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, 2000
                         Commission File Number 0-26168

                               CAREADVANTAGE, INC.
                               (Name of Business)

         Delaware                                           52-1849794
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                          Identification No.)

485-C Route 1 South, Iselin, New Jersey                         08830
(Address of principal executive office)                       (Zip Code)

       Registrant's telephone number, including area code: (732) 602-7000
                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)

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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-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. [ ]

The Registrant's revenues for its most recent fiscal year were $18,237,000


The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant  as of  February  28,  2001  (assuming  solely for  purposes  of this
calculation  that all  directors and executive  officers of the  Registrant  are
affiliates) was $869,869.

The number of shares of common  stock  outstanding  as of February  28, 2001 was
83,534,000.

              Transitional Small Business Disclosure Format Yes___ No_X_

     PORTIONS OF THE FOLLOWING DOCUMENTS HAVE BEEN INCORPORATED BY REFERENCE
                  INTO THIS ANNUAL REPORT ON FORM 10-KSB: NONE


<PAGE>


                                     PART I

Item 1. Description of Business
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Introduction and Background

         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 health  care cost  containment  services  designed to
enable health care insurers and other health service organizations to reduce the
costs of medical services provided to their subscribers. The management services
include care management  program  enhancement  services,  executive and clinical
management  services,  and training  programs;  the healthcare cost  containment
services   include   utilization   review  in   medical/surgical   cases   where
pre-authorization is required for hospitalization and for certain in-patient and
outpatient procedures,  case management and disease management,  and independent
reviews.  The  Company's  management  services  have been provided to integrated
health  care  delivery  systems;  the  Company's  health  care cost  containment
services  have been  principally  provided  to  several  of the  statewide  Blue
Cross/Blue  Shield  health  service  organizations  in the  Northeastern  United
States.

         CAI was  incorporated  in August 1994 as a wholly owned  subsidiary  of
Primedex Health Systems,  Inc. ("PMDX"), a publicly traded New York corporation.
During the Company's  fiscal year ended October 31, 1994, the Company  recruited
most of the members of its former  management team and began to put in place the
infrastructure  necessary to execute its growth and acquisition  strategies.  No
revenues were realized from the Company's inception through October 31, 1994, as
its principal  operating  activities were those of a development  stage company.
Effective  November 1, 1994,  the beginning of its 1995 fiscal year, the Company
commenced principal operations and began realizing revenues from certain interim
and long-term  service  agreements.  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.

        From its  inception  through  October  31,  1995,  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").  The transactions  included the sale to CW Ventures of
3,903,201  shares of the  Company's  common  stock,  par  value  $.001 per share
("Common Stock") at a purchase price of $0.2562 per share (after  adjustment for
the "one (1) for six  (6)"  reverse  stock  split of the  Company's  outstanding
Common Stock as discussed below) for an aggregate of $1,000,000 and the issuance
of an 8%  Exchangeable  Note in the  original  principal  amount of  $2,000,000,
maturing  on June 30,  1998 (the "CW  Note").  By its  terms,  CW  Ventures  was
required  to exchange  the CW Note on June 30, 1998 for shares of the  Company's
Common  Stock  absent any events of default,  as defined in the CW Note.  The CW
Note, which was collateralized by substantially all of the assets of the Company
and its subsidiaries,  was originally exchangeable into that number of shares of
the  Company's  Common  Stock  as  would  equal  approximately  23  1/3%  of the
outstanding  shares of the Company's common stock on a fully diluted basis as of
February 22, 1996.  Accordingly,  the  3,903,201  shares  issued to CW Ventures,
together  with the  shares  issuable  upon the  exchange  of the CW Note,  would
comprise 35% of the outstanding  shares of the Company's Common Stock on a fully
diluted basis as of February 22, 1996 (such percentage was subsequently adjusted
as discussed below). In addition, in connection with a $150,000 bridge financing
by CW Ventures to the  Company,  the Company  issued to CW Ventures  for nominal
consideration  five-year warrants (the "CW Warrants") to purchase 166,667 shares
of the  Company's  Common  Stock at an  exercise  price equal to $0.96 per share
(after  adjustment  for the  "one (1) for six (6)"  reverse  stock  split of the
Company's outstanding Common Stock).


<PAGE>


         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.  The CHCM
stock was  acquired  in exchange  for an 8%  Exchangeable  Note in the  original
principal  amount of  $3,600,000,  maturing on June 30, 1998 by CAHS in favor of
EHC,  which was  subsequently  assigned to Horizon  BCBSNJ (the "Horizon  BCBSNJ
Note").  The Horizon BCBSNJ Note was  collateralized by substantially all of the
assets  of the  Company  and its  subsidiaries.  The  Horizon  BCBSNJ  Note  was
originally exchangeable into that number of shares of the Company's Common Stock
as would equal  approximately  40% of the outstanding  shares on a fully diluted
basis as of February 22, 1996. The  transaction  was accounted for as a purchase
of CHCM for an amount  originally  approximating  $3,427,000 (the face amount of
the  Horizon  BCBSNJ  Note less an  original  issue  discount  of  approximately
$173,000), plus assumed liabilities of approximately $360,000 and purchase costs
of $64,000 and was subsequently  adjusted. The excess of the purchase price over
the fair value of CHCM's  tangible  assets  consisting of cash of  approximately
$848,000  and fixed  assets,  with a fair value of  approximately  $27,000,  was
allocated  to the  Services  Agreement  (see  Note C [1]  in the  "Notes  to the
Financial Statements").

         Since the Company did not have a sufficient  number of  authorized  but
unissued shares of Common Stock to permit the issuance of the required number of
shares  upon  exchange  of  the  CW  Note  and  the  Horizon  BCBSNJ  Note,  the
stockholders of the Company  approved an amendment to the Company's  Certificate
of Incorporation in August 1996, which decreased the authorized shares of Common
Stock to  90,000,000  shares,  created a new class of  "blank  check"  preferred
stock,  $.10 par value,  consisting of 10,000,000 shares and effected a "one (1)
for six (6)" reverse stock split of the Company's outstanding Common Stock. As a
result, and pursuant to the terms of the Horizon BCBSNJ Note, the Horizon BCBSNJ
Note was automatically exchanged on September 30, 1996 into 13,375,083 shares of
Common Stock of the Company.

         Pursuant  to the  terms of the CW Note  and the  Horizon  BCBSNJ  Note,
because the Company  failed to realize at least  $15,000,000  in net revenues or
specified  earnings before taxes for its fiscal year ended October 31, 1996, the
Company issued an aggregate of 50,156,559  additional  shares of Common Stock to
Horizon BCBSNJ and CW Ventures on February 27, 1997.

         The Company, Horizon BCBSNJ and CW Ventures are parties to an agreement
dated February 22, 1996 (the "Stockholders Agreement") pursuant to which Horizon
BCBSNJ and CW Ventures agreed that the Board shall consist of seven members.  By
unanimous  written  consent  dated as of May 22,  1997,  the Board of  Directors
reduced  the number of the  Company's  Directors  to six,  and by letters to the
Company  dated the same date ("May 22,  1997  Letters"),  Horizon  BCBSNJ and CW
Ventures consented to such reduction and modified their voting obligations under
the  Stockholders  Agreement.  As  modified  by the May 22,  1997  Letters,  the
Stockholders  Agreement  provides that Horizon BCBSNJ and CW Ventures each shall
vote their  shares in favor of two  members of the Board  designated  by Horizon
BCBSNJ,  two members of the Board  designated  by CW  Ventures,  one member from
senior  management  of the Company who is  acceptable  to Horizon  BCBSNJ and CW
Ventures,  and one member not associated  with  operations of the Company who is
acceptable to Horizon BCBSNJ and CW Ventures.

