency of the resulting analyses and support the new direction of the
      industry. Among the benefits of this solution is the ability of CareAdvantage
      clients to:





·
            Access
                meaningful information via an Internet-based
                portal


·
            Track
                population and member-related changes in disease status and severity
                over
                time


·
            Compare
                client sub-populations


·
            Profile
                provider using case mix and severity-adjusted
                techniques


·
            Select
                and prioritize members who would best benefit from care management
                interventions


·
            Understand
                adverse selection associated with existing and/or newly-obtained
                business
                as well as understand the impact of a plan’s overall turnover in terms of
                stayers and leavers


·
            Reduce
                the dependence on internal resources to develop and produce required
                reports to accomplish these tasks





There
      are
      several related efforts that result in additional sources of income for
      CareAdvantage, including:





·
            Development
                of new standardized analyses on a client-specific basis to meet a
                particular need for that client


·
            Undertaking
                of broader analytic consulting projects, using the methodology and
                logic
                within RPNavigator, on behalf of clients that need CareAdvantage’s
                expertise in analyzing and interpreting the
                data.





CareAdvantage
      also supports its clients through the provision of a wide range of consulting
      services to develop and implement the right solutions. These solutions provide
      the health care industry with strategies and tactical initiatives for
      effectively managing health care consumption, reducing costs and improving
      the
      quality and cost benefit of care.





For
      its
      services, the Company seeks to be compensated either (i) on a fee-for-service
      basis; (ii) per member per month (PMPM); or (iii) on the basis of a combination
      of both fee-for-service and PMPM.





**Customers
      and Marketing**





The
      Company currently provides its services to Blue Cross Blue Shield (“BCBS”)
      organizations, Kaiser Permanente, employers and a union pursuant to one or
      a combination of the compensation arrangements described above.





The
      Company markets its services to the health insurance industry, health service
      organizations, hospitals, insurance carriers, employers and unions.




3


**Competition**





The
      Company faces intense competition in a highly fragmented market of managed
      care
      services firms. Several managed care service firms currently provide and
      aggressively market services, which are in some respects similar to the
      Company's services. There are also a number of organizations developing a
      variety of approaches that are in competition with the Company’s products and
      services. Some of the Company's competitors have substantially greater financial
      resources and employ substantially greater numbers of personnel.





The
      Company intends to compete by offering what it believes to be the most
      comprehensive approach in the marketplace to address the medical cost and
      quality of care issues. Further, it believes that its competitive position
      is
      enhanced by its ability to develop tailored programs for large
      clients.





**Government
      Regulation**





*Health
      Care Regulation*





Government
      regulation of health care cost containment services, such as those provided
      by
      the Company, is a changing area of law that varies from jurisdiction to
      jurisdiction **** and
      generally gives responsible administrative agencies broad discretion. The
      Company is subject to extensive and frequently changing federal, state and
      local
      laws and regulations concerning company licensure **,** conduct
      of operations, acquisitions of businesses operating within its industry, the
      employment of physicians and other licensed professionals by business
      corporations and the reimbursement for services. Regulatory compliance could
      have an adverse effect on the Company's present business and future growth
      by
      restricting or limiting the manner in which it can acquire businesses, market
      its services, and contract for services with other health care providers by
      limiting or denying licensure or by limiting its reimbursement for services
      provided.





It
      should
      be noted that in providing utilization review and case management services,
      the
      Company made recommendations regarding what is considered appropriate medical
      care based upon professional judgments and established protocols. However,
      the
      ultimate responsibility for all health care decisions is with the health care
      provider. Furthermore, the Company is not an insurer, and the ultimate
      responsibility for the payment of medical claims is with the insurer.




Although
      the Company is not a health care provider, it could have potential liability
      for
      adverse medical consequences. The Company could also become subject to claims
      based upon the denial of health care services and claims such as malpractice
      arising from the acts or omissions of health care professionals. Its exposure
      in
      this regard is substantially reduced since it ceased providing utilization
      review and case management services as of December 31, 2002. Nonetheless, until
      the applicable statutes of limitations have run, the Company retains exposure
      for past activities as well as on account of its continued internal physician
      review services offered as part of its Executive and Clinical Management
      Services.





The
      Company’s operations in a particular state are typically subject to
      certification by the appropriate state agency. The Company has received or
      has
      filed the necessary application for such certification where required. In
      addition, various state and federal laws regulate the relationships between
      providers of health care services and physicians and other clinicians, including
      employment or service contracts, investment relationships and referrals for
      certain designated health services. These laws include the fraud and abuse
      provisions of the Medicare or Medicaid statutes, which prohibit the
      solicitation, payment, receipt or offering of any direct or indirect
      remuneration for the referral of Medicare or Medicaid patients or for the
      ordering or providing of Medicare or Medicaid covered services, items or
      equipment. Violations of these provisions may result in civil or criminal
      penalties for individuals or entities including exclusion from participation
      in
      the Medicare and Medicaid programs. Several states have adopted similar laws
      that cover patients in private programs as well as government programs. Because
      the anti-fraud and abuse laws have been broadly interpreted, they may limit
      the
      manner in which the Company can acquire businesses and market its services
      to,
      and contract for services with, other health care providers.





The
      Company's management believes that its present operations are in compliance
      with
      all applicable laws and regulations and that it maintains sufficient
      comprehensive general liability and professional liability insurance coverage
      to
      mitigate claims to which the Company may be subject in the future. The Company
      is unable to predict what, if any, government regulations affecting its business
      may be enacted in the future or how existing or future regulations may be
      interpreted. To maintain future compliance, it may be necessary for the Company
      to modify its services, products, structure or marketing methods. This could
      increase the cost of compliance or otherwise adversely affect the Company's
      operations, products, profitability or business prospects.





4





*Proposed
      Health Care Reform*





If
      proposed federal and state health care reform initiatives are enacted, the
      payments for and the availability of health care services may be affected.
      Aspects of certain proposals, such as reductions in Medicare and Medicaid
      payments, could adversely affect the Company. The Company is unable to predict
      what impact, if any, future enacted health care reform legislation may have
      on
      its current and future business, and no assurance can be given that any such
      reforms will not have an adverse impact on its business operations or potential
      profitability.





**Employees**





At
      December 31, 2005, the Company employed a total of 17 full-time employees.
      Of
      this total, 12 employees are engaged in servicing its clients. The 5 remaining
      employees include administrative support, finance, information systems and
      human
      resources personnel. None of the Company’s employees are party to any collective
      bargaining agreements.





**Item
      2.** ****  **Description
      of Property**





The
      Company's executive offices and operations, comprising approximately 28,000
      square feet of office space, are located in the Metropolitan Corporate Plaza
      in
      Iselin, New Jersey. The Company had executed a six-year lease for this facility
      commencing June 15, 1995, which was extended during 2000 for ten additional
      years. The extended lease provides for an annual base rent of approximately
      $668,000 with annual escalations based on increases in real estate taxes and
      operating expenses. As a result of the Company’s ceasing to provide services to
      Horizon BCBSNJ, the Company no longer needs 20,500 square feet of this space.





On
      January 10, 2005, the Company entered into a Lease Amendment commencing January
      1, 2005 to provide for the reduction in base rent and the waiver of escalations
      based on increases in real estate taxes and operating expenses ,
      and to
      provide the landlord with the option to recapture up to 50% of the leased
      premises at any time. The expiration date of the Lease, March 31, 2011, remains
      unchanged by the Lease Amendment.





Under
      the
      Lease Amendment, the Company is required to meet the following conditions:
      (1)
      the Company cannot assign the lease except for an assignment of the lease or
      a
      sublet provided under the original lease; (2) the Company is not in default
      under any terms and conditions of the original lease.  In the event the
      Company fails to meet these conditions, the reduction in base rent, real
      estate taxes and operating expenses will be nullified and entirely
      forfeited, and the Company will be immediately required to pay the landlord
      additional rent for the difference in the base rent, and additional rent for
      all
      escalations provided in the Lease Amendment and the original lease.





At
      December 31, 2005, this additional rent that would be due if the Company failed
      to meet the conditions of the amendment would be $346,000. Additional minimum
      lease payments for each of the next five years ended December 31 and thereafter
      that would be due if the Company failed to meet the conditions of the amendment
      are as follows:




**Year
                  Ending**
              
              **Office
                  Space**2006
              
              $367,0002007
              
              274,0002008
              
              174,0002009
              
              95,0002010
              
              1,000Thereafter
              
              0$911,000


The
      Company maintains rent-free operation offices in Vermont pursuant to an informal
      arrangement with its customer there, Blue Cross Blue Shield of Vermont.





**Item
      3.** ****  **Legal
      Proceedings**





*CareAdvantage,
      Inc. v. Blue Cross & Blue Shield of Rhode Island and Coordinated Health
      Partners* ,
      commenced March 2002 and pending in the Superior Court of the State of Rhode
      Island, arises out of the defendants’ termination of an Agreement effective as
      of January 1, 2000, among the parties pursuant to which the Company had been
      providing services. The Company is seeking declaratory relief including judgment
      (i) that the Company’s failure to attain Performance Goals under the Agreement
      was as a result of the defendants’ conduct, (ii) that defendants lacked cause to
      terminate the Agreement based on the Company’s failure to meet the Performance
      Goals, and (iii) that the Company is entitled to compensation under the
      Agreement, including compensation for having been deemed to have met the
      Performance Goals. In addition, the suit seeks equitable relief and damages
      with
      respect to defendants’ hiring a physician formerly employed by the Company.





5


*Alan
      Fontes v. CareAdvantage, Inc.* ,
      pending
      in Superior Court of New Jersey, was commenced in June 2004 by a former employee
      of the Company seeking compensation under various legal theories. In October
      2005, the court dismissed the claim under all theories except express contract.
      The Company believes that Mr. Fontes’s claim is without merit and is contesting
      the matter vigorously. Moreover, the Company filed a counterclaim for damages
      against Mr. Fontes claiming Mr. Fontes induced another employee to quit his
      employment with the Company and in October 2005, pursuant to court order,
      amended its counterclaim to seek equitable relief and damages against Mr. Fontes
      and Integrated eCare Solutions, LLC, claiming Mr. Fontes misappropriated and
      used certain Company property.





**Item
      4.** ****  **Submission
      of Matters to a Vote of Security Holders**





None.





6





**PART
      II**





**Item
      5.**  **Market
      for Registrant’s Common Equity and Related Stockholder
      Matters**





(a)
            *Market
                Information*:
                Since the Company's effective registration date of June 12, 1995,
                the
                Company's Common Stock has traded in the over-the-counter market
                and is
                currently quoted on the Electronic Bulletin Board under the symbol
                CADV.
                The following table shows the range of closing bid prices for each
                quarter
                of the Company’s two most recent calendar years. The prices reflect
                inter-dealer prices, without retail mark-up, markdown or commission,
                and
                may not represent actual
                transactions.





****
            **2005**
            ****
            **2004****Quarter
                Ended**
            
            **High**
            
            **Low**
            
            **High**
            
            **Low**March
                31,
            
            $.02
            
            $.01
            
            $.03
            
            $.02June
                30,
            
            $.03
            
            $.01
            
            $.02
            
            $.01September
                30,
            
            $.03
            
            $.01
            
            $.01
            
            $.01December
                31,
            
            $.02
            
            $.01
            
            $.04
            
            $.01




(b)
                *Holders*:****As
                    of February 15, 2006 there were approximately 2,537 holders of
                    record of
                    the Company’s Common Stock. No shares of the Company’s preferred stock
                    have been issued.
 (c)
                  *Dividends*:****During
                      the two most recent fiscal years, the Company paid no cash
                      dividends on
                      its Common Stock. The payment of future dividends on its Common
                      Stock is
                      subject to the discretion of the Board of Directors and is
                      dependent on
                      several factors, including the Company’s earnings and capital
                      needs.
  (d)
                    *Equity
                        Compensation Plans:*For
                        information regarding the Company’s equity compensation plans, please
                        refer to the table captioned “Equity Compensation Plans” in Item 11 of
                        this Form 10-KSB.
 (e)
                      *Issuer
                            Purchases of Equity Securities:*None
 **Item
                  6.** ****  **Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations**





**Cautionary
      Statements**





Statements
      in this Form 10-KSB may constitute "forward-looking statements" within the
      meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"),
      including statements concerning management's plans, intentions and expectations
      with respect to future financial performance and future events, particularly
      relating to revenues from performance-based services and re-negotiations of
      existing and new contracts with customers. Many of these statements involve
      known and unknown risks, uncertainties and contingencies, many of which are
      beyond our control, which could cause actual results and outcomes to differ
      materially from those expressed in this 10-KSB. Although we believe that our
      plans, intentions and expectations reflected in these forward-looking statements
      are reasonable, we can give no assurance that our plans, intentions or
      expectations will be achieved.





The
      following discussion contains cautionary statements regarding our business
      that
      investors and others should consider. This discussion is intended to take
      advantage of the "safe harbor" provisions of the PSLRA. In making these
      cautionary statements, we are not committed to addressing or updating each
      factor in future filings or communications regarding our business or results,
      or
      addressing how any of these factors may have caused results to differ from
      discussions or information contained in previous filings or communications.
      In
      addition, any of the matters discussed below may have affected or may affect
      our
      past, as well as current, forward-looking statements about future results.





**Risk
      Factors**





***Company
      Risk***





***We
      have had a history of losses.*** Although
      our Company was profitable for 2001 and 2002, we have experienced a history
      of
      significant operating losses on a consolidated basis. At December 31, 2005,
      we
      had working capital of approximately $323,000, stockholders’ equity of
      approximately $453,000 and an accumulated deficit of approximately
      $23,304,000.




7


***We
        face aggressive competition because new competitors can enter our field easily.*** The
        Company faces intense competition in a highly fragmented market of managed
        care
        services and new competitors can enter our field easily. We believe our ability
        to compete will depend in part upon our ability to:


·
            enhance
                our current technology and services;





·
            respond
                effectively to technological changes;





·
            introduce
                new technologies; and





·
            meet
                the increasingly sophisticated needs of our customers.





Increased
      competition may result in price reductions, reduced gross margins, and loss
      of
      market share, any of which could have a material adverse effect on our results
      of operations. In addition, pricing, gross margin, and market share could be
      negatively impacted further as a greater number of available products in the
      marketplace increases the likelihood that product and service offerings in
      our
      markets become more fungible and price sensitive.





***Due
      to increased merger and acquisition activity, we may face stronger competition
      in the future.*** Our
      industry, as well as many of our customers’ industries ( *i.e.* ,
      health
      insurers and HMOs) have experienced significant merger and acquisition activity.
      Merger and acquisition activity may result in decreased opportunities to provide
      our services. The acquisition of a customer could reduce our revenue and have
      a
      negative impact on our results of operation and financial condition. A smaller
      overall market for our products and services could also result in lower revenue
      and margins.





***Significant
      contracts with the Company have been terminated.*** Since
      2002, when the Company’s contracts were terminated with Blue Cross Blue Shield
      of Rhode Island (“BCBSRI”) and Horizon Blue Cross Blue Shield of New Jersey
      (“Horizon BCBSNJ”) (accounting respectively for 4% and 82% of net revenues for
      the year ended December 31, 2002), the Company has had to significantly reduce
      its operations to match its remaining revenues and focus on alternate sources
      of
      revenues to continue to build its business. As a response to these contract
      terminations, the Company has significantly reduced its employee base (down
      to
      17 employees from 191 in 2002) and has terminated or renegotiated a variety
      of
      information systems and communications agreements. The Company has ceased
      offering certain health care cost containment services due to the lack of the
      infrastructure necessary to support the provision of these services, and the
      Company is now focusing on selling its management and consulting services.
      There
      is no guarantee that the Company, through these measures, will be successful
      in
      mitigating the effects of the loss of these contracts and to continue to
      maintain its business operations.





***Revenue
      from a limited number of customers comprises a significant portion of our total
      revenue.*** Two
      customers, BCBS organizations, accounted for approximately 39% and 32% of
      license fees and service revenue for the year ended December 31, 2005. Another
      major customer, Kaiser Permanente, accounted for approximately 22% of license
      fees and service revenue for the year ended December 31, 2005. If these
      customers terminate or modify existing contracts or experience business
      difficulties, it could adversely affect our earnings.





***We
      could incur significant additional costs as a result of litigation based on
      the
      adverse medical consequences of our recommendations.*** Until
      December 31, 2002, we provided cost containment services for health care
      organizations. These services included: ******





·
            utilization
                review, which is the review of the appropriateness of a particular
                medical
                event, such as a hospital admission, a particular medical procedure
                or an
                additional day of inpatient care;





·
            case
                management services, which provide alternative plans for patient
                treatment
                and examine how the attending physician is managing the care of patients
                with chronic diseases on an ongoing basis;





·
            outpatient
                care coordination, which allows patients to access services such
                as home
                health care, rehabilitation and infusion therapy services; and





·
            disease
                management services, which provide patients with expert consensus
                on the
                most appropriate treatment alternatives for patients at different
                disease
                stages.





We
      based
      our recommendations for patient benefit plan coverage on judgments and
      established protocols as to the appropriateness of the proposed medical
      treatment. Our judgments and established protocols were based on data gathered
      through case studies on the treatment and care of patients over a number of
      years. As a result, we may be liable for adverse medical consequences of our
      recommendations. We could become subject to claims for the costs of services
      denied and malpractice claims arising from the acts or omissions of health
      care
      professionals. Although we do not believe that we engaged in the practice of
      medicine or that we delivered medical services directly, we may become subject
      to litigation or liability. Although we maintain comprehensive general liability
      and professional liability insurance coverage, including coverage for liability
      in connection with the performance of medical utilization review services,
      we
      cannot be certain that coverage will be adequate in the event we become subject
      to a claim. The Company’s exposure for these activities is substantially reduced
      since it stopped providing utilization review and case management services
      as of
      December 31, 2002. Nonetheless, until the applicable statutes of limitations
      have run, the Company retains exposure for past activities as well as on account
      of its continued internal physician review services offered as part of its
      Executive and Clinical Management Services.