         As of November 1, 2000, the Company and its subsidiaries  were indebted
to  Horizon  BCBSNJ  and one of its  subsidiaries  in the  aggregate  amount  of
$1,577,740.  The debt owed to Horizon BCBSNJ is pursuant to a promissory note of
the Company in the face amount of $1,862,823  having an unpaid principal balance
of  $692,571  and  accrued  and unpaid  interest of $40,139 as of that date (the
"Promissory  Note").  The obligation to the Horizon  subsidiary in the amount of
$839,000  plus  accrued  and unpaid  interest  of $6,030 as of  November 1, 2000
arises from the settlement described in the Company's Form 10-KSB for the fiscal
year ended December 31, 1999 among the Company,  Allied Specialty Care Services,
Inc. and the Horizon subsidiary (see Settlement Agreement filed as an Exhibit to
the  Company's  Form 10-QSB for the quarter  ending  September  30,  2000).  The
Company,  Horizon  BCBSNJ  and  the  Horizon  subsidiary  have  entered  into  a
Satisfaction of Debt Agreement whereby the Company has agreed to issue shares of
its Common Stock in full payment and  satisfaction  of both the Promissory  Note
and the  settlement.  The number of shares to be issued will be equal to the sum
of (A) the amount of the  obligation  divided by the  greater of (i) the average
mean  between the closing bid and asked price per share of Common  Stock for the
20 trading days ending of the fifth  business day  preceding  the closing of the
settlement,  or (ii) twelve  cents  ($.12),  plus (B) that number of  additional
shares of Common Stock equal to 20% of the number of shares  specified in clause
(A). Closing is subject to certain conditions, including approval by the New


                                       2
<PAGE>

Jersey Departments of Banking and Insurance and Health and Senior Services.

        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) 602-7000.

Industry Overview: Consumerism, Health Care Expenditures and Managed Care

         The American health care market continues to evolve with an emphasis on
consumer choice,  patient rights,  and  confidentiality  protections,  against a
backdrop of accelerating costs and an aging population.  Employer groups balance
concern about the costs of providing  health  insurance to their  employees with
the need to  maintain a  competitive  human  resource  position in a tight labor
market.  Employers,  the traditional  customers of commercial  health  insurance
companies, continue to seek strategies to reduce costs while assuring access and
satisfaction.  Among the strategies is a fundamental  shift:  some employers are
abandoning  the middleman  role and enabling  their  employees to make their own
benefit  decisions.  Although  this  will  not  occur  immediately,  some of the
barriers,  such as  restricted  access  to  comparative  information,  are being
eliminated.  Additionally,  some employers may seek to distance  themselves from
the potential legal liabilities emerging in the health benefits industry.

         Over  the  next  decade  the  health   insurance   market  will  become
increasingly one of defined  contribution,  not defined  benefit,  and employees
will enjoy  selection  among multiple health  insurance  products.  Among health
insurers,  premium price  differences will become less  significant;  quality of
provider  networks  will be  assumed  and  relatively  non-differentiating;  and
service will separate winners from losers.

         Concurrently,  the health care  providers,  especially  physicians  and
integrated delivery systems, are increasingly  cautious about entering into risk
arrangements,  while expressing renewed vigor in taking charge of their destiny.
The larger  entities  among them have made,  and  continue to make,  substantial
investments in information technology with increasingly sophisticated managerial
accounting  systems to support  the  management  of their  services,  arrayed by
product  line.  By virtue of their market  position,  provider  systems lack the
capital, claims systems, marketing strength and geographic scope to compete with
health insurers.

         Increasingly,  the market will force  providers and insurers to develop
operational  and  administrative  efficiencies  in their many shared  functions.
Among  these  shared  functions  is care  management,  the  core  capability  of
CareAdvantage.

Services and Products

         The Company offers management and health care cost containment services
to the health  insurance  industry and health service  organizations in order to
assure that members  receive  appropriate  health and medical care. The services
include focused  utilization  management  services,  physician  review services,
specialty  case  management   services,   care  management  program  enhancement
services, executive and clinical management services, and training programs.

         The  Company   possesses   substantial   resources  in  core  areas  of
information  management,  member and provider  profiling and outreach  services,
including provider network  management and specialty case management,  and makes
them available to its clients in specific packages.

         Focused Utilization Management and Independent Review

         The Company transforms the client's utilization management program from
an administrative  exercise to a program that uses focused profiling to identify
inappropriate  variations  in  medical  practices,  as well as  clinical  review
criteria and highly credible  physician  advisors to actively  engage  attending
physicians  in  treatment  decisions.  These  proactive  utilization  management
methods  enable  the  Company's  clients  to  achieve  utilization   performance
approaching or exceeding that of well-managed health maintenance organizations.


                                       3
<PAGE>

         Physician Review Services

         Rapidly changing state legislation and evolving URAC and NCQA standards
are  driving  the need for health  plans to seek  external,  objective  clinical
review services to support their internal  medical review  process.  The Company
offers a panel of board  certified  physicians  representing  48  specialties in
traditional and alternative  healthcare.  The Company provides  physician review
services to HMOs, PPOs and indemnity plans.

         Specialty Case Management

         Specialty case management services apply fundamental principles of case
management  to identify  those  members in need of  coordination  of care,  with
potential for  improving  the clinical  outcomes,  and with the  opportunity  to
optimize their health insurance  benefit while avoiding  unnecessary  costs. The
Company's  proprietary  method,  RightPath(TM),  enables  its case  managers  to
systematically  select those members most in need, to apply standard,  validated
approaches to members with common clinical conditions, and to measure outcomes.

         Care  coordination,  both outpatient and inpatient,  allows patients to
access  a  variety  of  health  care   services,   such  as  home  health  care,
rehabilitation  and infusion  therapy  services.  The Company's  outpatient care
coordination  services provide an effective mechanism for cost containment while
safeguarding  the delivery of quality health care services.  Additionally,  only
members who give  consent are  enrolled in the  program.  Currently  the Company
achieves consent rates in excess of 80%.

         Case  management  also  seeks to support  the  attending  physician  in
managing the care of patients with chronic  diseases on an on-going basis.  Case
conferences  with matched  medical  specialists  are used to optimize  attending
physician collaboration.

         Care Management Program Enhancement Services

         The  Company  offers an  experienced,  multi-disciplinary  team of care
management  professionals  that  assess  care  management  operations,  systems,
resources,  integration  and outcomes.  The team  identifies  opportunities  and
provides  specific and  prioritized  recommendations  to improve the efficiency,
effectiveness  and results of the  program.  In addition,  the team  provides an
experienced,   on-site   implementation   team  to  facilitate  the  recommended
enhancements.

         Executive and Clinical Management Services

         The Company  offers  experienced  health care  executives for strategic
planning,   guiding   organization   transitions,   and  designing  and  leading
re-engineering   initiatives.   In  addition,  the  Company  offers  experienced
physician executives for care management program leadership,  internal physician
review services, and mentoring of inexperienced health plan medical directors.

         Training Programs

         The Company offers an extensive  care  management  training  curriculum
focused  on  increasing  productivity,  improving  program  outcomes,  enhancing
quality customer service, and promoting quality patient outcomes.


Operations

         The  Company  utilizes a  multi-disciplinary  team  approach  to ensure
effective  management and health care cost  containment  services.  The Company,
through its employees and subcontracting physician advisors,  reviews, evaluates
and monitors the medical necessity and  appropriateness  of the medical services
prescribed   for  members  in  its  clients'   health  plans.   Generally,   the
pre-admission  review  process  for  elective  and  non-elective   admission  is
initiated telephonically by the member or provider.  During this phase, clinical
review  staffs  evaluate  the  need  for,  and/or  initiate  when   appropriate,
pre-certification,    second   surgical   opinion,    insurance    verification,
pre-admission  testing,   pre-operative   education,   pre-operative  anesthesia
evaluation,  and continuing care planning.  Additionally,  pre-admission  review
determines if the service  requested is medically  necessary by utilizing review
criteria, appropriate alternatives for providing service, length of stay and the
need for case management intervention.


                                       4
<PAGE>

         The Company currently  maintains a contracted  network of more  than 95
independent,  multi-specialty  physician  advisors,  most of whom are  active in
managed  care  practices  and some of whom are  affiliated  with major  teaching
hospitals.  Several of these physicians are currently  spending  one-to-two days
per week  on-site  with  and on  behalf  of the  Company's  clients,  discussing
questionable  cases with local  specialists and leading  meetings with groups of
local  specialists to disseminate  and implement the care  management  "critical
pathways"  necessary for effective  case  management.  The Company also uses its
nurse  reviewers for  telephonic  review as well as in hospitals to conduct more
extensive  on-site  reviews of patients,  whenever  possible.  On-site review is
performed for concurrent  review and case management  activities.  These on-site
reviews also include  collaboration  with the Company's local and national board
certified physician employees and advisors.  By reviewing on-site,  these nurses
are in a better  position to determine the need for continued  stay, and to make
necessary arrangements for outpatient care.

         For its services,  the Company is compensated either (i) on a fixed-fee
per subscriber basis; (ii) on a  performance-based  method whereby the Company's
compensation  is based on achieving  certain  defined  benchmarks;  (iii) on the
basis of a combination of both fixed fee per  subscriber  and  performance-based
fees; and (iv) on a fee-for-service basis. Accordingly,  the Company has adopted
the following  accounting  policies for revenue  recognition under each contract
category:

         (a)      Revenue under the fixed-fee and  fee-for-service  arrangements
                  is  recognized  as the  services  are provided and the related
                  costs of services are incurred.

         (b)      Revenue  under the partial  fixed-fee/incentive  agreements is
                  initially  recognized for the monthly fixed-fee component only
                  as services  are  provided  and related  costs of services are
                  incurred.  Incentives based upon performance are recorded when
                  such amounts can reasonably be determined.

Customers and Marketing

         The Company  currently  provides  its  services to five Blue Cross Blue
Shield  ("BCBS")  organizations  in the  Northeastern  United  States and to two
integrated  health care delivery systems pursuant to one or a combination of the
compensation  arrangements described above. Also, the Company is dependent on at
least  two  of  such  customers  including  Horizon  BCBSNJ,  a  more  than  45%
stockholder  of the Company,  for a substantial  portion of its revenues,  gross
margins and cash flows.  The loss of either of these two customers  would have a
material  adverse  impact on the Company's cash flows and results of operations.
The Company had a written service  agreement with Horizon BCBSNJ that expired on
June 30, 2000.  The Company has been  continuing to provide  services to Horizon
pursuant to an oral  agreement,  pending  negotiation  of a  definitive  written
contract renewal.  Although the precise terms of a contract renewal have not yet
been agreed upon,  the Company has been informed by Horizon  BCBSNJ that Horizon
BCBSNJ  intends to  continue to  contract  with the Company for care  management
services for the  indemnity  portion of the  business at least until  January 1,
2002. In 2000,  Horizon BCBSNJ accounted for  approximately 75% of the Company's
revenue, of which 65% was attributable to Horizon's indemnity business.

         The Company  markets its services to group health  insurance  companies
and health service organizations throughout the United States.

         Typically,  the  Company  will  enter into an  agreement  with a client
pursuant to which the Company provides its services.  The Company's services for
a group health insurance company generally cover all insureds under an indemnity
or PPO insurance plan and/or members of a health  maintenance  organization plan
affiliated with the insurer.  When the Company contracts to provide its services
to an insurer,  the insurer's  account  executives  ordinarily plan to offer the
Company's  services to its group  policyholders  and those groups  covered under
administrative-services-only arrangements.

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 services. Management is aware of a significant number of independent
utilization  review  firms  currently  marketing   utilization  review  services
directly  to  employers,  small  insurers,  and third party  administrators.  In
addition to other  utilization  review and  medical  management  companies,  the
Company competes with insurance  companies,  that have developed in-house staffs
to provide such services.  There are a variety of competitors offering component
services  such as physician  reviewers  and demand  management/patient  advisory
products.  There  are also a number of  organizations  developing  a variety  of


                                       5
<PAGE>

approaches to case and disease  management.  Some of the  Company's  competitors
have substantially  greater financial resources and employ substantially greater
numbers of personnel.

         The Company intends to compete on the basis of the quality of services,
including  its  ability to develop  tailored  programs  for large  clients,  its
willingness  to accept risk in methods of  compensation  based on  results,  its
computer-based  clinical decision making and information systems and its current
experience in developing outsourcing  arrangements acceptable to Blue Cross Blue
Shield plans.

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  makes  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. (See "Legal Proceedings.")

         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.



                                       6
<PAGE>


         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,  2000,  the Company  employed a total of 157  full-time
employees.  Of this total,  119  employees are engaged in servicing its clients.
The 38 remaining employees include executives,  administrative support, finance,
marketing,  training  and  education,  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 has executed a
six-year lease for this facility  commencing  June 15, 1995,  which was extended
during 2000 for ten 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.  The Company  believes that its facilities
are adequate for its current  needs and that suitable  additional  space will be
available as required.

         The   Company   also   maintains   rent-free   operations   offices  in
approximately  600 square feet of space in  Providence,  Rhode  Island  under an
informal  oral  arrangement  with  Blue  Cross and Blue  Shield of Rhode  Island
("BCBSRI").  Additionally,  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
-------  -----------------

         Robert T. Caruso v. John J. Petillo, Vincent M. Achillare,  Lawrence A.
Whipple,  et al.,  which was filed in Superior Court of New Jersey on August 12,
1998.  Messrs.  Petillo,  Achillare and Whipple were officers of the Company and
may have claims for  indemnification  for expenses and for any judgments against
them in this case.  Mr.  Caruso was a consultant  to the Company.  The complaint
alleges breach of contract, fraud, conspiracy, promissory estoppel and negligent
misrepresentation in connection with, among other things, the termination of Mr.
Caruso's  consulting  arrangement  with the Company.  The plaintiff seeks treble
damages from defendants,  including the Company,  for an unspecified  amount and
claims actual damages in the approximate amount of $1.8-2.0 million. The Company
received  notice from two of its  insurance  carriers  denying  coverage on this
matter,  but the Company plans to vigorously  contest these coverage  decisions.
The Company received a written claim for indemnification from defendants Petillo
and Achillare and,  subject to their having acted in good faith, the Company has
agreed to  indemnify  them and  defendant  Whipple  and to pay their  reasonable
defense  costs.  On February  16,  2001,  the court  dismissed  this action with
prejudice  with respect to defendant  Achillare;  this matter has been scheduled
for trial on April 30,  2001  with  respect  to the  remaining  defendants.  The
Company  believes  that  plaintiff's  claims  are  without  merit  and  plans to
vigorously contest them at trial.


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

         During the last  quarter of calendar  year ended  December  31, 2000, a
majority of the holders of the Company's  Common Stock  approved an amendment to
the Company's  Certificate of  Incorporation  (the "Charter  Amendment")  and an
amendment to the  Company's  Amended and  Restated  Stock Option Plan (the "Plan
Amendment").  The Charter Amendment increased the authorized Common Stock of the
Company from 103,600,000  shares to 200,000,000  shares,  and the Plan Amendment
increased the number of shares  authorized  under the Amended and Restated Stock
Option Plan (the  "Plan")  from  18,648,000  shares to  22,648,000  shares,  and
beginning  January 1, 2002,  will increase the number of shares  authorized  for
issuance under the Plan pursuant to non-qualified  options by three percent (3%)
annually.