8


***We
      depend on effective information systems to deliver products and services to
      customers.*** We
      depend
      on effective information systems and have linked our computer systems with
      our
      customers’ computer systems in order to conduct and deliver our products and
      services. Our information systems require an ongoing commitment of resources
      to
      maintain and enhance existing systems and develop new systems in order to keep
      pace with continuing changes in information processing technology, evolving
      industry standards, and changing customer preferences. Our failure to maintain
      effective and efficient information systems could cause loss of existing
      customers, difficulty in attracting new customers, customer disputes, regulatory
      problems and increases in administrative expenses.





***Our
      RPNavigator tool is dependent upon third-party risk stratification
      software*** .
      The
      Company currently has a license from Minnesota Mining and Manufacturing Company
      (“3M”) to use 3M’s Clinical Risk Grouping SoftwareTM, which license expires in
      April 2007 and renews automatically thereafter for successive one-year terms
      unless terminated by either party by written notice at least one year in
      advance. In the event that 3M terminated its license at the end of the term,
      the
      Company would be required to license other third-party risk stratification
      software and would be required to reconfigure RPNavigator to accommodate such
      other software. Moreover, although risk stratification software is available
      from other third parties, including Johns Hopkins University and/or its
      affiliates, the Company believes that the 3M software is more robust than its
      competitors because it considers the severity of illnesses and diseases. Because
      our RPNavigator tool depends on the integrity of third-party-risk stratification
      software, if the information contained in that software was found or perceived
      to be inaccurate, or if the information is generally perceived to be unreliable,
      we may not be able to maintain commercial acceptance.





***The
      introduction of software products incorporating new technologies and the
      emergence of new industry standards could render the Company’s existing software
      products less competitive, obsolete or unmarketable.*** There
      can
      be no assurance that the Company will be successful in developing and marketing
      new software products that respond to technological changes or evolving industry
      standards. If the Company is unable, for technological or other reasons, to
      develop and introduce new software products cost-effectively in a timely manner
      in response to changing market conditions or customer requirements, the
      Company’s business, results of operations and financial condition may be
      adversely affected.





Developing
      or implementing new or updated software products and services may take longer
      and cost more than expected. The Company relies on a combination of internal
      development, strategic relationships, and licensing to develop its software
      products and services. The cost of developing new healthcare information
      services and technology solutions is inherently difficult to estimate. If the
      Company is unable to develop new or updated software products and services
      cost-effectively on a timely basis and implement them without significant
      disruptions to the existing systems and processes of the Company’s customers,
      the Company may lose potential sales and harm its relationships with current
      or
      potential customers.





***To
      succeed, we must maintain the confidential nature of criteria that we have
      acquired or developed for the delivery of health care services in medical
      specialty areas.*** The
      success of our knowledge and information-related business depends on our ability
      to maintain the ownership rights to our products. We rely on agreements with
      customers, confidentiality agreements with employees, trade secrets, trademarks
      and patents to protect our ownership rights. These legal protections and
      precautions may not prevent misappropriation of our intellectual property.
      In
      addition, substantial litigation regarding intellectual property rights exists
      in the software industry, and we expect software products to be increasingly
      subject to third-party infringement claims as the number of products and
      competitors in our industry segment grows.





***Federal
      and state laws that protect patient health information may increase our costs
      and limit our ability to collect and use that
      information.*** There is
      substantial state and federal regulation of the confidentiality of patient
      health information and the circumstances under which such information may be
      used by, disclosed to, or processed by us as a consequence of our contacts
      with
      various health plans and healthcare providers. Although compliance with these
      laws and regulations is presently the principal responsibility of the health
      plan, hospital, physician or other healthcare provider, regulations governing
      patient confidentiality rights are dynamic and rapidly evolving. As such, laws
      and regulations could be modified so that they could directly apply to us.
      Also,
      changes to the laws and regulations that would require us to change our systems
      and our methods may be made in the future, which could require significant
      expenditure of capital and decrease future business prospects. Also, additional
      federal and state legislation governing the dissemination of patient health
      information may be proposed and adopted, which may also significantly affect
      our
      business. Finally, certain existing laws and regulations require healthcare
      entities to contractually pass on their obligations to other entities with
      which
      they do business; as such, we are indirectly impacted by various additional
      laws
      and regulations.




9


The
      Company and the healthcare industry generally are impacted by the Health
      Insurance Portability and Accountability Act of 1996, or HIPAA, which mandates,
      among other things, the adoption of standards to enhance the efficiency and
      simplify the administration of the healthcare system. HIPAA is a federal law
      that affects the use, disclosure, transmission and storage of individually
      identifiable health information referred to as “protected health information.”
As directed by HIPAA, the United States Department of Health and Human Services
      (“DHHS”) must promulgate standards or rules for certain electronic health
      transactions, code sets, data security, unique identification numbers, and
      privacy of protected health information. DHHS has issued some of these rules
      in
      final form, while others remain in development. In general, under these rules,
      we function as a “business associate” to some of our customers (who are
      considered to be “covered entities” under HIPAA). The two rules relevant to us
      and our customers—the Privacy Rule and the Security Rule—are discussed below. It
      is important to note that DHHS could, at any time in the future, modify any
      existing final rule in a manner that could require us to change our systems
      or
      operations.




First,
      DHHS has published a final HIPAA privacy rule (“Privacy Rule”) which had a
      compliance date of April 14, 2003. The Privacy Rule is complex and far reaching.
      The Privacy Rule directly applies to covered entities which, in most instances,
      are required to execute a contract with any business associate that performs
      certain services on the covered entity’s behalf involving the exchange or
      creation of protected health information. Our health plan customers are covered
      entities, and to the extent that we are required by our customer contracts
      to
      ensure that we comply with various aspects of the Privacy Rule, we believe
      that
      we meet the requirements of the Privacy Rule. The Privacy Rule and other similar
      state healthcare privacy regulations could materially restrict the ability
      of
      healthcare providers and health plans to disclose protected health information
      from patient records using our products and services, or it could require us
      to
      make additional capital expenditures to be in compliance. Accordingly, the
      Privacy Rule and state privacy laws may significantly impact our products’ use
      in the healthcare delivery system and, therefore, decrease our revenue, increase
      working capital requirements and decrease future business prospects.




Second,
      DHHS has published the final HIPAA security rule (“Security Rule”) with a
      compliance date of April 20, 2005. The Security Rule applies to the use,
      disclosure, transmission, storage and destruction of electronic protected health
      information by covered entities. The Security Rule requires that covered
      entities must implement administrative, technical and physical security measures
      to safeguard electronic protected health information. Also, as with the Privacy
      Rule, under the Security Rule, covered entities are required to contractually
      bind their business associates to certain aspects of the Security Rule. As
      such,
      where we function as a business associate to a customer that is a covered
      entity, we are required to enter into a business associate contract with that
      customer. Implementing such measures may require us to expend substantial
      capital due to required product, service, and procedure changes.




We
      believe our business practices and software offerings are consistent with the
      Privacy Rule and Security Rule. However, DHHS continues to publish change
      notices to the existing rules and propose new rules. There is no certainty
      that
      we will be able to respond to all such rules in a timely manner and our
      inability to do so could adversely affect our business.





***A
      breach of security may cause the Company’s customers to curtail or stop using
      the Company’s services*** **.** Accidental or willful security breaches or other unauthorized access by third
      parties to the Company’s information systems, the existence of computer viruses
      in the Company’s data or software and misappropriation of the Company’s
      proprietary information could expose the Company to a risk of information loss,
      litigation and other possible liabilities which may have a material adverse
      effect on the Company’s business, financial condition and results of operations.
      If security measures are breached because of third-party action, employee error,
      malfeasance or otherwise, or if design flaws in the Company’s software are
      exposed and exploited, and, as a result, a third party obtains unauthorized
      access to any customer data, the Company’s relationships with its customers and
      its reputation will be damaged, the Company’s business may suffer and the
      Company could incur significant liability. Because techniques used to obtain
      unauthorized access or to sabotage systems change frequently and generally
      are
      not recognized until launched against a target, the Company may be unable to
      anticipate these techniques or to implement adequate preventative measures.





10


***Investment
      Risk***





***The
      market price of our shares has been extremely volatile.*** The
      market price of our securities has shown volatility and sensitivity in response
      to many factors, including general market trends, public communications
      regarding managed care, legislative or regulatory actions, health care cost
      trends, pricing trends, competition, earnings or membership reports of
      particular industry participants, and acquisition activity.





***Because
      our common stock is traded in the over-the-counter market in “pink sheets” or
      the “OTC Bulletin Board,” our stock is illiquid.*** Our
      common stock is traded in the over-the-counter market in so-called "pink sheets"
      or, if available, the "OTC Bulletin Board." The OTC Bulletin Board is a
      regulated quotation service that displays real-time quotes, last-sale prices
      and
      volume information in over-the-counter equity securities. As a result, an
      investor may find it more difficult to dispose, of or to obtain accurate
      quotations as to the value, of our common stock. Because our common stock is
      subject to federal securities rules affecting "penny stock", the market
      liquidity for our common stock is adversely affected.





***Our
      common stock could become subject to additional sales practice requirements
      for
      low priced securities.*** Our
      common stock could become subject to Rule 15g-9 under the Securities Exchange
      Act of 1934, which imposes additional sales practice requirements on
      broker-dealers that sell our shares of common stock to persons other than
      established customers and "accredited investors" or individuals with net worth
      in excess of $1,000,000 or annual incomes exceeding $200,000 or $300,000
      together with their spouses.





The
      rule:





·
            requires
                a broker-dealer to make a special suitability determination for the
                purchaser and have received the purchaser's written consent to the
                transaction prior to sale. Consequently, the rule may affect the
                ability
                of broker-dealers to sell our securities and may affect the ability
                of our
                shareholders to sell any of our securities in the secondary market;





·
            generally
                defines a "penny stock" to be any non-NASDAQ equity security that
                has a
                market price less than $5.00 per share or an exercise price of less
                than
                $5.00 per share, subject to certain
                exceptions;





·
            requires
                broker dealers to deliver, prior to a transaction in a "penny stock",
                a
                risk disclosure document relating to the "penny stock" market.





Disclosure
      is also required to be made about compensation payable to both the broker-dealer
      and the registered representative and current quotations for the securities.
      In
      addition, the rule requires that broker dealers deliver to customers monthly
      statements that disclose recent price information for the "penny stock" held
      in
      the account and information on the limited market in penny stocks.





**Executive
      Overview**





The
      Company and its direct and indirect subsidiaries, CAHS and CHCM are in the
      business of providing management and consulting services designed to enable
      integrated health care delivery systems and other care management organizations
      to reduce the costs, while improving the quality, of medical services provided
      to their subscribers. The management and consulting services include care
      management program enhancement services, executive and clinical management
      services, and training programs. The Company’s management and consulting
      services have been and continue to be provided to integrated health care
      delivery systems and other care management organizations. The Company operates
      in one business segment.





Prior
      to
      January 1, 2003, the Company provided, principally to Horizon BCBSNJ, certain
      health care cost containment services, including utilization review, case
      management and disease management and independent reviews. As of December 31,
      2002, Horizon BCBSNJ ceased purchasing the Company’s services. As a result,
      beginning January 1, 2003, the Company ceased offering these services, since
      it
      no longer maintained the employees and infrastructure necessary to support
      their
      delivery. Horizon BCBSNJ accounted for 82% of net revenues for the year ended
      December 31, 2002.





The
      Company is now focusing on offering its management and consulting services.
      As
      part of this effort, the Company has developed RPNavigator, a proprietary tool
      to help managed care plans and employers better understand and forecast resource
      consumption, risk, and costs associated with their respective populations.
      In
      providing its consulting services, the Company licenses RPNavigator to its
      customers. The Company recognizes revenue as services are performed or ratably
      under contract terms. For a further discussion of considerations relating to
      this business, see “Liquidity, Financial Condition and Capital Resources -
      General Overview”.





11


Management
      believes it must continue to refine its current service lines in order to
      continue to add value to existing and potential customers. In addition, the
      Company intends to broaden the services offered with unique and complementary
      cost-containment strategies. Management intends to evaluate each service in
      light of anticipated changes in the health care industry, the cost to enter
      each
      such service line as well as the availability and timeliness of competent
      resources. To further expand its line of services, the Company contemplates
      pursuing alternatives to its internal product and service development efforts
      by
      entering into strategic alliances and joint ventures as well as through
      acquisitions.





Significant
      shareholders of the Company during 2004 included Horizon BCBSNJ (a 53.5%
      stockholder) and CW Ventures (a 37.7% stockholder). However, on September 29,
      2004, the Company entered into a Settlement Agreement with Horizon BCBSNJ,
      resolving the lawsuit captioned CareAdvantage, Inc. v. Horizon Blue Cross Blue
      Shield of New Jersey, which had been pending in the Superior Court of New
      Jersey. Under the Settlement Agreement, on October 1, 2004, Horizon BCBSNJ
      paid
      the Company $500,000 and assigned and transferred to the Company all the right,
      title and interest in and to all 53,394,820 shares of common stock, par value
      $.001 per share, of the Company held by Horizon BCBSNJ, and both Horizon BCBSNJ
      designated board members resigned from the board. The Company recorded the
      transaction on October 1, 2004. Additionally, as of October 6, 2004, CW Ventures
      distributed its stock in the Company to its partners.





On
      January 10, 2005, the Company entered into a Lease Amendment commencing January
      1, 2005, that amends the original lease to provide for a reduction in base
      rent
      and a waiver of escalations based on increases in real estate taxes and
      operating expenses, and to provide the landlord with the option to recapture
      up
      to 50% of the leased premises.





**Results
      of Operations--12 Months Ended December 31, 2005 Compared to 12 Months Ended
      December 31, 2004**




The
      following discussion compares the Company's results of operations for the 12
      months ended December 31, 2005, with those for the 12 months ended December
      31,
      2004. The Company's consolidated financial statements and notes thereto included
      elsewhere in this report contains detailed information that should be referred
      to in conjunction with the following discussion.





Total
      revenues for the years ended December 31, 2005 and 2004 were approximately
      $2,844,000 and $2,350,000, respectively. The increase in revenues of
      approximately $494,000 was primarily attributable to increased revenue of
      approximately $201,000 in new business relating to RPNavigator and approximately
      $926,000 in related consulting business, offset by decreased revenue of
      approximately $633,000 due to termination of consulting arrangements in
      2005.




*Cost
      of services:*





Cost
      of
      services for the years ended December 31, 2005 and 2004 were approximately
      $1,433,000 and $1,806,000, respectively. The decrease in the cost of services
      of
      approximately $373,000 is largely due to decreases of approximately $441,000
      in
      personnel costs and a decrease of approximately $31,000 in travel costs, offset
      by increases of approximately $99,000 in professional and consulting costs,
      largely due to increased licensing fees due to increased consulting
      business.





***Operating
      Cost and Expenses***





*Selling,
      general and administrative:*





Selling,
      general and administrative costs for the years ended December 31, 2005 and
      2004
      were $2,862,000 compared to $2,949,000, respectively. The decrease in selling,
      general and administrative costs of approximately $87,000 is largely due to
      decreased personnel costs of approximately $117,000, travel costs of
      approximately $33,000 and professional and consulting costs of approximately
      $160,000, largely due to the write off of CHCM assets in 2004, offset by
      increases of approximately $198,000 in facility costs, largely due to the
      straight line method of recording rent expense, approximately $14,000 in
      information and communication costs and other general and administrative costs
      of approximately $11,000.





*Depreciation
      and amortization:*





Depreciation
      and amortization for the years ended December 31, 2005 aggregated $187,000
      compared to $436,000 for the year ended December 31, 2004. The decrease in
      depreciation and amortization costs of approximately $249,000 is largely due
      to
      the write off of CHCM assets in 2004. Depreciation and amortization for the
      year
      ended December 31, 2005 includes amortization of intangible assets of
      approximately $59,000 and depreciation of property and equipment of
      approximately $128,000.





12


*Gain
      on renegotiation - lease:*




During
      the year ended December 31, 2004, the Company recognized a gain of $1,623,000
      pursuant to renegotiation of the lease. The Company reversed the balance of
      remaining liability set up in 2002, since it was no longer
      required.





*Loss
      on asset write-off:*





During
      the year ended December 31, 2004, the Company wrote off certain leaseholds
      improvements, furniture and fixture and equipment with a net book value of
      $501,000.





*Interest
      (expense)/income:*





Interest
      (expense)/income for the years ended December 31, 2005 and 2004 was $8,000
      and
      ($91,000), respectively. The decrease in interest expense of approximately
      $110,000 is largely due to the accretion of interest expense relating to the
      operating lease liability of $110,000 in 2004. The decrease in interest expense
      is offset by a decrease of approximately $11,000 in interest income due to
      a
      decrease in operating cash.





***Off-Balance
      Sheet Arrangements***





The
      Company does not have any off-balance sheet arrangements that have or are
      reasonably likely to have a current or future material effect on the company's
      financial condition, changes in financial condition, revenues or expenses,
      results of operations, liquidity, capital resources or capital
      reserves.





***Critical
      Accounting Policies***





The
      Company’s financial statements have been prepared in accordance with accounting
      principles generally accepted in the United States of America. Certain
      accounting policies have a significant impact on amounts reported in financial
      statements. A summary of those significant accounting policies can be found
      in
      Note B to the Company’s financial statements.