                                       7
<PAGE>


                                                       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.

                                           2000                    1999
                                           ----                    -----
              Quarter Ended            High      Low           High        Low
              -------------            ----      ---           ----        ---
              March 31,                $.48      $.16          $.25       $.03
              June 30,                 $.38      $.16          $.45       $.14
              September 30,            $.21      $.11          $.45       $.27
              December 31,             $.20      $.07          $.31       $.13

(b)      Holders: As of March 13, 2001 there were approximately 4,027 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 many factors,  including the Company's earnings and
         capital needs.


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  the 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.

Company Risk

        We have had a history of losses. Although our Company was profitable for
the calendar year 2000, we have  experienced a history of significant  operating
losses on a consolidated  basis. At December 31, 2000, we had working capital of
approximately $1,382,000,  stockholders equity of approximately $2,783,000,  and
an accumulated deficit of approximately $19,538,000.


                                       8
<PAGE>

         We face  aggressive  competition  because new competitors can enter our
field  easily and because  customers  could  decide to perform the  functions or
services that we provide internally. New competitors can enter our field easily.
Many of our  customers may decide to perform  functions or services  internally,
which we previously provided.  Also, some of our providers may decide to compete
against us by marketing products and services to our customers.

        Because  of  increased  merger  and  acquisition  activity  we may  face
stronger  competition  in the future.  Our industry,  as well as our  customers'
industries (i.e., health insurers and HMOs) have experienced  significant merger
and acquisition  activity.  Merger and acquisition  activity may create stronger
competitors  or  result  in  decreased  opportunities.   Strong  competition  or
competition  that intensifies in any market will adversely affect our ability to
retain or increase  customers,  or maintain or increase revenue growth,  pricing
flexibility, or control over medical cost trends and marketing expenses.

        We could incur  significant  additional  costs as a result of litigation
based on the adverse  medical  consequences of our  recommendations.  We provide
cost containment services for health care organizations. Our services include:

          o    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;

          o    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;

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

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

        We  base  our  recommendations  on  patient  benefit  plan  coverage  on
judgments and established  protocols as to the  appropriateness  of the proposed
medical  treatment.  Our judgments and  established  protocols are 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 engage in the
practice of medicine or that we deliver 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.

        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.

        Because  our  products  depend  on the  integrity  of our  data,  if the
information contained in our databases were 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.  We rely on data collected through case
studies and other confidential criteria to make cost containment decisions. Many
of the products that are part of our knowledge and information-related  business
rely on the  integrity of the data on which they are based.  If the  information
contained in our databases were 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 of our database-related products.

        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

                                       9
<PAGE>


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.

Industry Risk

        Because the managed  care  industry has  received  significant  negative
publicity there has been increased  activity,  regulation and review of industry
practices.  The managed care industry frequently receives  significant  negative
publicity.  The negative  publicity  has  contributed  to increased  legislative
activity,  regulation and review of industry  practices.  Legislative  activity,
regulation  and review may  adversely  affect our ability to market  products or
services,  may require us to change products and services,  and may increase the
regulatory burdens under which we operate.

        Our failure to comply with, or the costs of complying  with,  government
regulation could affect our ability to grow by denying  licensing or restricting
payment for services.  Our  operations  are subject to extensive and  frequently
changing  federal,  state and local laws and  regulation  concerning  licensing,
conduct of operations,  acquisitions of business operating in our industry,  the
employment  of  physicians  and other  licensed  professionals  and  payment for
services.  These various types of regulatory  activity could restrict our growth
through  acquisition  or  otherwise,  by  limiting  or denying  licensing  or by
limiting the payment for services provided.

        Existing  laws  and   regulations  may  be  revised  and  new  laws  and
regulations  could be adopted or become  applicable to us. We may not be able to
recover  these  increased  costs of  compliance  from our  customers  and future
changes  in  applicable  laws and  regulations  could  affect our  business  and
financial conditions.

Investment Risk

        The market price of our shares has been extremely  volatile.  The market
prices 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.

        Two  stockholders  own over 90% of the outstanding  shares of our common
stock.   Our  two  largest   stockholders,   Horizon  BCBSNJ  and  CW  Ventures,
beneficially own more than 90% of the outstanding shares of our common stock. An
agreement between our largest stockholders and us states that Horizon BCBSNJ and
CW Ventures  have agreed to vote their shares in us with respect to the election
of our board of directors for:

          o    two designees of CW Ventures;

          o    two designees of Horizon BCBSNJ;

          o    one  member  of our  management  acceptable  to CW  Ventures  and
               Horizon BCBSNJ; and

          o    one non-employee  outside director  acceptable to CW Ventures and
               Horizon BCBSNJ.

The  Stockholders  Agreement  prevents us from taking certain  material  actions
without the consent of Horizon BCBSNJ and/or CW Ventures.  If Horizon BCBSNJ and
CW Ventures  were to vote in the same  manner on the  election of members of the
board of directors or on any other  matter  requiring  approval of a majority of
the  outstanding  shares  of common  stock,  the  matter  would be  approved  or
defeated, as the case may be, depending on the vote of the stockholders.

        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. There is a limited public float in our common stock
as  the  result  of  the  ownership  of  91.65%  of  the  common  stock  by  two
stockholders.

                                       10
<PAGE>

        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:

          o    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;

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

          o    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.

Overview

         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.

Change in Fiscal Year

    On June 8, 1999, the Company changed its fiscal year from one ending October
31 to a calendar year ending December 31.


Results of  Operations--12  Months Ended December 31, 2000 Compared to 12 Months
Ended December 31, 1999

Revenues:

         Total  revenues for the years ended  December 31, 2000 and December 31,
1999 were approximately $18,237,000 and $16,410,000,  respectively. The increase
in revenues of  approximately  $1,827,000  was  primarily  attributable  to: (i)
increased  revenue of  approximately  $471,000 due to increased  membership on a
major account,  (ii) increased revenue due to realization of performance revenue
of approximately $204,000,  (iii) increased revenue of approximately  $1,308,000
due to new  contracts,  and (iv) offset by  decreased  revenue of  approximately
$156,000 due to decreased membership from the Company's other customers.

         Contracts that provide for  performance-based  revenues  require claims
data that is supplied by the Company's customers to calculate the achievement of
goals for each period.  Because  compilation  of claims data  typically lags the
Company's  actual  performance  by several  months,  it is  difficult  to ensure
complete  accuracy when  recording  performance-based  revenues.  Management has
worked  closely with its  customers  to secure more timely and accurate  data to
improve the accuracy of reporting its revenues,  including,  in some cases,  the
re-negotiation  of the  contract  a fixed fee  basis.  Management  believes  its
estimated  performance-based  revenues  contained  in reported  revenues for the
twelve months ended December 31, 2000 are accurate based upon the data available

                                       11
<PAGE>

to management.  However, information received by the Company after the filing of
this  Form  10-KSB  could  result  in  an   adjustment   of  its   estimates  of
performance-based  revenues (which would be reflected in subsequent quarters, if
necessary).

Cost of services:

         Cost of services for the years ended December 31, 2000 and December 31,
1999 were approximately $9,164,000 and $8,955,000, respectively. The increase in
the cost of services of  approximately  $209,000 is largely due to  increases in
personnel  costs  of  approximately  $286,000,  travel  costs  of  approximately
$79,000,  professional and consulting costs of approximately  $103,000 and other
costs of approximately $3,000, primarily offset by decreases in depreciation and
amortization costs of approximately $262,000.

Operating Expenses

Selling, general and administrative:

         Selling,  general and administrative costs for the years ended December
31,  2000  and  December  31,  1999  were  $7,994,000  compared  to  $7,931,000,
respectively.  The  increase in selling,  general  and  administrative  costs of
approximately  $63,000  is  largely  due to  increases  in  personnel  costs  of
approximately  $71,000,  professional  and  consulting  costs  of  approximately
$93,000, and other general and administrative  costs of approximately  $243,000,
offset by a decrease of  approximately  $344,000  due to a write-off of software
development costs in 1999.

Depreciation and amortization:

         Depreciation and amortization for the years ended December 31, 2000 and
December 31, 1999 aggregated $893,000,  of which $173,000 is included in cost of
services,  compared to $1,277,000 for the year ended December 31, 1999, of which
$435,000 is included in cost of services.  Depreciation and amortization for the
year  ended  December  31,  2000  includes  amortization  of  intangible  assets
attributed to the Services Agreement with Horizon BCBSNJ, in connection with the
acquisition  of  CHCM  of  approximately   $122,000  (See  "Notes  to  Financial
Statements  -  Introduction  and  Background"),  amortization  of  approximately
$241,000  relating to other  intangible  assets and depreciation of property and
equipment of approximately $530,000.

Interest income/expense:

         Interest  income for the year ended  December  31, 2000 was $96,000 and
$104,000,  respectively.  Interest expense during the fiscal year ended December
31,  2000 was $43,000  compared  with  interest  expense of $61,000 for the year
ended December 31, 1999. The decrease in net interest  expense of  approximately
$18,000 is largely due to  decreased  interest  costs under the IBM master lease
agreement of  approximately  $12,000,  and  decreased  interest  costs under the
Horizon BCBSNJ Note of approximately $6,000.

Financial Condition

Liquidity and capital resources:

         At December 31, 2000,  the Company had cash of  $1,479,000  and working
capital of  approximately  $1,382,000.  At December 31, 1999, the Company's cash
balance was  $1,615,000  and working  capital was  approximately  $264,000.  The
increase  in  working  capital of  approximately  $1,118,000  is largely  due to
increased operating income for the twelve months ended December 31, 2000.

         Net cash provided from operating  activities  amounted to approximately
$123,000  and  $244,000  for the years ended  December 31, 2000 and December 31,
1999,  respectively.  This  decrease in cash is largely due to the a decrease in
accounts payable of approximately  $124,000,  a decrease in accrued expenses and
other  liabilities of approximately  $91,000,  a decrease in deferred revenue of
approximately  $160,000,  an increase in other current  assets of  approximately
$64,000,  offset by increases  in cash due to  increases in non-cash  charges of
approximately  $1,020,000,  an increase in customer  receivable of approximately
$998,000 and $412,000 in net profit.



                                       12
<PAGE>


         Net cash used by investing activities amounted to approximately $53,000
and  $775,000  for the years ended  December  31, 2000 and  December  31,  1999,
respectively.  This  decrease in cash used of  approximately  $722,000 is due to
decreased capital expenditures during the current calendar year.

         Net  cash  used  by  financing  activities  amounted  to  approximately
$206,000 and  $1,208,000  for the years ended December 31, 2000 and December 31,
1999,  respectively.  This decrease in cash used of approximately  $1,002,000 is
primarily due to suspended loan payments  related to a  stockholder/customer  of
approximately  $889,000 and decreased  principal  payments related to the Master
Lease Agreement with IBM of  approximately  $319,000,  proceeds from issuance of
common stock of approximately $50,000,  offset by transfer of restricted cash of
approximately $256,000.

         While there can be no assurances,  management believes that its cash on
hand and projected  future cash flows from operations will support the Company's
anticipated cash needs for calendar year ending December 31, 2000.

         Pursuant  to a  promissory  note  dated  April 1, 1997 in the  original
principal  amount of $1,862,823,  assigned to Horizon  BCBSNJ,  the Company owes
$693,000 to Horizon BCBSNJ as of December 31, 2000.  The  promissory  note bears
interest at the five-year U.S, Treasury yield,  adjusted quarterly.  The Company
has an agreement with Horizon BCBSNJ to suspend  payments and convert  principal
and accrued interest as of November 1, 2000 to common stock.

         On  November  1,  2000,   the  Company  and  Horizon  BCBSNJ  signed  a
"Satisfaction of Debt Agreement".  Under the terms of the agreement, the Company
will pay and satisfy  amounts  outstanding  to Horizon  BCBSNJ of  approximately
$1,600,000 by issuance of its common stock. The amount of $1,600,000 consists of
the promissory  note dated April 1, 1997, with a balance at December 31, 2000 of
$693,000, the amount due to customer of $839,000, and accrued interest.

         The transaction is subject to approval from the New Jersey  Departments
of  Banking  and  Insurance  and is  expected  to close by the end of the second
quarter 2001.

         The  Company  had a credit  facility  with a bank that  provided  for a
$1,500,000  working  capital  revolver  to be used for general  working  capital
needs, which was effective through June 30, 2000. The Company did not renew such
credit facility.


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.



                                       13
<PAGE>

                                    PART III

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

The Company's  directors,  executive officers and control persons as of December
31, 2000 are as follows:

  Name                      Age  Positions with the Company
  ----                      ---  --------------------------
  William J. Marino (1)     57   Chairman of the Board of Director
  Robert J. Pures (2)       55   Director
  Barry Weinberg (1)        62   Director
  David McDonnell (1) (2)   58   Director
  Walter Channing, Jr. (2)  60   Director
  David G. Noone (3)        47   Director and Chief Executive Officer
  Dennis J. Mouras (3)      44   President and Chief Operating Officer
  R. Christopher Minor      46   Senior Vice President & Chief Financial Officer
------------------------------------------------------------------------

(1)  Member of Compensation Committee

(2)  Member of Audit Committee

(3)  As of February 15, 2001, Mr. Noone resigned as Chief Executive  Officer and
     Mr. Mouras was appointed to that office.  Also, as of that date,  the Board
     of Directors  was expanded to seven members and Mr. Mouras was appointed as
     Director.

         There is no family  relationship  between  any  Director  or  Executive
Officer of the Company. At a meeting of the Company's Board of Directors held on
January 14, 1997, a Compensation Committee and Audit Committee were formed.

         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  Company,  Horizon  BCBSNJ  and  CW  Ventures  are  parties  to the
Stockholders  Agreement,  pursuant to which Horizon  BCBSNJ and CW Ventures have
agreed  that each of them shall be  entitled  to  designate  two  members of the
Board;  one member will be management  of the Company  acceptable to CW Ventures
and Horizon BCBSNJ,  and one member will be a non-employee  who is acceptable to
CW Ventures and Horizon BCBSNJ (See  "Description of Business - Introduction and
Background"  above).  CW  Ventures  has  designated  Barry  Weinberg  and Walter
Channing,  Jr. as members of the Board. Horizon BCBSNJ has designated William J.
Marino and Robert J. Pures as members of the Board.

         The  following  sets forth  certain  information  with  respect to each
Director and Executive Officer of the Company:

         William J.  Marino has been a director of the  Company  since  February
1996 and a director of Contemporary  HealthCare  Management  System,  Inc. since
December 1993. He has been President,  Chief Executive Officer and a director of
Horizon  BCBSNJ since January 1994,  and Senior Vice President of Horizon BCBSNJ
from January 1992 through  December 1993. Mr. Marino also currently  serves as a
director and member of the compensation committee of Team Staff, Inc.

                                       14
<PAGE>

         Robert J. Pures has been a director of the Company since February 1996.
He has been Senior Vice President - Administration,  Chief Financial Officer and
Treasurer of Horizon BCBSNJ since 1995, and Vice President Finance and Treasurer
of Horizon BCBSNJ from October 1985 through July 1995.

         Barry  Weinberg has been a director of the Company  since May 1997.  He
has been President of the CW Group,  Inc., a company engaged in investing in the
health care field since 1981.  Mr.  Weinberg  currently  serves on the boards of
directors of several  privately  owned  companies and is a general partner of CW
Partners.