***Liquidity,
      Financial Condition and Capital Resources***





*General
      Overview:*





At
      December 31, 2005 the Company had cash of $114,000 and working capital of
      approximately $323,000. At December 31, 2004 the Company’s cash balance was
      $1,488,000 and working capital was approximately $1,609,000. The substantial
      decrease in cash balance as of December 31, 2005 compared to December 31, 2004
      resulted from the utilization of the Company’s cash in order to develop its
      Management Services business as described below.





The
      Company is focusing on offering its management and consulting services (the
      “Management Services”). At the present time, the Company’s primary focus now is
      to build up revenues from the Management Services, which will require the
      Company to devote significant resources, both in the time and efforts of its
      employees as well as funding, to promote and support these activities. As part
      of this effort, the Company has developed RPNavigator, a proprietary tool to
      help managed care plans and employers better understand and forecast resource
      consumption, risk, and costs associated with their respective populations.
      The
      tool uses 3M’s Clinical Risk Group (CRGs), a classification methodology that
      groups members according to risk related to the individual’s clinical history
      and demographic information. Using RPNavigator, the Company will enable its
      customers to:


·
              track
                  population and member-related disease progression changes over
                  time;
 
 ·
              compare
                  health plan sub-populations on a valid and reliable basis;
 
 ·
              profile
                  providers using case mix and severity-adjusted techniques;
 ·
                select
                    and prioritize members to optimize the allocation and assess
                    the impact of
                    care management resources, direct
                    interventions and initiatives; and
 
 ·
                reduce
                    client dependence on internal information technology resources.




The
      Company believes that the Management Services business has the potential to
      generate positive cash flows for the Company. The Company has reached agreements
      (one formal, the other informal) with two customers for significant contract
      expansions for Management Services: effective January 1, 2005, the Company
      extended its relationship with one of its customers by entering into a Services
      and License Agreement with Kaiser Foundation Health Plan of the Northwest
      (“Kaiser”) for the Company to provide Management Services to Kaiser and to
      license to Kaiser access to RPNavigator. Moreover, Management Services provided
      to Kaiser for the benefit of one of Kaiser’s clients, has resulted in a
      potential opportunity for the Company to provide Management Services to that
      portion of the client’s activities not serviced by Kaiser. Management believes
      that these opportunities will enhance business prospects, facilitate a more
      significant market penetration and improve revenues and profitability for the
      Company.





13


*Financial
      Condition:*





Net
      cash
      used in operating activities amounted to approximately $1,505,000 and $2,623,000
      for the years ended December 31, 2005 and 2004, respectively. This decrease
      in
      cash used by operating activities is largely due to the 12-month loss of
      $1,635,000 compared to a $1,813,000 loss in 2004, a decrease in accrued expenses
      of $10,000, a decrease in accounts receivable of approximately $310,000 and
      a
      decrease in other assets of approximately $38,000, offset by increases in
      accounts payable of approximately $77,000, employee stock option compensation
      costs of approximately $48,000, deferred rent of approximately $176,000 and
      depreciation and amortization of approximately $187,000.





Net
      cash
      used by investing activities amounted to approximately $39,000 and $127,000
      for
      the years ended December 31, 2005 and 2004, respectively. This decrease in
      cash
      used of approximately $88,000 is due to decreased capital
      purchases.




Net
      cash
      provided by financing activities amounted to approximately $170,000 and $0
      for
      the years ended December 31, 2005 and 2004, respectively. This increase in
      cash
      was largely due to $100,000 relating to the transfer of restricted cash and
      $70,000 was related to proceeds from issuance of common stock due to the
      exercise of stock options.





The
      Company has changed its business model over the past 3 years whereby it now
      generates most of its revenue from the licensing of RPNavigator and providing
      consulting services in connection with that licensing. Revenue has grown from
      $2,350,000 in 2004 to $2,844,000 in 2005. The Company plans to increase cash
      flows from operations through increases in revenue generated from the licensing
      and related consulting services. Based on a forecast prepared by management
      of
      increased revenue of the Company during 2006 and cash on hand at December 31,
      2005, management expects the Company to be able to meet its obligations as
      they
      become due during 2006. However, there can be no assurances that management’s
      plans and the projected increase in revenue will be attained.





**Item
      7.**  **Financial
      Statements and Supplementary Data**





The
      Financial Statements and supplementary data required by this item appear under
      the caption “Index to Consolidated Financial Statements” and are included
      elsewhere herein.





**Item
      8.** ****  **Changes
      in and Disagreements with Accountants On Accounting and Financial Disclosure**





None.





**Item
      8A. Controls and Procedures**





Senior
      management maintains disclosure controls and procedures that are designed to
      ensure that information required to be disclosed in our Exchange Act reports
      is
      recorded, processed, summarized and reported within the time periods provided
      in
      the SEC's rules and forms, and that such information is accumulated and
      communicated to our management, including the Chief Executive Officer, who
      is
      also currently the acting Chief Financial Officer, as appropriate, to allow
      timely decisions regarding required disclosure. In designing and evaluating
      the
      disclosure controls and procedures, senior management has recognized that any
      controls and procedures, no matter how well designed and operated, can provide
      only reasonable assurance of achieving the desired control objectives, and
      therefore has been required to apply its judgment in evaluating the cost-benefit
      relationship of possible controls and procedures.





In
      accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the fiscal
      year ended December 31, 2005, we carried out an evaluation under the
      supervisions and with the participation of our management, including our Chief
      Executive Officer and Chief Financial Officer, of the effectiveness of the
      design and operation of our disclosure controls and procedures as defined in
      Rule 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that evaluation,
      our Chief Executive Officer and acting Chief Financial Officer has concluded
      that our disclosure controls and procedures are effective.





During
      the quarter ended December 31, 2005, there have been no changes in our internal
      controls over financial reporting that that have materially affected, or are
      reasonably likely to materially affect these controls.





14


**Item
      8B. Other Information**





None.





**PART
      III**





**Item
      9.**  **Directors,
      Executive Officers, Promoters and Control Persons**





The
      Company’s directors, executive officers and control persons as of December 31,
      2004 are as follows:





**Name**
            ****
            **Age**
            ****
            **Positions
                with the Company**David
                G. Noone(1,
                2)
            
            52
            
            Chairman
                of the Board of DirectorsDennis
                J. Mouras
            
            49
            
            Chief
                Executive Officer, President and DirectorDavid
                J. McDonnell(1,2)
            
            63
            
            Director


__________


(1)  Member
      of
      Compensation Committee.


(2)  Member
      of
      Audit Committee.








There
      is
      no family relationship between any director or executive officer of the Company.





All
      directors of the Company are elected by the stockholders of the Company or,
      in
      the case of a vacancy, are elected by the directors then in office to hold
      office until the next annual meeting of stockholders of the Company and until
      their successors are elected and qualify or until their earlier resignation
      or
      removal.





The
      following sets forth certain information with respect to each director and
      executive officer of the Company as of December 31, 2005:





David
      G.
      Noone has been a director of the Company since January 1999 and Chairman of
      the
      Board since July 30, 2002, CEO from January 1999 until February 15, 2001, and
      an
      employee engaged in identifying and pursuing strategic business combinations
      from February 15, 2001 to September 2001. Prior to his service with the Company,
      Mr. Noone served from September 1995 to February 1997 as the President and
      Chief
      Executive Officer of Value Health International, a subsidiary of Value Health,
      Inc., where he was responsible for the migration of Managed Health Care
      strategies to emerging opportunity markets in Europe, Latin America and Asia.





Dennis
      J.
      Mouras has served as the Chief Executive Officer and a director of the Company
      since February 15, 2001. He has served as President and Chief Operating Officer
      of the Company since October 30, 2000, and as the Executive Vice President
      of
      Marketing and Sales of the Company from April 1999 to October 30, 2000. Prior
      to
      that, Mr. Mouras served as President of Intracorp, Inc. from January 1997 to
      January 1999, and as President and General Manager of CIGNA Healthcare of
      Colorado from October 1994 to January 1997.





David
      J.
      McDonnell has been a director of the Company since January 1997. He served
      from
      December 1993 to February 1997 as a director of Value Health, Inc., a company
      engaged in the health care service business. Prior to that, he was employed
      by
      Preferred Health Care Ltd., a behavioral managed care company, where he served
      as that company’s Chief Executive Officer from 1988 to 1993, and its President
      from 1988 to 1992. Mr. McDonnell also served as Chairman of Preferred Health
      Care Ltd.’s Board of Directors from 1991 to 1993.




***Audit
      Committee Financial Expert***





The
      Company does not have a financial expert on its audit committee because the
      Company's extremely small size, limited financial resources and limited activity
      make such a position unnecessary.





15


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





Section
      16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s
      officers and directors, and persons who own more than 10% of a registered class
      of the Company’s equity securities, to file reports of ownership and changes in
      ownership with the Securities and Exchange Commission and NASDAQ, copies of
      which are required by regulation to be furnished to the Company. Based solely
      on
      review of the copies of such reports furnished to the Company, the Company
      believes that during fiscal year ended December 31, 2005, its officers,
      directors and ten percent (10%) beneficial owners complied with all the Section
      16(a) filing requirements, with the exception that (i) Dennis J. Mouras filed
      late a Form 4 reporting the exercise of 4,513,889 stock options, (ii) David
      G.
      Noone filed late a Form 4 reporting the exercise of 800,000 stock options and
      (iii) David J. McDonnell filed late a Form 4 reporting the exercise of 300,000
      stock options.





***Code
      of Ethics***





During
      fiscal years 2004 and 2005, the Company's resources and operations were
      substantially curtailed. The Company currently has approximately 17 full-time
      employees, of which only one is a principal executive and financial officer,
      and
      has reduced its overhead expenses in order to operate within the constraints
      of
      its limited revenues. Because of the small staff, the involvement of management
      and the Board of Directors in the business and operations of the Company, and
      the internal policies of the Company, the Company has not adopted a separate
      code of ethics for principal executive and financial officers. We experience
      a
      limited number of financial transactions in our present operations, all of
      which
      are approved and executed by our chief executive officer, who is also currently
      acting as our principal financial officer. The Board of Directors and Management
      have unequivocally set the tone for integrity and credibility in all aspects
      of
      the Company's operations. In view of the Company's very small size and the
      limited number of personnel who are responsible for its operations, a formal
      code of ethics is not necessary. Our Board of Directors will revisit this issue
      in the future to determine if adoption of a code of ethics is appropriate.
      In
      the meantime, our management intends to promote honest and ethical conduct,
      full
      and fair disclosure in our reports to the SEC, and compliance with applicable
      governmental laws and regulations.





**Item
      10.**  **** **Executive
      Compensation**





**EXECUTIVE
      COMPENSATION**





The
      following table sets forth information concerning the compensation paid by
      the
      Company for each of the three calendar years ended December 31, to the
      individual performing the function of Chief Executive Officer and each of the
      next four most highly compensated executive officers with compensation in excess
      of $100,000, during such periods .





**Summary
      Compensation Table**


**Annual
                Compensation**
            **Long
                Term****Compensation****Name
                and Principal****Position**
            **Year
                Ended**
              **December
                31,**
            **Salary**
            **Bonus**
            **Other
                Annual**
              **Compensation****(2)**
            **Securities**
              **Underlying**
              **Options/SARSs(#)**
            **All
                Other**
              **Compensation****Dennis
                J. Mouras**
              *Chief
                Executive Officer & President*
            2005
              2004
              2003
            $285,000
              $285,000
              $285,000
            -0-
              -0-
              $86,436
            $42,163
              $29,762
              $29,630
            4,500,000(3)
              3,000,000
              -0-
            $6,000(1)
              $6,000(1)
              $6,000(1)


___________________________


(1) 
      Represents Company matching contributions to a 401(k) profit sharing/savings
      plan.


(2) 
      Other Annual Compensation includes taxable fringe benefits.


(3) 
      Represents options that were re-priced on May 25, 2005 as described below in
      “Option Grants in Last Fiscal Year” and “Report of Re-pricing of
      Options”.








16


**Compensation
      Plans**





***Stock
      Option Plan:***




The
      Board
      of Directors initially adopted the Stock Option Plan (“Plan”) on June 6, 1996,
      and the stockholders approved the plan on August 23, 1996. Effective January
      8,
      1999 and January 26, 1999, the Board of Directors approved amendments to the
      Plan to update the Plan and to increase the number of shares and certain other
      benefits available under the Plan. The stockholders approved the amendments
      to
      the Plan on July 7, 1999. Additionally, effective November 30, 2000, the Board
      of Directors and a majority of the stockholders acting by written consent,
      approved amendments to the Plan to increase the number of shares available
      under
      the Plan.





The
      Plan
      is administered by a Committee of the Board of Directors consisting of at least
      two members who are "outside directors" as defined in Section 162(m) of the
      Internal Revenue Code who are also "disinterested persons" as defined in
      regulations under the Securities and Exchange Act of 1934. Employees, officers,
      and other persons selected by the Committee are eligible to receive options
      under the Plan.





Under
      the
      Plan, as amended, the Company has reserved an aggregate of 22,648,000
      shares of Common Stock for issuance pursuant to options granted under the Plan.
      Beginning on January 1, 2002, and on each subsequent January 1, the number
      of
      shares reserved for issuance under the Plan shall be increased by three percent
      (3%), provided, however, that no shares authorized pursuant to such annual
      increase shall be issued with respect to incentive stock options. Pursuant
      to the terms of the Plan, the Committee will select the persons to be granted
      options and will determine: (i) whether to grant a non-qualified stock option
      and/or an incentive stock option; (ii) the number of shares of the Company's
      Common Stock that may be purchased upon the exercise of such option; (iii)
      the
      time or times when the option becomes exercisable; (iv) the exercise price,
      which cannot be less than 100% of the fair market value of the Common Stock
      on
      the date of grant for incentive stock options (110% of such fair market value
      for incentive options granted to a person who owns or who is considered to
      own
      stock possessing more than 10% of the total combined voting power of all classes
      of stock of the Company); (v) the duration of the option, which cannot exceed
      ten (10) years; and (vi) the terms and provisions of option agreements, which
      may differ among recipients, and which, unless the Committee otherwise
      determines, shall be substantially in the forms attached as exhibits to the
      Plan. Incentive stock options may only be granted to employees (including
      officers) of the Company and/or any of its subsidiaries. Non-qualified stock
      options may be granted to any employees (including employees who have been
      granted incentive stock options) and other persons who the Committee may select.
      The Committee may issue non-qualified stock options with an exercise price
      less
      than 100% of fair market value of the Common Stock.





All
      options granted under the Plan are exercisable during the option grantee's
      lifetime only by the option holder (or his or her legal representative) and
      generally only while such option grantee is in the Company's employ. Unless
      the
      Committee otherwise provides, in the event an option grantee's employment is
      terminated other than by death or disability, such person shall have three
      months from the date of termination to exercise such option to the extent the
      option was exercisable at such date, but in no event subsequent to the option's
      expiration date. Unless the Committee otherwise provides, in the event of
      termination of employment due to death or disability of the option grantee,
      such
      person (or such person's legal representative) shall have 12 months from such
      date to exercise such option to the extent the option was exercisable at the
      date of termination, but in no event subsequent to the option's expiration
      date.
      A grantee may exercise an option by payment of the exercise price via any lawful
      method authorized by the Committee.





The
      Plan
      contains anti-dilution provisions which provide that, in the event of any change
      in the Company's outstanding capital stock by reason of a stock dividend,
      recapitalization, stock split, combination, exchange of shares or merger or
      consolidation, the Committee or the Board shall proportionately adjust the
      number of shares covered by each option granted and the exercise price per
      share. The Committee's or Board's determinations in these matters shall be
      conclusive.





The
      Board
      of Directors has the authority to terminate the Plan as well as to make changes
      in and additions to such Plan. The Plan will terminate on June 6, 2006, unless
      previously terminated by the Board of Directors. However, unless approved by
      the
      stockholders of the Company, the Board of Directors may not change the aggregate
      number of shares subject to the Plan, materially modify the requirements of
      eligibility to such Plan or materially increase the benefits accruing to
      participants under such Plan.





17


No
      stock
      options were granted to Mr. Mouras in 2005, however, the following options
      were
      repriced:





**Option
      Repricing in Last Fiscal Year**





**Name**
            ****
            **Number
                of Securities**
              **Underlying
                Options**
              **Granted
                (#)(1)**
            ****
            **%
                of Total Options**
              **Repriced
                to Employees**
              **in
                Fiscal Year**
            ****
            **Exercise**
              **Price
                per Share**
            ****
            **Expiration
                Date**Dennis
                J. Mouras
            
            500,000
            
            6.7%
            
            $.01
            
            06/08/092,500,000
            
            33.5%
            
            $.01
            
            10/26/10500,000
            
            6.7%
            
            $.01
            
            03/20/121,000,000
            
            13.4%
            
            $.01
            
            10/31/12




(1)  Represents
      options that were amended and re-priced on May 25, 2005.





**Aggregated
      Option Exercises in Last Fiscal Year**


**and
      Fiscal Year-End Option Values**





**Name**
            ****
            **Shares**
              **Acquired**
              **on
                Exercise**
            ****
            **Value**
              **Realized**
            ****
            **Number
                of**
              **Shares
                Underlying**
              **Unexercised
                Options at**
              **December
                31, 2005**
              **Exercisable/Unexercisable**
            ****
            **Value
                of**
              **Unexercised**
              **In-the-Money**
              **Options
                at**
              **December
                31, 2005**
              **Exercisable/Unexercisable(1)**Dennis
                J. Mouras
            
            4,513,889
            
            $11,424
            
            1,358,024/1,628,087
            
            $20,370/
                $24,421





__________________________________________________________





(1)
      Calculated on the basis of the closing bid price on the OTC Bulletin Board
      of
      the Company’s Common Stock of $.015 on December 31, 2005.