         Walter Channing, Jr. has been a director of the Company since May 1997.
He has been Vice President of the CW Group, Inc., a company engaged in investing
in the health care field since 1981. Mr. Channing currently serves on the boards
of directors of several privately owned companies and is a general partner of CW
Partners.

         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.

         David Noone has been a director  of the  Company and CEO since  January
1999. 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 and
from December 1993 to February 1995, as President and Chief Executive Officer of
Value Health Insurance Services Group,  another Value Health,  Inc.  subsidiary,
where he was responsible  for  development of a diversified  managed health care
company serving the property casualty,  group health and auto liability sectors.
Prior to that time, Mr. Noone served as President and Chief Operating Officer of
Preferred Health Care Ltd. from 1992 to 1993 and in a variety of capacities with
that company from 1987 to 1992.  Effective February 15, 2001, Mr. Noone resigned
his position as Chief Executive Officer of the Company.

         Dennis Mouras has served as the Chief Executive  Officer of the Company
since February 15, 2001. He has served as President and Chief Operating  Officer
of the Company since October 30, 2000, He served 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.

         R.  Christopher  Minor has served as Senior  Vice  President  and Chief
Financial  Officer since April 2000.  Prior to that,  Mr. Minor served as Senior
Vice President & Treasurer of Hermitage  Insurance Company from December 1997 to
March  2000,  and as Vice  President  and Chief  Financial  Officer  of One Call
Medical, Inc. from August 1996 to December 1997. Prior to that, Mr. Minor served
as Vice President and Chief Financial  Officer of Value  Behavioral  Health from
January 1994 to March 1996.


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 2000 its officers,  directors
and ten percent  (10%)  beneficial  owners  complied  with all the Section 16(a)
filing  requirements,  with the exception that Mr. Noone inadvertently failed to
report in a timely  manner his exercise of two options.  These two  transactions
were reported late on a Form 4.



                                       15
<PAGE>

Item 10.   Executive Compensation
--------   ----------------------

                             EXECUTIVE COMPENSATION

    The following table sets forth information  concerning the compensation paid
or accrued by the  Company  for each of the three  fiscal  calendar  years ended
December 31, 2000, 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.
<TABLE>
<CAPTION>

                           Summary Compensation Table

-----------------------------------------------------------------------------------------------------------------------------------

                                                          Annual Compensation                     Long Term
                                                                                                 Compensation
-----------------------------------------------------------------------------------------------------------------------------------
                                 Year Ended                                                        Securities
     Name and Principal          December 31,    Salary         Bonus       Other Annual           Underlying        All Other
          Position                                                          Compensation(2)     Options/SARSs(#)     Compensation
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>         <C>              <C>            <C>                   <C>             <C>
David G. Noone (5)                  2000        $300,000         $-0-           $-0-                 -0-              $5,100 (1)
Chief Executive Officer             1999        $295,385         $-0-           $-0-              3,600,000           $4,800 (1)
                                    1998          $-0-           $-0-           $-0-                 -0-                 $-0-
-----------------------------------------------------------------------------------------------------------------------------------
Richard W. Freeman, M.D. (3)        2000        $275,009         $-0-          $18,051               -0-              $5,100 (1)
President &                         1999        $275,009        $55,723         $-0-              2,541,000           $4,800 (1)
Chief Operating Officer             1998        $270,162         $-0-           $-0-                 -0-              $4,917 (1)
-----------------------------------------------------------------------------------------------------------------------------------
Dennis J. Mouras (5)                2000        $229,615         $-0-          $64,728            2,500,000           $5,100 (1)
President &                         1999        $155,769         $-0-          $41,538             500,000               $-0-
Chief Operating Officer             1998          $-0-           $-0-           $-0-                 -0-                 $-0-
-----------------------------------------------------------------------------------------------------------------------------------
R. Christopher Minor                2000        $145,385         $-0-           $-0-               700,000               $-0-
Senior Vice President               1999          $-0-           $-0-           $-0-                 -0-                 $-0-
& Chief Financial Offer             1998          $-0-           $-0-           $-0-                 -0-                 $-0-
-----------------------------------------------------------------------------------------------------------------------------------
David DeBoskey(4)                   2000        $108,231         $-0-           8,405                -0-                 $935
Senior Vice President               1999        $107,269         $-0-           $-0-               610,000            $2,718 (1)
Finance & Accounting                1998        $ 87,654        $25,000         $-0-                 -0-              $2,608 (1)
-----------------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------

(1)  Represents Company matching contributions to a 401(k) profit sharing/savings plan.
(2)  Other  Annual  Compensation  includes  taxable  fringe  benefits and unused
     accrued vacation days, and, in the case of Mr. Mouras,  advance commissions
     that were paid.
(3)  Mr. Freeman resigned his employment with the Company effective October 2, 2000.
(4)  Mr. DeBoskey resigned his employment with the Company effective March 23, 2000.
(5)  As of February 15, 2001,  Mr. Noone  resigned as Chief  Executive  Officer and Mr. Mouras was  appointed to that office.
     Also, as of that date, the Board of Directors was expanded to seven members and Mr. Mouras was appointed as Director.

</TABLE>

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.


                                       16
<PAGE>


    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. 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'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 plans.  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.

<TABLE>
<CAPTION>

                        Option Grants in Last Fiscal Year

      ------------------------------------------------------------------------------------------
                                   Number of     % of Total
                                   Securities      Options
                                   Underlying    Granted to
                 Name               Options     Employees in   Exercise Price
                                  Granted (#)    Fiscal Year      per Share     Expiration Date
      ------------------------------------------------------------------------------------------
<S>                                <C>               <C>            <C>         <C>
      Dennis J. Mouras             2,500,000         53%            $0.11       October 25, 2010
      ------------------------------------------------------------------------------------------
      R. Christopher Minor           500,000         11%            $0.40       April 3, 2010
                                     200,000          4%            $0.11       October 25, 2010
      ------------------------------------------------------------------------------------------
</TABLE>


                                       17
<PAGE>



                 Aggregated Option Exercises in Last Fiscal Year
                        and Fiscal Year-End Option Values

<TABLE>
<CAPTION>

                                                      Number of                            Value of
                                                  Shares Underlying                Unexercised In-the-Money
                 Name                          Unexercised Options at                     Options at
                 ----                            December 31, 2000                   December 31, 2000
                                              Exercisable/Unexercisable          Exercisable/Unexercisable(1)
                                              -------------------------          ----------------------------

<S>                                              <C>                                  <C>
David G. Noone                                     750,000/1,800,000                   $ 67,500/$162,000
Richard W. Freeman, M.D.                         1,578,334/0                           $142,050/$0
Dennis Mouras                                      273,609/2,726,391                    $24,625/$245,375
R. Christopher Minor                                     0/700,000                           $0/$63,000

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

(1)  Calculated on the basis of the closing bid price on the OTC Bulletin  Board
of the Company's Common Stock of $0.09 on December 31, 2000.

Employment Agreements and Board Appointments

        Noone Employment Agreement

         Effective as of January 8, 1999 the Company  entered into an Employment
Agreement and Confidentiality,  Invention and Non-Compete Agreement of even date
therewith with David Noone, its current Chief Executive  Officer  (collectively,
the "Noone  Agreements").  The Noone  Agreements  provide  for a  one-year  term
commencing January 8, 1999, with annual  compensation of $300,000 per annum. The
Company will pay Mr. Noone a severance payment equal to six-month's salary if he
is terminated  upon a "change of control" (as defined below).  In addition,  Mr.
Noone is subject to a non-compete restriction during the term of employment plus
two years thereafter.  The Noone Agreements  further provide for the issuance of
stock options as of the commencement  date providing Mr. Noone with an option to
purchase  Common  Stock  in an  amount  equal  to  four  (4%)  of the  Company's
capitalization  on such date,  upon the terms and  conditions set forth therein.
These options are subject to  accelerated  vesting if: (a) the Company's  Common
Stock  reaches  certain  target  levels or (b) if either  of the  Company's  two
largest  shareholders,  Horizon  BCBSNJ and CW Ventures  sells or transfers  its
shares of Common Stock to a  non-affiliated  party  ("Change of Control")  for a
price at least 300% higher than the average sales price of the Company's  Common
Stock,  during the thirty (30) days prior to his employment with the Company, as
reported by Bloomberg Business Services. For this purpose, Horizon BCBSNJ and CW
Ventures shall not be considered affiliated with each other.

         Pursuant to  unanimous  written  consents  of each of the  Compensation
Committee of the Board of  Directors  and the Board of Directors of the Company,
dated January 8, 1999, David Noone was appointed a "management  director" of the
Board of  Directors  effective  as of January 8, 1999,  filling a vacancy on the
Board.

         Mr. Noone's employment agreement was renewed for a one-year term on the
same terms and conditions, except the Agreement was amended to increase from six
months to one year the amount of  compensation  that Mr. Noone would  receive in
the event that his employment  was  terminated  after a Change in Control of the
Company.  As of February 15, 2001, Mr. Noone resigned as Chief Executive Officer
of the Company.

         Freeman Employment Agreement

         The Company entered into an Amended and Restated Employment  Agreement,
dated as of September 29, 1998, with Richard Freeman, M.D., the former President
and Chief  Operating  Officer of the Company and CAHS (the  "Freeman  Employment
Agreement").  The term of the Freeman Employment  Agreement commenced on October
30,  1998 and  continued  for a two-year  period,  with an  additional  one-year
renewal.  Dr.  Freeman was entitled to an annual salary of $275,000,  plus other
benefits set forth therein. The Freeman Employment Agreement provides for a cash
bonus in the  amount of  $95,000  in the event of a "Change  in  Control  of the
Company" (as defined therein).  The Freeman Employment Agreement also contains a
non-compete  restriction  during the term of Dr.  Freeman's  employment plus two
years  thereafter.  Dr. Freeman  resigned his employment  with the Company as of
October 2, 2000.



                                       18
<PAGE>



         Mouras Employment Agreement

         As of  October  25,  2000,  the  Company  entered  into  an  Employment
Agreement with Dennis Mouras (the "Mouras  Employment  Agreement"),  the current
President and Chief Operating Officer.  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 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.

         Minor Employment Agreement

         Effective as of April 17, 2000, the Company  entered into an Employment
Agreement with R. Christopher Minor, its current Senior Vice President and Chief
Financial  Officer  (the  "Minor  Agreement").  The term of the Minor  Agreement
commenced  April 19, 2000,  and  continues for a one-year  term,  after which it
renews  automatically for successive one-year terms unless otherwise  terminated
in accordance with its terms.  Under the Minor Agreement,  Mr. Minor is entitled
to (a) an annual salary of $210,000,  (b) an incentive  stock option to purchase
500,000 shares of the Company's  Common Stock,  and (c) other benefits set forth
therein.  Mr. Minor is subject to a non-compete  restriction  during the term of
his employment and for a period of one year thereafter.


Compensation of Directors

Generally

         No member of the Board of Directors of the Company  presently  receives
annual remuneration for acting in that capacity,  except disinterested Directors
who  are  neither  officers  nor  associated  with  stockholders.  Disinterested
Directors  are paid  $1,000 for each  meeting  of the Board they  attend and are
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. As of December 31, 2000,
Mr. McDonnell is the only director that has been granted any options pursuant to
the  Directors  Stock Option Plan.  Mr.  McDonnell was awarded as of January 26,
1999, an option to purchase  300,000 shares of the Company's  Common Stock.  The
option may be exercised at $.08 per share,  and becomes  exercisable as follows:
(a)  100,000 of such  shares were  immediately  exercisable;  (b) 66,666 of such
shares became  exercisable on January 26, 2000; and (c) the remaining 133,334 of
such  shares  become  exercisable  in 24 equal  monthly  amounts  commencing  on
February  26, 2000 and on the 26th day of the  following  23 months.  The market
price of the Common Stock on January 26, 1999,  the date the option was granted,
was $.08 per share.

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.  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  (other  than
directors  appointed by CW Ventures or Horizon BCBSNJ) 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 (equal to 2,072,000
shares of Common Stock) is reserved for issuance.

         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.



                                       19
<PAGE>

         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
--------  --------------------------------------------------------------

         The following table sets forth as of March 1, 2001 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

                                       Number of Shares
    Name of Beneficial Owner       Beneficially Owned(1) Percent of Ownership(2)

Principal Holders:
    Horizon Blue Cross and Blue Shield of
       New Jersey (3)(4)(5)              37,617,420              45.03%
    CW Ventures II, L.P.(5)(6)           37,617,420              45.03%

Management:
    William J. Marino (3)                       334                  *
    Robert J. Pures (3)                           0                  *
    Walter Channing, Jr. (5)(6)(7)       37,617,420              45.03%
    Charles Hartman (5)(6)(7)            37,617,420              45.03%
    Barry Weinberg (5)(6)(7)             37,617,420              45.03%
    David J. McDonnell (9)(10)              249,992                  *
    David Noone (9)(10)                   1,900,000               2.25%
    Dennis Mouras (9)(10)                   312,497                  *
    R. Christopher Minor (9)(10)                  0                  *

    All Directors and executive officers as
    a Group (8 persons) (7)(10)          40,079,909              47.18%
--------------------------
    * Less than 1%



                                       20
<PAGE>




(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  business  address of Horizon  Blue Cross and Blue Shield of New Jersey,
Mr.  Marino,  Chairman of the Board of Directors of the Company,  and Mr. Pures,
Directors of the Company, is 3 Penn Plaza East, Newark, New Jersey 07105.

(4) In the event that the  Services  Agreement  between  the Company and Horizon
BCBSNJ is  terminated  by Horizon  BCBSNJ,  CW  Ventures  will have the right to
purchase   Horizon   BCBSNJ's  shares  in  accordance  with  the  terms  of  the
Stockholders Agreement between Horizon BCBSNJ and CW Ventures.

(5) Horizon  BCBSNJ may be deemed a member of a "group," as such term is used in
Section 13(d) of the Exchange Act, with CW Ventures,  CW Partners III, L.P., the
general partner of CW Ventures ("CW  Partners"),  and Walter  Channing,  Charles
Hartman and Barry Weinberg, the general partners of CW Partners.  Horizon BCBSNJ
on the one hand, and CW Ventures, CW Partners and Messrs. Channing,  Hartman and
Weinberg,  on the  other,  disclaim  membership  in a group for the  purpose  of
Section 13(d) of the Exchange Act or for any other purpose.

(6) The  business  address of Messrs.  Channing and  Weinberg,  Directors of the
Company, and Mr. Hartman is 1041 Third Avenue, New York, New York 10021.

(7) Includes 37,617,420 shares directly owned by CW Ventures.  Messrs. Channing,
Hartman and Weinberg are the general partners of CW Partners, and as such may be
deemed to beneficially own such shares and to have shared voting and disposition
power  over  such  shares.  Messrs.  Channing,  Hartman  and  Weinberg  disclaim
beneficial  ownership  of such shares  except to the extent of their  respective
direct and indirect partnership interests in CW Ventures.

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

(9) The  business  address of Messrs.  Mouras,  Minor and Noone is 485-C Route 1
South, Iselin, New Jersey 08830.