***Report
      on Re-Pricing of Options***





The
      Board
      of Directors believes that the Corporation’s employees are its most important
      assets. During 2004 and 2005, the Company’s stock price decreased substantially
      and the Compensation Committee concluded that outstanding options, of which
      a
      significant number had exercise prices that were much higher than the
      then-current market price of the Corporation’s Common Stock, became less
      valuable as an incentive to retain and motivate the Corporation’s employees.
      Accordingly, on May 27, 2005, our Compensation Committee approved the amendment
      and re-pricing of options to purchase shares of the Company’s Common Stock,
      previously granted to the Company’s employees under the Company’s Stock Option
      Plan, including options to purchase a total of 4,500,000 shares of our Common
      Stock previously granted in favor of Mr. Mouras, the Company’s President and
      Chief Executive Officer. The option price was reduced to $0.01 per share in
      order that the exercise price was more reflective of the then current trading
      price of our Common Stock and in order to provide a continuing performance
      incentive. The 4,500,000 options that had been granted to Mr. Mouras were
      re-priced as of May 25, 2005 as set forth in more detail in the table below.
      The
      last closing price for the Company’s Common Stock was $.02 per share; however,
      the low bid for the Company’s common stock on May 25, 2005 was $.012. The
      Compensation Committee granted the replacement options with an exercise at
      a
      price of $.01 per share, slightly below the market price of the stock on the
      date of the grant, as a bonus to the employees who have remained with the
      Company after its significant downsizing. By doing so, the Compensation
      Committee intended to provide these individuals with the benefit of owning
      options that over time, may have a greater potential to increase in value,
      which
      creates better performance incentives and therefore maximizes shareholder value.
      The new option grants did not change the vesting schedules or expiration date
      of
      the options.




18




The
      following table sets forth more detailed information regarding the amendment
      of
      these options:





**Name**
            ****
            **Original**
              **Grant
                Date**
            ****
            **Amendment**
              **Date**
            ****
            **Number**
              **Of
                Securities**
              **Underlying**
              **Options**
            ****
            **Market
                Price**
              **Of
                Stock at**
              **Time
                of**
              **Re-pricing
                or**
              **Amendment**
              **Realized**
            ****
            **Exercise**
              **Price
                at**
              **Time
                of**
              **Re-pricing**
              **Or
                Amendment**
            
            **New**
              **Exercise**
              **Price**Dennis
                J. Mouras
            
            06/08/99
            
            05/25/05
            
            500,000
            
            $.02
            
            $.27
            
            $.0110/26/00
            
            05/25/05
            
            2,500,000
            
            $.02
            
            $.11
            
            $.0103/20/02
            
            05/25/05
            
            500,000
            
            $.02
            
            $.14
            
            $.0110/31/02
            
            05/25/05
            
            1,000,000
            
            $.02
            
            $.06
            
            $.01





THE
              COMPENSATION COMMITTEEDavid G. NooneDavid
              J.
              McDonnell




**Employment
      Agreements and Board Appointments**





***Mouras
      Employment Agreement***





As
      of
      October 25, 2000, the Company entered into an Employment Agreement with Dennis
      Mouras (the “Mouras Employment Agreement”), the current Chief Executive Officer
      and President. The Mouras Employment Agreement replaces an earlier agreement
      between Mr. Mouras and the Company during the time that Mr. Mouras served as
      the
      Company’s Executive Vice President of Marketing and Sales. **** The
      Mouras Employment Agreement continues for a one-year term, after which it renews
      automatically for successive one-year terms unless terminated by either party
      on
      at least sixty days notice prior to an anniversary date. Under the Mouras
      Employment Agreement, Mr. Mouras is entitled to (a) an annual salary of
      $285,000, (b) a grant of incentive stock options on October 26, 2000 pursuant
      to
      the Company’s Stock Option Plan for 2,500,000 shares, and (c) other benefits set
      forth therein. Under the Mouras Employment Agreement, Mr. Mouras waived unpaid
      sales commissions to which he was otherwise entitled under his prior agreement.
      The Mouras Employment Agreement also contains a non-solicitation restriction
      for
      one year after Mr. Mouras’ employment. On October 30, 2002, the Company amended
      the Mouras Employment Agreement by agreeing to increase to one year (from six
      months) the severance that Mr. Mouras would be entitled to receive upon his
      termination from the Company without cause.





**Compensation
      of Directors**





***Generally***





No
      member
      of the Board of Directors of the Company presently receives annual remuneration
      for acting in that capacity, except directors who are not officers. Directors
      are paid $1,200 for each meeting of the Board of Directors they attend. Such
      directors are also eligible for the grants of options under the Directors Stock
      Option Plan. Directors are also reimbursed their reasonable out-of-pocket
      expenses for each attended meeting of the Board or any committee thereof. On
      May
      27, 2005, the Board of Directors of the Company granted stock options to
      purchase 1,850,000 shares of the registrant’s common stock to each of its
      non-employee directors, David J. McDonnell and David G. Noone, effective as
      of
      May 25, 2005. The exercise price for these options is $.01 per share, and each
      option is exercisable as follows: (i) options to purchase 1/3 of the shares
      become exercisable on May 25, 2006, and (ii) options to purchase the remaining
      2/3 of the subject shares become exercisable in 24 equal monthly amounts
      beginning on June 25, 2006, and on the 25th day of each of the following 23
      months. Additionally, on May 27, 2005, the Company amended all outstanding
      stock
      options with an exercise price greater than $.01 per share previously granted
      to
      the non-employee directors pursuant to the Company’s Directors’ Stock Option
      Plan, and reduced the exercise price of such options to $.01, effective as
      of
      May 25, 2005. The amendments resulted in the re-pricing of options to purchase 300,000
      shares previously granted to David J. McDonnell at an exercise price of $.08
      per
      share, with a new exercise price of $.01 per
      share.





19


***Directors
      Stock Option Plan***





The
      Company adopted the Director Stock Option Plan (the “Director Plan”) on June 6,
      1996, and amended it on July 24, 1996 and the stockholders approved the amended
      plan on August 23, 1996. Effective January 26, 1999, the Board of Directors
      approved amendments to the Director Plan to update the plan and to increase
      the
      number of shares and certain other benefits available under the Director Plan.
      The stockholders approved the amendments to the Director Plan on July 7,
      1999.





Pursuant
      to the terms of the Director Plan, the Board of Directors may grant
      non-qualified stock options to non-employee directors and will determine: (i)
      the number of shares of the Company’s Common Stock that may be purchased upon
      the exercise of such option; (ii) the time or times when the option becomes
      exercisable; (iii) the exercise price; and (iv) the duration of the option,
      which cannot exceed ten (10) years. Under the Director Plan, an aggregate of
      2%
      of the Company’s authorized number of shares of Common Stock is reserved for
      issuance. On
      January 19, 2001, the Company increased its authorized shares of common stock
      from 103,600,000 to 200,000,000 shares. As a result, the number of shares
      reserved for issuance under the Director Plan is 4,000,000 shares, and on
      account of the grants made in 1999 and 2005, no further shares are available
      for
      issuance under the Directors Plan.





All
      options granted under the Director Plan are exercisable during the option
      grantee’s lifetime only by the option grantee (or his or her legal
      representative). In the event of termination of an option grantee’s
      directorship, such person shall have three months from such date to exercise
      such option to the extent the option was exercisable as at the date of
      termination, but in no event subsequent to the option’s expiration date. In the
      event of termination of an option grantee’s directorship due to death, such
      person’s legal representative shall have 12 months from such date to exercise
      such option to the extent the option was exercisable at the date of death,
      but
      in no event subsequent to the option’s expiration date.





The
      Directors Stock Option Plan contains anti-dilution provisions which provide
      that
      in the event of any change in the Company’s outstanding capital stock by reason
      of stock dividend, recapitalization, stock split, combination, exchange of
      shares or merger or consolidation, the Board shall equitably adjust the
      aggregate number and kind of shares reserved for issuance, and for outstanding
      options, the number of shares covered by each option and the exercise prices
      per
      share.




The
      Board
      of Directors has the authority to terminate the Director Plan with respect
      to
      any shares of Common Stock not at the time subject to an option as well as
      to
      make changes in and additions to such plans. The plan will terminate on June
      6,
      2006, unless previously terminated by the Board. However, the Board may not,
      unless approved by the stockholders of the Company, change the aggregate number
      of shares subject to the Director Plan, materially change the requirements
      of
      eligibility to such plan or materially increase the benefits accruing to
      participants under such plan.





**Item
      11.** **** **Security
      Ownership of Certain Beneficial Owners and Management and Related Stockholder
      Matters**





The
      following table sets forth as of February 15, 2006 certain information regarding
      the beneficial ownership of the Company’s Common Stock by (i) all persons known
      to the Company who own more than 5% of the outstanding Common Stock, (ii) each
      director, (iii) each of the executive officers named in the Summary Compensation
      Table, and (iv) all executive officers and directors as a group. Unless
      otherwise indicated, the persons named in the table below have sole voting
      and
      investment power with respect to all shares of Common Stock shown as
      beneficially owned by them.





**Beneficial
      Ownership of Common Stock by**


**Certain
      Stockholders and Management**


**Name
                of Beneficial Owner**
            ****
            **Number
                of Shares**
              **Beneficially
                Owned (1)**
            ****
            **Percent
                of**
              **Ownership
                (2)**Principal
                Holders:Credit
                Suisse Asset Management, LLC (3)(4)
            
            7,536,204
            
            14.11%Management:David
                J. McDonnel (5)
            
            300,000
            
            *David
                G. Noone(6)
            
            2,300,000
            
            4.13%Dennis
                J. Moura (7)(8)
            
            6,083,433
            
            10.22%All
                directors and executive officers asa
                Group (3 persons)(8)
            
            8,683,433
            
            14.33%


__________________________


*
      Less
      than 1%





20


(1) Beneficial
      ownership is determined in accordance with the rules of the Securities and
      Exchange Commission, which generally attribute beneficial ownership of
      securities to persons who possess sole or shared voting or investment power
      with
      respect to those securities. Beneficial ownership includes outstanding shares
      and shares subject to options exercisable within 60 days.





(2) The
      percent beneficially owned by any person or group who held options exercisable
      within 60 days has been calculated assuming all such options have been exercised
      in full and adding the number of shares subject to such options to the total
      number of shares issued and outstanding.





(3) The
      principal business address of Credit Suisse Asset Management, LLC, is 466
      Lexington Avenue, New York, New York 10017.





(4) Information
      based on Schedule 13G filed by Credit Suisse Asset Management, LLC on December
      22, 2004, with the Securities and Exchange Commission (“SEC”).





(5) The
      business address of Mr. McDonnell, a director of the Company, is 301 Aqua Court,
      Naples, Florida 34102.





(6)  
      The business address of Mr. Noone, a director of the Company, is 34 Sunset
      Hill
      Road, Redding, Connecticut, 06896.





(7)  
      The business address of Mr. Mouras, Chief Executive Officer and a director,
      is
      485-C Route 1 South, Iselin, New Jersey 08830.





(8)  
      1,569,544 of Mr. Mouras’ shares of Common Stock and 1,569,544 of the shares of
      Common Stock of all directors and executive officers as a group are issuable
      upon the exercise of stock options to purchase shares of Common Stock that
      were
      exercisable on February 15, 2006 or that will become exercisable within 60
      days
      of such date.





***Equity
      Compensation Plans***





The
      following table sets forth the securities authorized for issuance under the
      Company’s equity compensation plans as of December 31, 2005:





**Plan
                category**
            
            **(A)**
              **Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights**
            
            **(B)**
              **Weighted-average
                exercise price of, outstanding options, warrants and
                rights**
            
            **(C)**
              **Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (A)**Equity
                compensation plans approved by security holders
            
            
            12,832,011
            
            $
            0.009
            
            
            7,813,755Equity
                compensation plans not approved by
              security
                holders
            
            
            -
            
            $
            -
            
            
            -Total
            
            
            12,832,011
            
            $
            0.009
            
            
            7,813,755





**Item
      12.** **** **Certain
      Relationships and Related Transactions**





None





**Item
      13.** **** **Exhibits**




**Exhibit
              No.**
            ****
            **Description
              of Exhibit**2.1
            
            Deposit
                Agreement dated October 31, 1994 among Midlantic Bank,
                N.A., PMDX and the Registrant incorporated by reference to Exhibit
                2.1
                filed with the Company's Registration Statement on Form S-1 (File
                No.
                33-89176).2.2
            
            Certificate
                of Merger of Care Advantage Health Systems (f/k/a
                Advantage Health Systems, Inc.), a Georgia corporation into CareAdvantage
                Health Systems, Inc., a Delaware corporation incorporated by reference
                to
                Exhibit 2.2 filed with the Company's Registration Statement on Form
                S-1
                (File No. 33-89176).






21




3.1
            
            Registrant's
                Certificate of Incorporation incorporated by reference to Exhibit
                3.1
                filed with the Company's Registration Statement on Form S-1 (File
                No.
                33-89176).3.1(a)
            
            Amended
                and Restated Certificate of Incorporation incorporated by reference
                to the
                Company's Information Statement dated September 1996.3.2
            
            Registrant's
                By-Laws incorporated by reference to Exhibit 3.2 filed with the Company's
                Registration Statement on Form S-1 (File No. 33-89176).10.1
            
            Letter
                of intent dated September 30, 1994 between the Registrant and New
                Jersey
                BCBS, amendments thereto of December 29, 1994, February 27, 1995
                and April
                4, 1995 and Interim Services Agreement as of April 1, 1995 between
                the
                Registrant and New Jersey BCBS incorporated by reference to Exhibit
                10.12
                filed with the Company's Registration Statement on Form S-1 (File
                No.
                33-89176).10.1(a)
            
            December
                22, 1995 Letter Agreement between the Registrant and New Jersey BCBS
                extending the Letter of Intent and Interim Services Agreement to
                March 31,
                1996 incorporated by reference to Exhibit 10.12(a) filed with the
                Company's Annual Report on Form 10-KSB for the year ended October
                31,
                1996.10.2
            
            Lease
                Agreement dated April 14, 1995 between the Registrant and Metropolitan
                Life Insurance Company incorporated by reference to Exhibit 10.13
                filed
                with the Company's Registration Statement on Form S-1 (File No. 33-89176).10.3
            
            Letter
                of Intent dated January 2, 1996 between CW Ventures II, L.P., the
                Registrant and its CareAdvantage Health Systems, Inc. subsidiary
                incorporated by reference to Exhibit 10.14 filed with the Company's
                Annual
                Report on Form 10-KSB for the year ended October 31, 1996.10.4
            
            Securities
                Purchase Agreement dated February 22, 1996 among CW Ventures, CAHS
                and the
                Registrant incorporated by reference to Exhibit 10.15 filed with
                the
                Company's Annual Report on Form 10-KSB for the year ended October
                31,
                1996.10.5
            
            CW
                Exchangeable Note incorporated by reference to Exhibit 10.16 filed
                with
                the Company's Annual Report on Form 10-KSB for the year ended October
                31,
                1996.10.6
            
            Stock
                Acquisition Agreement dated February 22, 1996 among EHC, CHCM, CAHS
                and
                the Registrant incorporated by reference to Exhibit 10.17 filed with
                the
                Company's Annual Report on Form 10-KSB for the year ended October
                31,
                1996.10.7
            
            EHC
                Exchangeable Note incorporated by reference to Exhibit 10.18 filed
                with
                the Company's Annual Report on Form 10-KSB for the year ended October
                31,
                1996.10.8
            
            Services
                Agreement dated February 22, 1996 among Horizon BCBSNJ, CHCM, CAHS
                and the
                Registrant incorporated by reference to Exhibit 10.19 filed with
                the
                Company's Annual Report on Form 10-KSB for the year ended October
                31,
                1996.10.9
            
            Stockholders’
                Agreement dated February 22, 1996 among EHC, CW Ventures and the
                Registrant incorporated by reference to Exhibit 10.20 filed with
                the
                Company's Annual Report on Form 10-KSB for the year ended October
                31,
                1996.10.10
            
            Joint
                Services Agreement, dated May 29, 1997, among Allied Health Group,
                Inc.,
                CAHS, Inc. and the Company incorporated by reference to Exhibit 10(c)
                filed with the Company's Form 10-QSB for the quarter ended April
                30,
                1997.10.11
            
            Agreement,
                dated as of January 1, 1997 between Blue Cross and Blue Shield of
                Rhode
                Island (“BCBSRI”) and CAHS, Inc. incorporated by reference to Exhibit
                10(a) filed with the Company's Form 10-QSB for the quarter ended
                July 31,
                1997.10.12
            
            Consultant
                Agreement dated March 17, 1997, between Coordinated Health Partners,
                Inc.
                d/b/a Blue Chip, and CAHS, Inc. incorporated by reference to Exhibit
                10(d)
                filed with the Company's Form 10-QSB for the quarter ended April
                30,
                1997.






22




10.13
            
            Letter
                Agreement, dated as of March 1, 1997, between Medigroup of New Jersey,
                Inc. d/b/a HMO Blue, the Company and Allied Health Group, Inc.
                incorporated by reference to Exhibit 10(e) filed with the Company's
                Form
                10-QSB for the quarter ended April 30, 1997.10.14
            
            First
                Amendment and Restatement of Services Agreement, dated as of June
                13,
                1997, among CAHS, Inc., CHCM, the Company and Horizon BCBSNJ incorporated
                by reference to Exhibit 10(b) filed with the Company's Form 10-QSB
                for the
                quarter ended April 30, 1997.10.15
            
            Credit
                Agreement among Summit Bank, the Company and Horizon BCBSNJ, dated
                June
                13, 1997 incorporated by reference to Exhibit 10(f) filed with the
                Company's Form 10-QSB for the quarter ended April 30, 1997.10.16
            
            Revolving
                Credit Note, dated June 13, 1997 by the Company in favor of Summit
                Bank in
                the original principal amount of $1,500,000 incorporated by reference
                to
                Exhibit 10(f)(1) filed with the Company's Form 10-QSB for the quarter
                ended April 30, 1997.10.17
            
            Term
                Note, dated June 13, 1997, by the Company in favor of Summit Bank
                in the
                original principal amount of $1,500,000 incorporated by reference
                to
                Exhibit 10(f)(2) filed with the Company's Form 10-QSB for the quarter
                ended April 30, 1997.10.18
            
            Promissory
                Note and Security Agreement, dated April 1, 1997, by CHCM in favor
                of
                Horizon BCBSNJ, in the original principal amount of $1,862,823
                incorporated by reference to Exhibit 10(f)(3) filed with the Company's
                Form 10-QSB for the quarter ended April 30, 1997.10.19
            
            Employment
                Agreement between the Company and Thomas Riley, dated June 10, 1997,
                as
                supplemented by a side agreement with CW and Horizon BCBSNJ, of even
                date
                therewith incorporated by reference to Exhibit 10(a) filed with the
                Company's Form 10-QSB for the quarter ended April 30, 1997.10.20
            
            Services
                Agreement as of January 5, 1998, by and between New York Care Plus
                Insurance Company, Inc. and the Company, incorporated by reference
                to
                Exhibit 10.20 filed with the Company's Form 10KSB for the year ended
                October 31, 1997.10.21
            
            Consultation
                Agreement dated October 1, 1997 by and between the Company and David
                McDonnell, an independent director of the Company, incorporated by
                reference to Exhibit 10.21 filed with the Company's Form 10KSB for
                the
                year ended October 31, 1997.10.22
            
            Mutual
                Release Agreement dated as of January 6, 1998 between the Company
                and
                MEDecision, Inc., incorporated by reference to Exhibit 10.22 filed
                with
                the Company's Form 10KSB for the year ended October 31, 1997.10.23
            
            Separation
                Agreement dated April 20, 1995 between PMDX and the Registrant
                incorporated by reference to Exhibit 10.1 filed with the Company's
                Registration Statement on Form S-1 (File No. 33-89176).10.24
            
            Agreement
                dated as of January 1, 1995, between Maine BCBS and CAHS incorporated
                by
                reference to Exhibit 10.2 filed with the Company's Registration Statement
                on Form S-1 (File No. 33-89176).10.25
            
            Products
                and Services Agreement dated November 7, 1994 between MEDecision,
                Inc. and
                CAHS incorporated by reference to Exhibit 10.3 filed with the Company's
                Registration Statement on Form S-1 (File No. 33-89176).10.26
            
            Registrant’s
                1995 Comprehensive Stock Incentive Plan incorporated by reference
                to
                Exhibit 4.2 filed with the Company's Registration Statement on Form
                S-1
                (File No. 33-89176).10.27
            
            Registrant’s
                1996 Stock Option Plan incorporated by reference to the Company's
                Information Statement dated September 1996.10.28
            
            Registrant’s
                1996 Director Stock Option Plan incorporated by reference to the
                Company's
                Information Statement dated September 1996.10.29
            
            Option
                Agreement between CW Ventures and Horizon BCBSNJ incorporated by
                reference
                to Exhibit 5 of Schedule 13(d) of Horizon BCBSNJ respecting beneficial
                ownership of Common Stock of the Company dated June 1997.






23




10.30
            
            Settlement
                and Release Agreement dated January 13, 1998 between the Company
                and John
                Petillo incorporated by reference to Exhibit 10.30 filed with the
                Company's Form 10KSB for the year ended October 31, 1997.10.31
            
            Settlement
                and Release Agreement dated December 19, 1997 between the Company
                and
                Vince Achilarre incorporated by reference to Exhibit 10.31 filed
                with the
                Company's Form 10KSB for the year ended October 31, 1997.10.32
            
            Employment
                Agreement between the Company and David Noone, dated January 8, 1999,
                incorporated by reference to Exhibit 10.32 filed with the Company’s Form
                10KSB for the year ended September 30, 1998.10.33
            
            Confidentiality,
                Invention, and Non-Compete Agreement between the Company and David
                Noone,
                dated as of January 8, 1999, incorporated by reference to Exhibit
                10.33
                filed with the Company’s Form 10KSB for the year ended September 30,
                1998.10.36
            
            Settlement
                and Release Agreement entered into among Horizon BCBSNJ, the Company,
                CAHS, and CHCM, Enterprise Holding Company, Inc. ("EHC") and CW Ventures,
                incorporated by reference to Exhibit 10(a) filed with the Company’s Form
                10-QSB for the quarter ended July 31, 1998.10.37
            
            Services
                Agreement dated as of January 1, 1999, by and between HealthNow New
                York,
                Inc. ("HNNY") and the Company, incorporated by reference to Exhibit
                10.35
                filed with the Company’s Form 10KSB for the year ended September 30,
                1998.10.36
            
            Amended
                and Restated Employment Agreement, dated as of September 29, 1998,
                with
                Richard W. Freeman, M.D., CAHS and the Company (the “Freeman Employment
                Agreement”), incorporated by reference to Exhibit 10.36 filed with the
                Company’s Form 10KSB for the year ended September 30, 1998.10.37
            
            Employment
                Agreement, dated as of March 25, 1997, by and between the Company
                and
                Elaine del Rossi, incorporated by reference to Exhibit 10.37 filed
                with
                the Company’s Form 10KSB for the year ended September 30,
                1998.10.38
            
            Confidentiality,
                Invention and Non-Compete Agreement dated as of March 25, 1998 between
                the
                Company and Elaine del Rossi, incorporated by reference to Exhibit
                10.38
                filed with the Company’s Form 10KSB for the year ended September 30,
                1998.10.39
            
            Employment
                Agreement, effective as of April 28, 1998, by and among Stephan D.
                Deutsch, M.D., the Company and CAHS, incorporated by reference to
                Exhibit
                10.39 filed with the Company’s Form 10KSB for the year ended September 30,
                1998.10.40
            
            Employment
                Agreement, effective as of April 19, 1999, between Dennis M. Mouras,
                and
                the Company, incorporated by reference to Exhibit 10.40 filed with
                the
                Company’s Form 10KSB for the year ended December 31, 1999.10.41
            
            Settlement
                Agreement dated August 9, 2000 among the Company, Horizon Healthcare
                of
                New Jersey, Inc. and Allied Specialty Care Services, Inc., incorporated
                by
                reference to Exhibit 10.1 filed with the Company’s Form 10QSB for the
                quarter ended September 30, 2000.10.42
            
            Employment
                Agreement, effective as of April 17, 2000, between Christopher Minor
                and
                the Company, incorporated by reference to Exhibit 10.2 filed with
                the
                Company’s Form 10QSB for the quarter ended September 30,
                2000.10.43
            
            Satisfaction
                of Debt Agreement among Horizon Blue Cross Blue Shield of New Jersey,
                Horizon Healthcare of New Jersey, Inc., CareAdvantage, Inc., CareAdvantage
                Health Systems, Inc. and Contemporary HealthCare Management, Inc,
                incorporated by reference to Exhibit 10.1 filed on the Company’s Form 8-K
                dated December 5, 2000 and filed on December 13, 2000.10.44
            
            Amendment
                dated March 26, 2001 to Satisfaction of Debt Agreement dated as of
                November 1, 2000 among Horizon BCBSNJ, Horizon Healthcare of New
                Jersey,
                Inc., CareAdvantage, Inc., CareAdvantage Health Systems, Inc. and
                Contemporary HealthCare Management, Inc, incorporated by reference
                to
                Exhibit 10.1 filed with the Company’s Form 10-QSB for the quarter ended
                March 31, 2001.






24




10.45
            
            Service
                Agreement dated as of January 1, 2000 between Blue Cross Blue Shield
                of
                Rhode Island, Coordinated Health Partners, Inc. and CareAdvantage
                Health
                Systems, Inc., incorporated by reference to Exhibit 10.2 filed with
                the
                Company’s Form 10-QSB for the quarter ended March 31, 2001.10.46
            
            Amendment
                dated as of August 9, 2001 to Satisfaction of Debt Agreement dated
                as of
                November 1, 2000 among Horizon BCBSNJ, Horizon Healthcare of New
                Jersey,
                Inc., CareAdvantage, Inc., CareAdvantage Health Systems, Inc. and
                Contemporary HealthCare Management, Inc, incorporated by reference
                to
                Exhibit 10.1 filed with the Company’s Form 10-QSB for the quarter ended
                June 30, 2001.10.47
            
            Settlement
                Agreement between CareAdvantage, Inc. and Horizon Blue Cross Blue
                Shield
                of New Jersey, effective as of October 1, 2004, incorporated by reference
                to Exhibit 10.1 filed on the Company’s Form 8-K filed on October 1,
                2004.10.48
            
            Second
                Amendment to Lease Agreement between CareAdvantage Health Systems,
                Inc.
                and Corporate Plaza Associates, L.L.C., incorporated by reference
                to
                Exhibit 10.1 filed on the Company’s Form 8-K filed on January 11,
                2005.10.49
            
            Services
                and License Agreement between the Company and Kaiser Foundation Health
                Plan of the Northwest ("Kaiser"), effective as of January 1, 2005.
                Portions of this exhibit (indicated by asterisks) have been omitted
                pursuant to a request for confidential treatment pursuant to Rule
                24b-2 of
                the Securities Exchange Act of 1934*.10.50
            
            Amendment
                to Employment Agreement between the Company and Dennis J. Mouras,
                dated as
                of November 11, 2005, and Employment Agreement between the Company
                and
                Dennis J. Mouras, dated as of October 25,2000, incorporated by reference
                to Exhibit 10.50 filed with the Company’s Form 10-QSB for the quarter
                ended September 30, 2005.10.51
            
            First
                Amendment to Services and License Agreement between the Company and
                Kaiser
                Foundation Health Plan of the Northwest (“Kaiser”), effective as of
                January 1, 2006. Portions of this exhibit (indicated by asterisks)
                have
                been omitted pursuant to a request for confidential treatment pursuant
                to
                Rule 24b-2 of the Securities Exchange Act of 1934*.10.52
            
            Second
                Amendment to Services and License Agreement between the Company and
                Kaiser, effective as of April 1, 2006. Portions of this exhibit (indicated
                by asterisks) have been omitted pursuant to a request for confidential
                treatment pursuant to Rule 24b-2 of the Securities Exchange Act of
                1934*.16.1
            
            Letter
                regarding change in accountants, incorporated by reference to Exhibit
                16.1
                filed on the Company’s Form 8-K dated June 6, 1996.16.2
            
            Letter
                regarding change in accountants, incorporated by reference to Exhibit
                16.1
                filed on the Company’s Form 8-K dated July 31, 2001.16.3
            
            Letter
                regarding change in accountants, incorporated by reference to Exhibit
                16.1
                filed on the Company’s Form 8-K dated June 6, 2002.21
            
            Subsidiaries
                of the Registrant*23.1
            
            Consent
                of Independent Auditors*31
            
            Certifications
                pursuant to Rule 13a-14(a), promulgated under the Securities Exchange
                Act
                of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of
                2002*32
            
            Certifications
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 **




_____________________________________


*filed
      herewith


**
      furnished herewith








25


I **tem
      14.** **** **Principal
      Accountant Fees and Services**





**Audit
      and Non-Audit Fees**





The
      following table shows the fees billed to the Company for the audit and other
      services provided by Eisner, LLP in 2004 and 2005:





**Services
                Performed**
            
            **2005**
            
            **2004**Audit
                Fees (1)
            
            
            62,000
            
            
            57,000Audit-Related
                Fees (2)
            
            
            6,200
            
            
            0Tax
                Fees (3)
            
            
            14,256
            
            
            12,500All
              Other Fees (4)
            
            
            4,300
            
            
            12,500Total
                Fees
            
            
            86,756
            
            
            82,000





(1)  Audit
      fees represent fees for professional services provided in connection with the
      audit of the Company’s financial statements and review of the financial
      statements included in the Company’s 10-Q and 10-K filings, and services that
      are normally provided in connections with statutory and regulatory filings
      or
      engagements.





(2)  Audit-related
      fees are fees for services performed by Eisner, LLP that are reasonably related
      to the performance of the audit or review of the Company’s financial statements.





(3)  Tax
      fees
      are fees for professional services performed by Eisner, LLP with respect to
      tax
      compliance, tax preparation, tax advice and tax planning in 2004 and
      2005.





(4)  All
      other
      fees include work performed by Eisner, LLP relating to 401k audit and benefit
      plan filings that does not meet the above category descriptions.





****** **Pre-Approval
      of Audit and Non-Audit Services** ******




The
      audit
      committee currently pre-approves all services provided by our independent
      auditors. All of the above fees for 2004 and 2005 were pre-approved by the
      audit
      committee. No fees in 2004 or 2005 were paid to the independent registered
      public account firm pursuant to the “de minimis” exception to the foregoing
      pre-approval policy.





The
      audit
      committee has considered the nature and amount of fees billed by Eisner, LLP
      and
      believes that the provision of services for activities unrelated to the audit
      is
      compatible with maintaining Eisner LLP's independence.


26


**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, thereunto duly authorized.




CareAdvantage,
                Inc.
              (Registrant)Date: March
              31, 2006
            By:
            /s/
              Dennis J. MourasDennis
              J. Mouras, Chief Executive Officer




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the Registrant and in the
      capacities and on the dates indicated:











Date:March
                  31, 2006
              
              By:
                  /s/ Dennis J. MourasDennis J. Mouras, Chief Executive Officer,
                Director
                  and acting Principal Financial Officer
                and
                  Accounting OfficerDate:March
                  31, 2006
              
              By:
                    /s/ David J. McDonnellDavid J. McDonnell, DirectorDate:March
                  31, 2006
              
              By:
                    /s/ David G. NooneDavid G. Noone, Director














CAREADVANTAGE,
      INC.


AND
      SUBSIDIARIES




CONSOLIDATED
      FINANCIAL


STATEMENTS





DECEMBER
      31, 2005 AND 2004





















INDEX
      TO
      CONSOLIDATED FINANCIAL STATEMENTS





**Financial
      Statements**


**Financial
                  Statements**
              **Page**Report
                  of Independent Registered Public Accounting Firm
              F-2Consolidated
                  Balance Sheet as of December 31, 2005
              F-3Consolidated
                  Statements of Operations for the years ended December 31, 2005 and
                  2004
              F-4Consolidated
                  Statements of Stockholders' Equity for the years ended December 31,
                  2005 and 2004
              F-5Consolidated
                  Statements of Cash Flows for the years ended December 31, 2005 and
                  2004
              F-6Notes
                  to consolidated financial statements
              F-7







F-1









Eisner
              LLP
              Accountants
                and Advisors
              
              750
                Third Avenue
              New
                York, NY 10017-2703
              Tel
                212.949.8700
              Fax
                212 891.4100
              www.eisnerllp.com






**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





Board
      of
      Directors and Stockholders


CareAdvantage,
      Inc.








We
      have
      audited the accompanying consolidated balance sheet of CareAdvantage, Inc.
      and
      subsidiaries (the “Company”) as of December 31, 2005, and the related
      consolidated statements of operations, stockholders' equity and cash flows
      for
      the years ended December 31, 2005 and 2004. These consolidated financial
      statements are the responsibility of the Company's management. Our
      responsibility is to express an opinion on these consolidated financial
      statements based on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). 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 financial statements enumerated above present fairly, in all
      material respects, the consolidated financial position of CareAdvantage, Inc.
      and subsidiaries as of December 31, 2005, and the consolidated results of
      their operations and their consolidated cash flows for the years ended December
      31, 2005 and 2004, in conformity with U.S. generally accepted accounting
      principles.













Eisner
       LLP


New
      York,
      New York


February
      10, 2006








F-2


CAREADVANTAGE,
        INC.AND
        SUBSIDIARIES


**Consolidated
      Balance Sheet**





**December
                31,****2005****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            **$**
            **114,000**Accounts
                receivable
            
            
            **457,000**Other
                current assets
            
            
            **108,000**Total
                current assets
            
            
            **679,000**Property
                and equipment, at cost, less accumulated depreciation
            
            
            **137,000**Intangible
                assets, net of accumulated amortization
            
            
            **2,000**Other
                assets
            
            
            **167,000**Total
                Assets
            
            **$**
            **985,000****LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilities:Accounts
                payable
            
            
            **139,000**Accrued
                compensation and related benefits
            
            
            **105,000**Accrued
                expenses and other current liabilities
            
            
            **112,000**Total
                current liabilities
            
            
            **356,000**Long
                Term Liabilities:Deferred
                rent
            
            
            **176,000**Total
                Liabilities**532,000**Commitments
                and contingenciesStockholders'
                equity:Preferred
                stock - par value $.10 per share; authorized 10,000,000shares;
                none issuedCommon
                stock - par value $.001 per share, authorized 200,000,000shares;
                issued 106,812,041 shares and outstanding
                53,417,221
            
            
            **107,000**Additional
                paid in capital
            
            
            **23,
                952,000**Deferred
                compensation cost
            
            
            **(40,000**
            **)**Accumulated
                deficit
            
            
            **(23,
                304,000**
            **)**Treasury
                Stockat
                cost, 53,394,820 shares
            
            
            **(262,000**
            **)**Total
                stockholders’ equity
            
            
            **453,000**Total
                Liabilities and Stockholders' Equity
            
            **$**
            **985,000**





*See
      notes to consolidated financial statements*








F-3


CAREADVANTAGE,
      INC.AND
      SUBSIDIARIES




Consolidated
      Statements of Operations








**Year
                Ended December 31,****2005**
            
            **2004**License
                fees and service revenue
            
            **$**
            **2,844,000**
            
            $
            2,350,000Cost
                of services
            
            
            **1,433,000**
            
            
            1,806,000Gross
                profit
            
            
            **1,411,000**
            
            
            544,000Operating
                expenses:Selling,
                general and administrative
            
            
            **2,862,000**
            
            
            2,949,000Depreciation
                and amortization
            
            
            **187,000**
            
            
            436,000Gain
                on renegotiation - lease
            
            
            **—**
            
            
            (1,623,000)Loss
                on asset write off
            
            
            **—**
            
            
            501,000Total
                operating expenses
            
            
            **3,049,000**
            
            
            2,263,000Operating
                (loss)
            
            
            **(1,638,000**
            **)**
            
            (1,719,000
            )Interest
                (expense)/income, net
            
            
            **8,000**
            
            
            (91,000
            )(Loss)
                before provision for income taxes
            
            
            **(1,630,000**
            **)**
            
            (1,810,000
            )Provision
                for income taxes
            
            
            **5,000**
            
            
            3,000**Net
                (loss)**
            
            **$**
            **(1,635,000**
            **)**
            $
            (1,813,000
            )**Net
                (loss) per share of common stock -**Basic
                and diluted
            
            **$**
            **(.03**
            **)**
            $
            (
                .02
            )**Weighted
                average number of common shares outstanding -**Basic
                and diluted
            
            
            **48,802,000**
            
            
            86,043,000




*See
      notes to consolidated financial statements*





F-4


CAREADVANTAGE,
      INC.AND
      SUBSIDIARIES




**Consolidated
      Statements of Stockholders' Equity**


**Common
                  Stock**
              
              
              
              **Treasury
                  Stock****Number
                  of Shares**
              
              **Par
                  Value Amount**
              
              **Additional
                  Paid In Capital**
              
              **Accumulated
                  Deficit**
              
              **Number
                  of Shares**
              
              **Deferred
                  Compensation**
              
              **Par
                  Value Amount**
              
              **Stockholder
                  Equity******
              
              ****
              
              ****
              
              ****
              
              ****
              
              ****
              
              ******Balance
                  as of**
                **January
                  1, 2003**
              
              
              99,794,152
              
              $
              100,000
              
              $
              23,801,000
              
              $
              (14,698,000
              )
              
              
              
              
              
              
              
              
              
              $
              9,203,000Net
                  loss for the year ended December 31, 2003
              
              
              
              
              
              
              
              
              
              
              
              (5,158,000
              )
              
              
              
              
              
              
              
              
              
              
              (5,158,000
              )Balance
                  as of
                December 31,
                  2003
              
              
              99,794,152
              
              
              100,000
              
              
              23,801,000
              
              
              (19,856,000
              )
              
              
              
              
              
              
              
              
              
              
              4,045,000Treasury
                  Stock surrender -
                Horizon
                BCBSNJ
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (53,394,820
              )
              
              
              
              
              (262,000
              )
              
              (262,000
              )Net
                  loss for the year ended December 31, 2004
              
              
              
              
              
              
              
              
              
              
              
              (1,813,000
              )
              
              
              
              
              
              
              
              
              
              
              (1,813,000
              )**Balance
                  as of**
                **December 31,
                  2004**
              
              
              **99,794,152**
              
              **$**
              **100,000**
              
              **$**
              **23,801,000**
              
              **$**
              (21,669,000
              )
              
              (53,394,820
              )
              
              
              
              **$**
              (262,000
              )
              **$**
              **1,970,000****Balance
                  as of**
                **January
                  1, 2005**
              
              
              99,794,152
              
              $
              100,000
              
              $
              23,801,000
              
              $
              (21,669,000
              )
              
              (53,394,820
              )
              
              
              
              
              (262,000
              )
              $
              1,970,000Exercise
                  of stock options
              
              
              7,017,889
              
              
              7,000
              
              
              63,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              70,000Deferred
                  compensation cost
              
              
              
              
              
              
              
              
              50,000
              
              
              
              
              
              
              
              
              (50,000
              )
              
              
              
              
              —Employee
                  stock option compensation
                cost
              
              
              
              
              
              
              
              
              38,000
              
              
              
              
              
              
              
              
              10,000
              
              
              
              
              
              48,000Net
                  loss for
                the
                  year ended December 31, 2005
              
              
              
              
              
              
              
              
              
              
              
              (1,635,000
              )
              
              
              
              
              
              
              
              
              
              
              (1,635,000
              )**Balance
                  as of**
                **December 31,
                  2005**
              
              
              **106,812,041**
              
              **$**
              **107,000**
              
              **$**
              **23,952,000**
              
              **$**
              (23,304,000
              )
              
              (53,394,820
              )
              **$**
              (40,000
              )
              **$**
              (262,000
              )
              **$**
              **453,000**







*See
      notes to consolidated financial statements*





F-5


CAREADVANTAGE,
        INC.AND
        SUBSIDIARIES


**Consolidated
      Statements of Cash Flows**


**Year
                  Ended December 31****2005**
              
              **2004****Cash
                  flows from operating activities:**Net
                  loss
              
              **$**
              **(1,635,000**
              **)**
              **$**
              (1,813,000
              )Adjustments
                  to reconcile net loss to net cashused
                  in operating activities:Depreciation
                  and amortization
              
              
              **187,000**
              
              
              436,000Employee
                  Stock option compensation cost
              
              
              **48,000**
              
              
              —Accreted
                  interest - lease
              
              
              **—**
              
              
              110,000Gain
                  on renegotiation of lease
              
              
              **—**
              
              
              (1,623,000
              )Asset
                  write off
              
              
              **—**
              
              
              501,000Deferred
                  revenue
              
              
              **—**
              
              
              (75,000
              )Changes
                  in:Accounts
                  receivable stockholder
              
              
              **—**
              
              
              500,000Accounts
                  receivable other
              
              
              **(310,000**
              **)**
              
              28,000Other
                  assets
              
              
              **(38,000**
              **)**
              
              69,000Accounts
                  payable
              
              
              **77,000**
              
              
              (158,000
              )Accrued
                  expenses and other current liabilities
              
              
              **(10,000**
              **)**
              
              (598,000
              )Deferred
                  rent
              
              
              **176,000**
              
              
              —Net
                  cash used in operating activities
              
              
              **(1,505,000**
              **)**
              
              (2,623,000
              )**Cash
                  flows from investing activity:**Capital
                  expenditures
              
              
              **(39,000**
              **)**
              
              (127,000
              )Net
                  cash used in investing activity
              
              
              **(39,000**
              **)**
              
              (127,000
              )**Cash
                  flows from financing activity:**Transfer
                  from restricted cash
              
              
              **100,000**
              
              
              —Proceeds
                  from exercise of stock options
              
              
              **70,000**
              
              
              —Net
                  cash used in financing activity
              
              
              **170,000**
              
              
              —**Net
                  decrease in cash**
              
              
              **(1,374,000**
              **)**
              
              (2,750,000
              )Cash
                  - beginning of year
              
              
              **1,488,000**
              
              
              4,238,000**Cash
                  - end of year**
              
              **$**
              **114,000**
              
              $
              1,488,000**Supplemental
                  disclosures of cash flow information:**Income
                  taxes paid
              
              **$**
              **5,000**
              
              $
              3,000**Supplemental
                  disclosures of non-cash items - financing
                  activities:**
                Common
                  shares received in settlement (see Note [E])
              
              **$**
              **—**
              
              $
              262,000






*See
      notes to consolidated financial statements*





F-6


**CAREADVANTAGE,
      INC. AND SUBSIDIARIES**





**Note
      A - BUSINESS AND BASIS OF PRESENTATION**





**[1]** **Business:**





CareAdvantage,
      Inc. (“CAI” or the “Company”) and its direct and indirect subsidiaries,
      CareAdvantage Health Systems, Inc. (“CAHS”) and Contemporary HealthCare
      Management, Inc. (“CHCM”), are in the business of providing management and
      consulting services designed to enable integrated health care delivery systems
      and other care management organizations to reduce the costs, while improving
      the
      quality, of medical services provided to their subscribers. The management
      and
      consulting services include care management program enhancement services,
      executive and clinical management services, and training programs. The Company
      operates in one business segment.





As
      part
      of offering its management and consulting services, the Company has developed
      RPNavigator, a proprietary tool to help managed care plans and employers better
      understand and forecast resource consumption, risk, and costs associated with
      their respective populations. In providing its consulting services, the Company
      licenses RPNavigator to its customers.





**[2]** **Basis
        of presentation:**





For
      the
      years ended December 31, 2005 and 2004, the Company has incurred net losses
      of
      ($1,635,000) and ($1,813,000), respectively and has an accumulated deficit
      of
      ($23,304,000) as of December 31, 2005. Additionally, the Company has $114,000
      of
      cash and cash equivalents at December 31, 2005 and has used cash in operations
      of $1,505,000 during the year then ended. The Company has changed its business
      model over the past 3 years whereby it now generates most of its revenue from
      the licensing of RPNavigator and providing consulting services in connection
      with that licensing. Revenue has grown from $2,350,000 in 2004 to $2,844,000
      in
      2005. The Company plans to increase cash flows from operations through increases
      in revenue generated from the licensing and related consulting services. Based
      on a forecast prepared by management of increased revenue of the Company during
      2006 and cash on hand at December 31, 2005, management expects the Company
      to be
      able to meet its obligations as they become due during 2006. However, there
      can
      be no assurances that management’s plans and the projected increase in revenue
      will be attained.





**Note
      B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





**[1]** **Principles
        of consolidation:**





The
      consolidated financial statements include the accounts of CAI, and its wholly
      owned subsidiary, CAHS and CAHS's wholly owned subsidiary, CHCM. Intercompany
      accounts and transactions have been eliminated in consolidation.





**[2]** **Revenue
        recognition:**





With
      respect to RPNavigator license fees, all of the Company’s customers licensing
      RPNavigator are required as part of their agreements with the Company to receive
      consulting services with the Company. All contracts provide for licensing of
      RPNavigator and consulting services at a fixed monthly fee, a per member per
      month fee, or a combination of both. The Company earns the revenue from both
      services on a monthly basis and recognizes revenue from both services on a
      monthly basis at either a fixed monthly fee, a per member per month fee or
      a
      combination of both. Additionally, the Company provides consulting services
      on a
      fee for service basis. Revenue for these consulting services is recognized
      as
      the services are provided.





**[3]** **Depreciation
        and amortization:**





Depreciation
      is computed by the straight-line method and over the estimated useful lives
      of
      the assets, which range from three to seven years. Leasehold improvements are
      amortized using the straight-line method over the remaining term of the related
      lease or the estimated useful life, whichever is shorter. Depreciation expense
      amounted to $128,000 and $340,000 for the years ended December 31, 2005 and
      2004, respectively.





Intangible
      assets, principally software development costs, are amortized over the expected
      useful lives of five to seven years on the straight-line method (see Note C).
      Amortization expense was $59,000 and $96,000 for the years ended December 31,
      2005 and 2004, respectively.





F-7


CAREADVANTAGE,
      INC. AND
      SUBSIDIARIES


**Note
      B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





**[4]** **Per
        share data:**





Basic
      and
      diluted net loss per share has been computed based on the weighted average
      number of outstanding shares of common stock. Potentially dilutive securities
      which were excluded from the computation of basic loss per share because to
      do
      so would have been anti-dilutive, are as follows:




**December
                31,****2005**
            
            **2004**Options
            
            
            **12,832,000**
            
            
            16,122,000Total
                Potential Dilutive shares
            
            
            **12,832,000**
            
            
            16,122,000





**[5]** **Concentration
        of credit risk:**





Financial
      instruments that potentially subject the Company to credit risk consist of
      cash
      and accounts receivable. The Company maintains its cash balances in high quality
      financial institutions. Collateral is not required to support these financial
      instruments.





**[6]** **Estimates:**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those estimates.





**[7]** **Fair
        value of financial instruments:**





The
      fair
      value of financial instruments approximates their carrying amount due to the
      short-term nature of such instruments.




**[8]** **Cash
        and cash equivalents:**





The
      Company considers all highly liquid investments which have maturities of three
      months or less, when acquired, to be cash equivalents. The carrying amount
      reported in the balance sheet for cash and cash equivalents approximates its
      fair value. At December 31, 2005, the Company had deposited approximately
      $114,000 in one commercial bank.





**[9]** **Major
        customers:**





Two
      customers, BCBS organizations, accounted for approximately 39% and approximately
      32% of license fees and service revenue for the year ended December 31, 2005.
      Another major customer, Kaiser Permanente, accounted for approximately 22%
      of
      license fees and service revenue for the year ended December 31, 2005. Two
      customers, BCBS organizations, accounted for approximately 31% and approximately
      24% of license fees and service revenue for the year ended December 31, 2004.
      Another major customer, Kaiser Permanente, accounted for approximately 21%
      of
      license fees and service revenue for the year ended December 31,
      2004.




**[10]** **Stock-based
        compensation:**


The
      Company accounts for stock-based employee compensation under Accounting
      Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to
      Employees”, and related interpretations. The Company has adopted the
      disclosure-only provisions of Statement of Financial Accounting Standards
      (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” and
      SFAS
      No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure”,.
      The Company’s stock option plans are described in Note E. The following table
      illustrates the effect on net (loss) per share if the fair value based method
      had been applied to all employee awards.




F-8


**CAREADVANTAGE,
      INC. AND
      SUBSIDIARIES**




**Note
      B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**




**Year
                Ended December 31****2005**
            
            **2004**Reported
                net loss
            
            
            (1,635,000
            )
            
            (1,813,000
            )Stock-based
                employee compensation included in reported net loss
            
            
            48,000
            
            
            —Stock-based
                employee compensation determined under the fair value based
                method
            
            
            (73,000
            )
            
            (10,000
            )Pro
                forma net loss
            
            
            (1,660,000
            )
            
            (1,823,000
            )Basic
                and diluted loss per share:As
                reported
            
            
            (.03
            )
            
            (.02
            )Pro
                forma
            
            
            (.03
            )
            
            (.02
            )





The
      weighted average fair value of options granted in 2005 and 2004 was
      approximately $.015 and $.01, respectively, using the Black-Scholes Option
      Pricing model utilizing the following assumptions:


**December 31,****2005**
            **2004**Dividend
                yield
            **0**
            **0**Volatility
            **149%**
            **185%**Risk
                free interest rate
            **3.81%**
            **3.01-3.39%**Expected
                life in years
            **5**
            **5**





**[11]** **Recently
        issued accounting standards:**





**Share
      Based Payment**





In
      December 2004, the FASB revised FAS No. 123 and issued FAS No. 123R, Share
      Based
      Payment. Effective January 1, 2006, the statement requires companies to measure
      and recognize compensation expense associated with share-based payments
      to employees and directors in the financial statements based on their fair
      values. The Company adopted FAS 123R on January 1, 2006 and will apply the
      provisions of the statement prospectively for any newly issued, modified, or
      settled award after the date of initial adoption, as well as for any awards
      that
      were granted prior to the adoption date for which the requisite service has
      not
      been provided as of the adoption date. The Company intends to continue to use
      the Black Scholes option-pricing model to calculate total stock compensation
      expense.





**Note
      C - INTANGIBLE ASSETS**





Intangible
      assets, net of accumulated amortization consist of the following at December
      31,
      2005:





Trademark
            
            **$**
            **3,000**Software
                development cost
            
            
            **296,000****299,000**Less
                accumulated amortization
            
            
            **(297,000)****$**
            **2,000**







F-9


**CAREADVANTAGE,
      INC. AND SUBSIDIARIES**




**Note
      C - INTANGIBLE ASSETS (CONTINUED)**





**[1]** **Trademark:**





The
      trademark fees of $3,000 are associated with RPNavigator.





**[2]** **Software
        development costs:**





Software
      development costs are capitalized beginning when project technological
      feasibility is established and concluding when the product is ready for release.
      Development costs related to software development are expensed as incurred.


**Note
      D - PROPERTY AND EQUIPMENT**





Property
      and equipment consist of the following at December 31, 2005:





Computer
                equipment
            
            **$**
            **436,000**Furniture
                and fixtures
            
            
            **1,000**Office
                machines and telephone equipment
            
            
            **54,000**Leasehold
                improvements
            
            
            **2,000****493,000**Less
                accumulated depreciation and amortization
            
            
            **(356,000**
            **)****$**
            **137,000**





For
      the
      year ended December 31, 2004, the Company wrote off certain property and
      equipment carrying a net book value of $501,000 in connection with the
      renegotiation of the lease. (see Note H)


**Note
      E - STOCKHOLDERS' EQUITY**





**[1]** **Preferred
        stock:**





The
      preferred stock is issuable in such series and with such designations,
      preferences, conversion rights, cumulative, participating, optional or other
      rights, including voting rights, qualifications, limitations or restrictions
      thereof as determined by the Board of Directors of the Company. As such, the
      Board of Directors of the Company is entitled to authorize the creation and
      issuance of 10,000,000 shares of preferred stock in one or more series with
      such
      limitations and restrictions as may be determined in the Board's sole
      discretion, with no further authorization by stockholders required for the
      creation and issuance thereof.





**[2]** **Stock
        option plans:**





The
      Stock
      Option Plan (the “Plan”) is administered by a Committee of the Board of
      Directors consisting of at least two members who are "outside directors" as
      defined in Section 162(m) of the Internal Revenue Code who are also
      "disinterested persons" as defined in regulations under the Securities and
      Exchange Act of 1934. Employees, officers, and other persons selected by the
      Committee are eligible to receive options under the Plan.





Under
      the
      Plan, as amended, the Company has reserved an initial aggregate of 22,648,000
      shares of Common Stock for issuance pursuant to options granted under the Plan.
      Beginning on January 1, 2002, and on each subsequent January 1, the number
      of
      shares reserved for issuance under the Plan shall be increased by three percent
      (3%), provided, however, that no shares authorized pursuant to such annual
      increase shall be issued with respect to incentive stock options. The amount
      outstanding and available for issuance as of December 31, 2005 is 16,945,766
      shares of Common Stock.





Pursuant
      to the terms of the Plan, the Committee will select the persons to be granted
      options and will determine: (i) whether to grant a non-qualified stock option
      and/or an incentive stock option; (ii) the number of shares of the Company's
      Common


F-10




CAREADVANTAGE,
      INC. AND
      SUBSIDIARIES


**Note
      E - STOCKHOLDERS' EQUITY (CONTINUED)**





Stock
      that may be purchased upon the exercise of such option; (iii) the time or times
      when the option becomes exercisable; (iv) the exercise price, which cannot
      be
      less than 100% of the fair market value of the Common Stock on the date of
      grant
      for incentive stock options (110% of such fair market value for incentive
      options granted to a person who owns or who is considered to own stock
      possessing more than 10% of the total combined voting power of all classes
      of
      stock of the Company); and (v) the duration of the option, which cannot exceed
      ten (10) years. Incentive stock options may only be granted to employees
      (including officers) of the Company and/or any of its subsidiaries.
      Non-qualified stock options may be granted to any employees (including employees
      who have been granted incentive stock options) and other persons who the
      Committee may select. The Committee may issue non-qualified stock options with
      an exercise price less than 100% of fair market value of the Common Stock.





All
      options granted under the Plan are exercisable during the option grantee's
      lifetime only by the option holder (or his or her legal representative) and
      generally only while such option grantee is in the Company's employ. Unless
      the
      Committee otherwise provides, in the event an option grantee's employment is
      terminated other than by death or disability, such person shall have three
      months from the date of termination to exercise such option to the extent the
      option was exercisable at such date, but in no event subsequent to the option's
      expiration date. Unless the Committee otherwise provides, in the event of
      termination of employment due to death or disability of the option grantee,
      such
      person (or such person's legal representative) shall have 12 months from such
      date to exercise such option to the extent the option was exercisable at the
      date of termination, but in no event subsequent to the option's expiration
      date.
      An optionee may exercise an option by payment of the exercise price via any
      lawful method authorized by the Committee.





The
      Plan
      contains anti-dilution provisions which provide that, in the event of any change
      in the Company's outstanding capital stock by reason of a stock dividend,
      recapitalization, stock split, combination, exchange of shares or merger or
      consolidation, the Committee or the Board shall proportionately adjust the
      number of shares covered by each option granted and the exercise price per
      share. The Committee or Board's determinations in these matters shall be
      conclusive.





The
      Board
      of Directors has the authority to terminate the Plan as well as to make changes
      in and additions to the Plan. The Plan will terminate on June 6, 2006, unless
      previously terminated by the Board. However, unless approved by the Stockholders
      of the Company, the Board may not change the aggregate number of shares subject
      to the Plan, materially modify the requirements of eligibility to such Plan
      or
      materially increase the benefits accruing to participants under such Plan.


Pursuant
      to the terms of the Director Stock Option Plan (the “Director Plan”), the Board
      of Directors may grant non-qualified stock options to non-employee directors
      and
      will determine: (i) the number of shares of the Company's common stock that
      may
      be purchased upon the exercise of such option; (ii) the time or times when
      the
      option becomes exercisable; (iii) the exercise price; and (iv) the duration
      of
      the option, which cannot exceed ten (10) years. Under the Director Plan, an
      aggregate of 2% of the Company's authorized number of shares of common stock
      is
      reserved for issuance. On January 19, 2001, the Company increased its authorized
      shares of common stock from 103,600,000 to 200,000,000 shares. As a result,
      the
      number of shares reserved for issuance under the Director Plan is 4,000,000
      shares, and on account of the grants made in 1999 and 2005, no shares remain
      available for issuance under the Directors Plan.





All
      options granted under the Director Plan are exercisable during the option
      grantee's lifetime only by the option grantee (or his or her legal
      representative). In the event of termination of an option grantee's
      directorship, such person shall have three months from such date to exercise
      such option to the extent the option was exercisable as at the date of
      termination, but in no event subsequent to the option's expiration date. In
      the
      event of termination of an option grantee's directorship due to death, such
      person's legal representative shall have 12 months from such date to exercise
      such option to the extent the option was exercisable at the date of death,
      but
      in no event subsequent to the option's expiration date.





The
      Director Plan contains anti-dilution provisions which provide that in the event
      of any change in the Company's outstanding capital stock by reason of stock
      dividend, recapitalization, stock split, combination, exchange of shares or


merger
      or
      consolidation, the Board shall equitably adjust the aggregate number and kind
      of
      shares reserved for issuance, and for outstanding options, the number of shares
      covered by each option and the exercise prices per share.





The
      Board
      of Directors has the authority to terminate the Director Plan with respect
      to
      any shares of common stock not at the time subject to an option as well as
      to
      make changes in and additions to such plan. The Director Plan will terminate
      on
      June 6, 2006, unless previously terminated by the Board. The Board may not,
      unless approved by the stockholders of the Company, change the aggregate number
      of shares subject to the Director Plan, materially change the requirements
      of
      eligibility to such plan or materially increase the benefits accruing to
      participants under such plan.




F-11


**CAREADVANTAGE,
      INC. AND SUBSIDIARIES**




**Note
      E - STOCKHOLDERS' EQUITY (CONTINUED)**




The
      total
      reserved shares remaining available for issuance under both plans are 7,813,755
      shares of Common Stock.





In
      May
      25, 2005, the Board approved a reduction in the exercise price, from various
      previously granted stock prices in excess of $.01 to $.01, of outstanding
      options to purchase 7,460,000 shares of common stock held by the shareholders.
      The Company recorded a charge to the Statement of Operations at the repricing
      date and at each reporting date, based upon subsequent changes in values of
      the
      price of the Company’s stock and recorded an aggregate charge for these employee
      stock options of $38,000 for the year ended December 31, 2005. These
      charges will cease upon adoption of FAS 123R in January
      2006.





The
      following is a summary of stock option activity during the years ended
      December 31:




**2005**
              
              **2004****Shares**
              
              **Weighted**
                **Average**
                **Exercise**
                **Price**
              
              **Shares**
              
              **Weighted**
                **Average**
                **Exercise**
                **Price**Outstanding
                  at beginning of year
              
              
              **16,122,000**
              
              **$**
              **.13**
              
              
              10,046,000
              
              $
              .22Granted
              
              
              **5,200,000**
              
              
              **.01**
              
              
              7,489,000
              
              
              .02Exercised
              
              
              **(7,018,000**
              **)**
              
              **.01**
              
              
              -
              
              
              -Expired/Forfeited
              
              
              **(1,472,000**
              **)**
              
              **.81**
              
              
              (1,413,000
              )
              
              .11Outstanding
                  at end of year
              
              
              **12,832,000**
              
              
              **.009**
              
              
              16,122,000
              
              
              .13Exercisable
                  at end of year
              
              
              **3,677,000**
              
              
              **.009**
              
              
              7,933,000
              
              
              .25


The
      following table summarizes information about stock options at December 31,
      2005:





**Options
                Outstanding**
            
            **Options
                Exercisable****Range
                of**
              **Exercise
                Price**
            
            **Number**
              **Outstanding**
            
            **Weighted**
              **Average**
              **Remaining**
              **Contractual**
              **Life
                In Years**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Number**
              **Exercisable**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**$.008
            
            
            6,448,000
            
            
            8.63
            
            
            0.008
            
            
            2,606,000
            
            
            0.008$.010
            
            
            6,384,000
            
            
            8.74
            
            
            0.010
            
            
            1,071,000
            
            
            0.01012,832,000
            
            
            
            
            $
            0.009
            
            
            3,677,000
            
            $
            0.009





**[3]** **Settlement
        with Horizon BCBSNJ** :





On
      September 29, 2004, the Company entered into a Settlement Agreement with Horizon
      BCBSNJ. Under the terms of the agreement the Company received $500,000, the
      return of 53,394,820 common shares, representing 100% of Horizon BCBSNJ holdings
      and the resignation of both Horizon BCBSNJ designated board members. The cash
      and common shares were received by the Company on October 1, 2004. The Company
      ascribed a value of $262,000, representing the estimated fair value of the
      common stock, to the shares received from Horizon BCBSNJ. The return of the
      shares of common stock is recorded as treasury stock. The Company applied the
      cash and the value of the shares of common stock to the receivable balance
      of
      $762,000 due from Horizon BCBSNJ. The Company did not recognize any gain or
      loss
      in this related party transaction.


F-12


CAREADVANTAGE,
      INC. AND
      SUBSIDIARIES




**Note
      F - INCOME TAX**





Under
      the
      asset and liability method used by the Company as outlined in SFAS No. 109,
      "Accounting for Income Taxes", deferred tax assets and liabilities are
      recognized for the future tax consequences attributable to temporary differences
      between the consolidated financial statements' carrying amounts of existing
      assets and liabilities and their respective tax bases.





The
      tax
      effects of temporary differences that give rise to significant portions of
      the
      deferred tax assets at December 31, 2005 are as follows:





Noncurrent
                portion of deferred tax assets/(liabilities):Net
                operating loss carryforwards
            
            
            **7,262,000**Deferred
                rent
            
            
            **69,000**Tax/
                book basis of fixed assets
            
            
            **390,000**Intangibles
            
            
            **589,000**Alternative
                minimum tax credit
            
            
            **55,000**Deferred
                tax assets
            
            
            **8,365,000**Valuation
                allowance
            
            
            **(8,365,000**
            **)****$**
            **0**





The
      Company's deferred tax asset has been fully reserved, as its future realization
      cannot be determined. The Company has net operating loss carryforwards of
      approximately $18,619,000 at December 31, 2005, expiring through 2024.
      Pursuant to Section 382 of the Internal Revenue Code, the carryforwards are
      subject to limitations on annual utilization based upon an ownership change
      that
      took place during 1996 and 2004. It is reasonably possible that the amount
      of
      the carryforward and its annual utilization may be reduced upon examination
      by
      the Internal Revenue Service. The valuation allowance on the Company's deferred
      tax asset increased approximately $635,000 and $704,000 for the years ended
      December 31, 2005 and 2004, respectively. The Company incurred state income
      tax
      of approximately $5,000 and $3,000 for the years ended December 31, 2005 and
      2004, respectively. The Company has adjusted deferred tax assets for 2004 to
      conform to its tax returns as filed.





The
      difference between the federal statutory rate and the Company's effective tax
      rate is as follows:


**Year
                  Ended**December 31,**2005**
            
            **2004**Income
                taxes at federal statutory rate
            
            **$**
            **(554,000**
            **)**
            **$**
            **(615,000**
            **)**Permanent
                differences
            
            
            **2,000**
            
            
            **2,000**Change
                in valuation allowance
            
            
            **635,000**
            
            
            **704,000**State
                taxes, net of federal benefit
            
            
            **(82,000**
            **)**
            
            **(92,000**
            **)**Other
            
            
            **4,000**
            
            
            **4,000****$**
            **5,000**
            
            **$**
            **3,000**




**Note
      G - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS**





**[1]** **Contingencies:**





*Alan
      Fontes v. CareAdvantage, Inc.* ,
      pending
      in Superior Court of New Jersey, was commenced in June 2004 by a former employee
      of the Company seeking compensation under various legal theories. In October
      2005, the court dismissed the claim under all theories except express contract.
      The Company believes that Mr. Fontes’s claim is without merit and is contesting
      the matter vigorously. Moreover, the Company filed a counterclaim for damages
      against Mr. Fontes claiming Mr. Fontes induced another employee to quit his
      employment with the Company and in October 2005, pursuant to court order,
      amended its counterclaim to seek equitable relief and damages against Mr. Fontes
      and Integrated eCare Solutions, LLC, claiming Mr. Fontes misappropriated and
      used certain Company property.







F-13




CAREADVANTAGE,
      INC. AND
      SUBSIDIARIES




**Note
      G - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
      (CONTINUED)**




**[2]** **Professional
      liability:**





In
      providing utilization review and case management services, the Company makes
      recommendations regarding benefit plan coverage based upon judgments and
      established protocols as to the appropriateness of the proposed medical
      treatment. Consequently, the Company could have potential liability for adverse
      medical results. The Company could become subject to claims based upon the
      denial of health care benefits and claims such as malpractice arising from
      the
      acts or omissions of health care professionals. Although the Company does not
      believe that it engages in the practice of medicine or that it delivers medical
      services directly, no assurance can be given that the Company will not be
      subject to litigation or liability which may adversely affect its financial
      condition and operations in a material manner. Although the Company maintains
      comprehensive general liability and professional liability insurance coverage,
      including coverage for liability in connection with the performance of medical
      utilization review services and typically obtains indemnification from its
      customers, no assurances can be given that such coverage will be adequate in
      the
      event the Company becomes subject to any of the above described claims. The
      Company’s exposure in this regard is substantially reduced since it ceased
      providing utilization review and case management services as of December 31,
      2002. Nonetheless, until the applicable statutes of limitations have expired,
      the Company retains exposure for past activities as well as on account of its
      continued internal physician review services offered as part of its Executive
      and Clinical Management Services.





**[3]** **Operating
      leases:**





The
      Company has a lease for office space expiring in March 2011, which as discussed
      in Note H was amended on January 10, 2005. Minimum annual lease payments for
      office space and equipment for each of the next five years ending December
      31
      and thereafter are as follows:





**Year
                Ending**
            
            **Office
                Space**2006
            
            $
            350,0002007
            
            
            450,0002008
            
            
            550,0002009
            
            
            650,0002010
            
            
            750,000Thereafter
            
            
            188,000$
            2,938,000




Rent
      expense for the years ended December 31, 2005 and 2004 was $526,000 and
      $258,000, respectively.





**[4]** **Employee
        benefit plans:**





The
      Company administers a profit-sharing/savings plan pursuant to
      Section 401(k) of the Internal Revenue Code. The plan provides for a
      matching contribution by the Company up to a maximum level, which in no case
      exceeds 3% of the employees' compensation. Company contributions are fully
      vested immediately.





The
      Company's matching contribution was $52,000 and $64,000 for the years ended
      December 31, 2005 and 2004, respectively.





F-14




**CAREADVANTAGE,
      INC. AND SUBSIDIARIES**




**Note
      H - ADJUSTMENT TO ESTIMATED OPERATING LEASE LIABILITY AND WRITE DOWN OF
      LEASEHOLD IMPROVEMENTS:**





In
      June
      2002, the Financial Accounting Standards Board (“FASB”) issued Statement of
      Financial Accounting Standards (“SFAS”) No. 146, “Accounting for Costs
      Associated with Exit or Disposal Activities,” and nullifies Emerging Issues Task
      Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee
      Termination Benefits and Other Costs to Exit an Activity (including Certain
      Costs Incurred in a Restructuring)”. SFAS No. 146 requires that a liability for
      a cost associated with an exit or disposal activity be recognized when the
      liability is incurred. Under EITF Issue No. 94-3, a liability for exit costs
      was
      recognized at the date of an entity’s commitment to an exit plan. SFAS No. 146
      is effective for exit or disposal activities that are initiated after December
      31, 2002.





In
      2003,
      the Company incurred costs associated with the termination of certain operating
      leases, including the lease for its office space in Iselin, NJ in connection
      with exiting its prior service business with Horizon BCBSNJ and another BCBS
      customer under SFAS No. 146.





During
      2004, the Company continued its negotiation with the landlord and on January
      10,
      2005, the Company entered into a Lease Amendment commencing January 1, 2005
      to
      provide for the reduction in base rent and the waiver of escalations
      based on increases in real estate taxes and operating expenses ,
      and to
      provide the landlord with the option to recapture up to 50% of the leased
      premises at any time. The expiration date of the Lease, March 31, 2011, remains
      unchanged by the Lease Amendment.





For
      the
      year ended December 31, 2004, the Company accreted interest of $110,000, which
      is recognized as an increase in the carrying amount of the liability and as
      an
      expense. During 2004, the Company continued to pay the landlord the rent under
      the lease. The Company recorded a rent expense of approximately $258,000
      representing rent for space being used as contemplated. The balance of rent
      payment of $437,000 was applied against the liability. In accordance with SFAS
      No. 146 the cumulative effect of a change from the revisions of the lease was
      recognized as an adjustment to the liability and was reported as a gain of
      $1,623,000 during 2004.


Further
      in connection with the amended lease, during 2004 the Company wrote off certain
      leasehold improvements, furniture and fixtures and equipment with a net book
      value of $501,000 and included this as a loss on assets write-off in the
      accompanying consolidated statements of operations.





Under
      the
      Lease Amendment, the Company is required to meet the following conditions:
      (1)
      the Company cannot assign the


lease
      except for an assignment of the lease or a sublet provided under the original
      lease; (2) the Company is not in default under any terms and conditions of
      the
      original lease.  In the event the Company fails to meet these
      conditions, the reduction in base rent, real estate taxes and operating
      expenses will be nullified and entirely forfeited, and the Company will be
      immediately required to pay the landlord additional rent for the difference
      in
      the base rent, and additional rent for all escalations provided in the Lease
      Amendment and the original lease.





At
      December 31, 2005, this additional rent that would be due if the Company failed
      to meet the conditions of the amendment would be $ 346,000. Additional minimum
      lease payments for each of the next five years ended December 31 and thereafter
      that would be due if the Company failed to meet the conditions of the amendment
      are as follows:




**Year**
            
            **Office****Ending**
            
            **Space**2006
            
            $
            367,0002007
            
            
            274,0002008
            
            
            174,0002009
            
            
            95,0002010
            
            
            1,000Thereafter
            
            
            0$
            911,000







F-15


CAREADVANTAGE,
      INC. AND
      SUBSIDIARIES




**Note
      I - STAND BY LETTER OF CREDIT**





During
      2001, the Company obtained an irrevocable letter of credit in the amount of
      $92,793 in favor of the landlord for the Company’s obligation under its real
      estate lease. This letter expired as of March 31, 2005 and was not renewed.








F-16


EXHIBIT
      INDEX




**Exhibit
              No.**
            ****
            **Description
              of Exhibit**2.1
            
            Deposit
                Agreement dated October 31, 1994 among Midlantic Bank, N.A., PMDX
                and the
                Registrant incorporated by reference to Exhibit 2.1 filed with the
                Company's Registration Statement on Form S-1 (File No.
                33-89176).2.2
            
            Certificate
                of Merger of Care Advantage Health Systems (f/k/a Advantage Health
                Systems, Inc.), a Georgia corporation into CareAdvantage Health Systems,
                Inc., a Delaware corporation incorporated by reference to Exhibit
                2.2
                filed with the Company's Registration Statement on Form S-1 (File
                No.
                33-89176).




3.1
            
            Registrant's
                Certificate of Incorporation incorporated by reference to Exhibit
                3.1
                filed with the Company's Registration Statement on Form S-1 (File
                No.
                33-89176).3.1(a)
            
            Amended
                and Restated Certificate of Incorporation incorporated by reference
                to the
                Company's Information Statement dated September 1996.3.2
            
            Registrant's
                By-Laws incorporated by reference to Exhibit 3.2 filed with the Company's
                Registration Statement on Form S-1 (File No. 33-89176).10.1
            
            Letter
                of intent dated September 30, 1994 between the Registrant and New
                Jersey
                BCBS, amendments thereto of December 29, 1994, February 27, 1995
                and April
                4, 1995 and Interim Services Agreement as of April 1, 1995 between
                the
                Registrant and New Jersey BCBS incorporated by reference to Exhibit
                10.12
                filed with the Company's Registration Statement on Form S-1 (File
                No.
                33-89176).10.1(a)
            
            December
                22, 1995 Letter Agreement between the Registrant and New Jersey BCBS
                extending the Letter of Intent and Interim Services Agreement to
                March 31,
                1996 incorporated by reference to Exhibit 10.12(a) filed with the
                Company's Annual Report on Form 10-KSB for the year ended October
                31,
                1996.10.2
            
            Lease
                Agreement dated April 14, 1995 between the Registrant and Metropolitan
                Life Insurance Company incorporated by reference to Exhibit 10.13
                filed
                with the Company's Registration Statement on Form S-1 (File No. 33-89176).10.3
            
            Letter
                of Intent dated January 2, 1996 between CW Ventures II, L.P., the
                Registrant and its CareAdvantage Health Systems, Inc. subsidiary
                incorporated by reference to Exhibit 10.14 filed with the Company's
                Annual
                Report on Form 10-KSB for the year ended October 31, 1996.10.4
            
            Securities
                Purchase Agreement dated February 22, 1996 among CW Ventures, CAHS
                and the
                Registrant incorporated by reference to Exhibit 10.15 filed with
                the
                Company's Annual Report on Form 10-KSB for the year ended October
                31,
                1996.10.5
            
            CW
                Exchangeable Note incorporated by reference to Exhibit 10.16 filed
                with
                the Company's Annual Report on Form 10-KSB for the year ended October
                31,
                1996.10.6
            
            Stock
                Acquisition Agreement dated February 22, 1996 among EHC, CHCM, CAHS
                and
                the Registrant incorporated by reference to Exhibit 10.17 filed with
                the
                Company's Annual Report on Form 10-KSB for the year ended October
                31,
                1996.10.7
            
            EHC
                Exchangeable Note incorporated by reference to Exhibit 10.18 filed
                with
                the Company's Annual Report on Form 10-KSB for the year ended October
                31,
                1996.10.8
            
            Services
                Agreement dated February 22, 1996 among Horizon BCBSNJ, CHCM, CAHS
                and the
                Registrant incorporated by reference to Exhibit 10.19 filed with
                the
                Company's Annual Report on Form 10-KSB for the year ended October
                31,
                1996.











10.9
            
            Stockholders’
                Agreement dated February 22, 1996 among EHC, CW Ventures and the
                Registrant incorporated by reference to Exhibit 10.20 filed with
                the
                Company's Annual Report on Form 10-KSB for the year ended October
                31,
                1996.10.10
            
            Joint
                Services Agreement, dated May 29, 1997, among Allied Health Group,
                Inc.,
                CAHS, Inc. and the Company incorporated by reference to Exhibit 10(c)
                filed with the Company's Form 10-QSB for the quarter ended April
                30,
                1997.10.11
            
            Agreement,
                dated as of January 1, 1997 between Blue Cross and Blue Shield of
                Rhode
                Island (“BCBSRI”) and CAHS, Inc. incorporated by reference to Exhibit
                10(a) filed with the Company's Form 10-QSB for the quarter ended
                July 31,
                1997.10.12
            
            Consultant
                Agreement dated March 17, 1997, between Coordinated Health Partners,
                Inc.
                d/b/a Blue Chip, and CAHS, Inc. incorporated by reference to Exhibit
                10(d)
                filed with the Company's Form 10-QSB for the quarter ended April
                30,
                1997.




10.13
            
            Letter
                Agreement, dated as of March 1, 1997, between Medigroup of New Jersey,
                Inc. d/b/a HMO Blue, the Company and Allied Health Group, Inc.
                incorporated by reference to Exhibit 10(e) filed with the Company's
                Form
                10-QSB for the quarter ended April 30, 1997.10.14
            
            First
                Amendment and Restatement of Services Agreement, dated as of June
                13,
                1997, among CAHS, Inc., CHCM, the Company and Horizon BCBSNJ incorporated
                by reference to Exhibit 10(b) filed with the Company's Form 10-QSB
                for the
                quarter ended April 30, 1997.10.15
            
            Credit
                Agreement among Summit Bank, the Company and Horizon BCBSNJ, dated
                June
                13, 1997 incorporated by reference to Exhibit 10(f) filed with the
                Company's Form 10-QSB for the quarter ended April 30, 1997.10.16
            
            Revolving
                Credit Note, dated June 13, 1997 by the Company in favor of Summit
                Bank in
                the original principal amount of $1,500,000 incorporated by reference
                to
                Exhibit 10(f)(1) filed with the Company's Form 10-QSB for the quarter
                ended April 30, 1997.10.17
            
            Term
                Note, dated June 13, 1997, by the Company in favor of Summit Bank
                in the
                original principal amount of $1,500,000 incorporated by reference
                to
                Exhibit 10(f)(2) filed with the Company's Form 10-QSB for the quarter
                ended April 30, 1997.10.18
            
            Promissory
                Note and Security Agreement, dated April 1, 1997, by CHCM in favor
                of
                Horizon BCBSNJ, in the original principal amount of $1,862,823
                incorporated by reference to Exhibit 10(f)(3) filed with the Company's
                Form 10-QSB for the quarter ended April 30, 1997.10.19
            
            Employment
                Agreement between the Company and Thomas Riley, dated June 10, 1997,
                as
                supplemented by a side agreement with CW and Horizon BCBSNJ, of even
                date
                therewith incorporated by reference to Exhibit 10(a) filed with the
                Company's Form 10-QSB for the quarter ended April 30, 1997.10.20
            
            Services
                Agreement as of January 5, 1998, by and between New York Care Plus
                Insurance Company, Inc. and the Company, incorporated by reference
                to
                Exhibit 10.20 filed with the Company's Form 10KSB for the year ended
                October 31, 1997.10.21
            
            Consultation
                Agreement dated October 1, 1997 by and between the Company and David
                McDonnell, an independent director of the Company, incorporated by
                reference to Exhibit 10.21 filed with the Company's Form 10KSB for
                the
                year ended October 31, 1997.10.22
            
            Mutual
                Release Agreement dated as of January 6, 1998 between the Company
                and
                MEDecision, Inc., incorporated by reference to Exhibit 10.22 filed
                with
                the Company's Form 10KSB for the year ended October 31, 1997.10.23
            
            Separation
                Agreement dated April 20, 1995 between PMDX and the Registrant
                incorporated by reference to Exhibit 10.1 filed with the Company's
                Registration Statement on Form S-1 (File No. 33-89176).10.24
            
            Agreement
                dated as of January 1, 1995, between Maine BCBS and CAHS incorporated
                by
                reference to Exhibit 10.2 filed with the Company's Registration Statement
                on Form S-1 (File No. 33-89176).











10.25
            
            Products
                and Services Agreement dated November 7, 1994 between MEDecision,
                Inc. and
                CAHS incorporated by reference to Exhibit 10.3 filed with the Company's
                Registration Statement on Form S-1 (File No. 33-89176).10.26
            
            Registrant’s
                1995 Comprehensive Stock Incentive Plan incorporated by reference
                to
                Exhibit 4.2 filed with the Company's Registration Statement on Form
                S-1
                (File No. 33-89176).10.27
            
            Registrant’s
                1996 Stock Option Plan incorporated by reference to the Company's
                Information Statement dated September 1996.10.28
            
            Registrant’s
                1996 Director Stock Option Plan incorporated by reference to the
                Company's
                Information Statement dated September 1996.10.29
            
            Option
                Agreement between CW Ventures and Horizon BCBSNJ incorporated by
                reference
                to Exhibit 5 of Schedule 13(d) of Horizon BCBSNJ respecting beneficial
                ownership of Common Stock of the Company dated June 1997.


10.30
            
            Settlement
                and Release Agreement dated January 13, 1998 between the Company
                and John
                Petillo incorporated by reference to Exhibit 10.30 filed with the
                Company's Form 10KSB for the year ended October 31, 1997.10.31
            
            Settlement
                and Release Agreement dated December 19, 1997 between the Company
                and
                Vince Achilarre incorporated by reference to Exhibit 10.31 filed
                with the
                Company's Form 10KSB for the year ended October 31, 1997.10.32
            
            Employment
                Agreement between the Company and David Noone, dated January 8, 1999,
                incorporated by reference to Exhibit 10.32 filed with the Company’s Form
                10KSB for the year ended September 30, 1998.10.33
            
            Confidentiality,
                Invention, and Non-Compete Agreement between the Company and David
                Noone,
                dated as of January 8, 1999, incorporated by reference to Exhibit
                10.33
                filed with the Company’s Form 10KSB for the year ended September 30,
                1998.10.36
            
            Settlement
                and Release Agreement entered into among Horizon BCBSNJ, the Company,
                CAHS, and CHCM, Enterprise Holding Company, Inc. ("EHC") and CW Ventures,
                incorporated by reference to Exhibit 10(a) filed with the Company’s Form
                10-QSB for the quarter ended July 31, 1998.10.37
            
            Services
                Agreement dated as of January 1, 1999, by and between HealthNow New
                York,
                Inc. ("HNNY") and the Company, incorporated by reference to Exhibit
                10.35
                filed with the Company’s Form 10KSB for the year ended September 30,
                1998.10.36
            
            Amended
                and Restated Employment Agreement, dated as of September 29, 1998,
                with
                Richard W. Freeman, M.D., CAHS and the Company (the “Freeman Employment
                Agreement”), incorporated by reference to Exhibit 10.36 filed with the
                Company’s Form 10KSB for the year ended September 30, 1998.10.37
            
            Employment
                Agreement, dated as of March 25, 1997, by and between the Company
                and
                Elaine del Rossi, incorporated by reference to Exhibit 10.37 filed
                with
                the Company’s Form 10KSB for the year ended September 30,
                1998.10.38
            
            Confidentiality,
                Invention and Non-Compete Agreement dated as of March 25, 1998 between
                the
                Company and Elaine del Rossi, incorporated by reference to Exhibit
                10.38
                filed with the Company’s Form 10KSB for the year ended September 30,
                1998.10.39
            
            Employment
                Agreement, effective as of April 28, 1998, by and among Stephan D.
                Deutsch, M.D., the Company and CAHS, incorporated by reference to
                Exhibit
                10.39 filed with the Company’s Form 10KSB for the year ended September 30,
                1998.10.40
            
            Employment
                Agreement, effective as of April 19, 1999, between Dennis M. Mouras,
                and
                the Company, incorporated by reference to Exhibit 10.40 filed with
                the
                Company’s Form 10KSB for the year ended December 31, 1999.10.41
            
            Settlement
                Agreement dated August 9, 2000 among the Company, Horizon Healthcare
                of
                New Jersey, Inc. and Allied Specialty Care Services, Inc., incorporated
                by
                reference to Exhibit 10.1 filed with the Company’s Form 10QSB for the
                quarter ended September 30, 2000.











10.42
            
            Employment
                Agreement, effective as of April 17, 2000, between Christopher Minor
                and
                the Company, incorporated by reference to Exhibit 10.2 filed with
                the
                Company’s Form 10QSB for the quarter ended September 30,
                2000.10.43
            
            Satisfaction
                of Debt Agreement among Horizon Blue Cross Blue Shield of New Jersey,
                Horizon Healthcare of New Jersey, Inc., CareAdvantage, Inc., CareAdvantage
                Health Systems, Inc. and Contemporary HealthCare Management, Inc,
                incorporated by reference to Exhibit 10.1 filed on the Company’s Form 8-K
                dated December 5, 2000 and filed on December 13, 2000.10.44
            
            Amendment
                dated March 26, 2001 to Satisfaction of Debt Agreement dated as of
                November 1, 2000 among Horizon BCBSNJ, Horizon Healthcare of New
                Jersey,
                Inc., CareAdvantage, Inc., CareAdvantage Health Systems, Inc. and
                Contemporary HealthCare Management, Inc, incorporated by reference
                to
                Exhibit 10.1 filed with the Company’s Form 10-QSB for the quarter ended
                March 31, 2001.


10.45
            
            Service
                Agreement dated as of January 1, 2000 between Blue Cross Blue Shield
                of
                Rhode Island, Coordinated Health Partners, Inc. and CareAdvantage
                Health
                Systems, Inc., incorporated by reference to Exhibit 10.2 filed with
                the
                Company’s Form 10-QSB for the quarter ended March 31, 2001.10.46
            
            Amendment
                dated as of August 9, 2001 to Satisfaction of Debt Agreement dated
                as of
                November 1, 2000 among Horizon BCBSNJ, Horizon Healthcare of New
                Jersey,
                Inc., CareAdvantage, Inc., CareAdvantage Health Systems, Inc. and
                Contemporary HealthCare Management, Inc, incorporated by reference
                to
                Exhibit 10.1 filed with the Company’s Form 10-QSB for the quarter ended
                June 30, 2001.10.47
            
            Settlement
                Agreement between CareAdvantage, Inc. and Horizon Blue Cross Blue
                Shield
                of New Jersey, effective as of October 1, 2004, incorporated by reference
                to Exhibit 10.1 filed on the Company’s Form 8-K filed on October 1,
                2004.10.48
            
            Second
                Amendment to Lease Agreement between CareAdvantage Health Systems,
                Inc.
                and Corporate Plaza Associates, L.L.C., incorporated by reference
                to
                Exhibit 10.1 filed on the Company’s Form 8-K filed on January 11,
                2005.10.49
            
            Services
                and License Agreement between the Company and Kaiser Foundation Health
                Plan of the Northwest ("Kaiser"), effective as of January 1, 2005.
                Portions of this exhibit (indicated by asterisks) have been omitted
                pursuant to a request for confidential treatment pursuant to Rule
                24b-2 of
                the Securities Exchange Act of 1934*.10.50
            
            Amendment
                to Employment Agreement between the Company and Dennis J. Mouras,
                dated as
                of November 11, 2005, and Employment Agreement between the Company
                and
                Dennis J. Mouras, dated as of October 25,2000, incorporated by reference
                to Exhibit 10.50 filed with the Company’s Form 10-QSB for the quarter
                ended September 30, 2005.10.51
            
            First
                Amendment to Services and License Agreement between the Company and
                Kaiser
                Foundation Health Plan of the Northwest (“Kaiser”), effective as of
                January 1, 2006. Portions of this exhibit (indicated by asterisks)
                have
                been omitted pursuant to a request for confidential treatment pursuant
                to
                Rule 24b-2 of the Securities Exchange Act of 1934*.10.52
            
            Second
                Amendment to Services and License Agreement between the Company and
                Kaiser, effective as of April 1, 2006. Portions of this exhibit (indicated
                by asterisks) have been omitted pursuant to a request for confidential
                treatment pursuant to Rule 24b-2 of the Securities Exchange Act of
                1934*.16.1
            
            Letter
                regarding change in accountants, incorporated by reference to Exhibit
                16.1
                filed on the Company’s Form 8-K dated June 6, 1996.16.2
            
            Letter
                regarding change in accountants, incorporated by reference to Exhibit
                16.1
                filed on the Company’s Form 8-K dated July 31, 2001.16.3
            
            Letter
                regarding change in accountants, incorporated by reference to Exhibit
                16.1
                filed on the Company’s Form 8-K dated June 6, 2002.











21
            
            Subsidiaries
                of the Registrant*23.1
            
            Consent
                of Independent Auditors*31
            
            Certifications
                pursuant to Rule 13a-14(a), promulgated under the Securities Exchange
                Act
                of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of
                2002*32
            
            Certifications
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 **




_____________________________________


*filed
      herewith


**
      furnished herewith