(10) 249,992 of Mr. McDonnell's  shares of Common Stock,  850,000 of Mr. Noone's
shares  of Common  Stock,  312,497  of Mr.  Mouras'  shares of Common  Stock and
1,412,489 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 March 1, 2001 or that will be exercisable
within 60 days of such date.

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

         The Company  has entered  into a series of  transactions  with  Horizon
BCBSNJ.  In February  1996,  the Company  issued the Horizon BCBSNJ Note, in the
original  principal  amount of $3,600,000,  which  provided for conversion  into
13,375,083  shares of Common Stock and the issuance of an additional  24,242,337
shares of Common  Stock for failure of the Company to meet  certain  revenue and
income thresholds.  Accordingly, in conjunction with this obligation the Company
issued to Horizon BCBSNJ 24,242,337 shares of Common Stock on February 27, 1997.
For further description of the Horizon BCBSNJ Note, see "Description of Business
- Introduction and  Background." As of December 31, 2000,  Horizon BCBSNJ is the
beneficial owner of 37,617,420  shares of Common Stock,  constituting  45.03% of
the outstanding  Common Stock at December 31, 2000.  Effective June 13, 1997 the
Services Agreement with Horizon BCBSNJ was amended and restated, which amendment
was attached as Exhibit 10(a) to the Company's Form 10-QSB for the quarter ended
April 30, 1997 and is incorporated by reference herein.  The First Amendment and
Restatement  of the Services  Agreement  requires,  among other things,  Horizon
BCBSNJ to pay a monthly "interim payment" based on current enrollment data which
is adjusted every April and October.  Although this agreement has expired by its
terms,  the Company is continuing to provide services to Horizon BCBSNJ pursuant
to an informal  agreement.  Currently,  the Company is  receiving  approximately
$1,100,000  per month as a result of this  agreement.  In  addition,  two (2) of
Horizon BCBSNJ  officers are directors of the Company:  Robert Pures, a director
of the Company, is Senior Vice President,  Chief Financial Officer and Treasurer
of Horizon BCBSNJ;  and William  Marino,  a director of the Company and CHCM, is
also a director, President and Chief Executive Officer of Horizon BCBSNJ.

         As of November 1, 2000, the Company and its subsidiaries  were indebted
to  Horizon  BCBSNJ  and one of its  subsidiaries  in the  aggregate  amount  of
$1,577,740.  The debt owed to Horizon BCBSNJ is pursuant to a promissory note of
the Company in the face amount of $1,862,823  having an unpaid principal balance
of $692,571 and accrued and unpaid interest of $40,139 as of that date (the


                                       21
<PAGE>

"Promissory  Note").  The obligation to the Horizon  subsidiary in the amount of
$839,000  plus  accrued  and unpaid  interest  of $6,030 as of  November 1, 2000
arises from the settlement described in the Company's Form 10-KSB for the fiscal
year ended December 31, 1999 among the Company,  Allied Specialty Care Services,
Inc. and the Horizon subsidiary (see Settlement  Agreement filed as Exhibit 10.1
to the Company's  Form 10-QSB for the quarter  ending  September 30, 2000).  The
Company,  Horizon  BCBSNJ  and  the  Horizon  subsidiary  have  entered  into  a
Satisfaction of Debt Agreement whereby the Company has agreed to issue shares of
its Common Stock in full payment and  satisfaction  of both the Promissory  Note
and the settlement (see  Satisfaction of Debt Agreement filed as Exhibit 10.1 to
the Company's  Form 8-K filed on December 13, 2000).  The number of shares to be
issued will be equal to the sum of (A) the amount of the  obligation  divided by
the greater of (i) the average  mean between the closing bid and asked price per
share of Common Stock for the 20 trading  days ending of the fifth  business day
preceding the closing of the settlement,  or (ii) twelve cents ($.12),  plus (B)
that number of  additional  shares of Common Stock equal to 20% of the number of
shares  specified  in clause  (A).  Closing is  subject  to certain  conditions,
including  approval by the New Jersey  Departments  of Banking and Insurance and
Health and Senior Services.

         The  Company has also  entered  into a series of  transactions  with CW
Ventures.  In February  1996,  the Company  issued the CW Note,  in the original
principal  amount of  $2,000,000,  which  provided for exchange  into  7,799,997
shares of Common Stock and the issuance of an  additional  25,914,222  shares of
Common Stock failed to meet certain revenue and income thresholds.  Accordingly,
the Company issued to CW Ventures  25,914,222 shares of Common Stock on February
27, 1997 for failure to meet such thresholds.  For further description of the CW
Note, see  "Description of Business - Introduction  and Background." In February
1996 the  Company  also  issued to CW  Ventures  the CW  Warrants.  For  further
description of the CW Warrants,  see "Description of Business - Introduction and
Background."  Effective June 30, 1998, the CW Note was  automatically  converted
into 7,799,997  shares of Common Stock.  As of December 31, 2000, CW Ventures is
the beneficial owner of 37,784,087 shares of Common Stock,  constituting  45.55%
of the outstanding Common Stock,  assuming the exercise of the CW Warrants only.
In February 2001, the CW Warrants expired  unexercised.  Also, two of CW Venture
officers  are  directors  of the  Company:  Barry  Weinberg is a director of the
Company,  CAHS and CHCM and is also a General  Partner  of CW  Partners;  Walter
Channing,  Jr. is a director of the Company and is also a General  Partner of CW
Partners.

         In June  1997,  CW  Ventures  granted  to  Horizon  BCBSNJ an option to
purchase  from it  10,031,238  shares  of common  stock at $0.38 per share  (the
"Horizon BCBSNJ Option").  The Horizon BCBSNJ Option would have been exercisable
in the event the Company had achieved  certain goals for defined periods through
February  2000,  which  goals were not  achieved.  The option was  granted by CW
Ventures to Horizon  BCBSNJ in  consideration  of Horizon  BCBSNJ  revising  its
Services  Agreement with the Company,  entering into a joint services  agreement
between Horizon BCBSNJ,  the Company and an unrelated party, and an agreement to
guaranty the Summit Bank Credit Agreement.



                                       22
<PAGE>


Item 13.  Exhibits and Reports on Form 8-K
--------  --------------------------------

(a)      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).

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).

3.11     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.

                                       23
<PAGE>


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  10-KSB 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 10-KSB 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  10-KSB 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).


                                       24
<PAGE>


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.

10.34    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.

10.35    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.

                                       25
<PAGE>

10.41    Settlement  Agreement  Settlement  Agreement dated August 9, 2000 among
         the  Company,  Horizon  Healthcare  of  New  Jersey,  Inc.  and  Allied
         Specialty Care Services, Inc.

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    Debt Satisfaction Agreement among Horizon Blue Cross Blue Shield of New
         Jersey,  Horizon  Healthcare  of New  Jersey,  Inc.,  and the  Company,
         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.

16       Letter  regarding  change in accountants,  incorporated by reference to
         Exhibit 16.1 filed on the Company Form 8-K dated June 6, 1996.

23       Consent of Independent Auditors*
--------------------------------------------
*filed herewith

(b)      Reports on Form 8-K

         On December 13,  2000,  the Company  filed a Report on Form 8-K,  dated
December 5, 2000,  under Items 5 and 7 of Form 8-K,  announcing that the Company
entered  into a Debt  Satisfaction  Agreement  to  convert  approximately  $1.58
million in indebtedness owed to Horizon Blue Cross and Blue Shield of New Jersey
and Horizon Healthcare of New Jersey, Inc. into the Company's common stock.


                                       26
<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                       CareAdvantage, Inc.
                                       -----------------------------------------
                                       (Registrant)

Date: March 30, 2001              By: /s/ Dennis J. Mouras
      --------------                  ------------------------------------------
                                      Dennis J. Mouras, Chief Executive Officer,
                                      Director

         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 30, 2001              By: /s/ Dennis J. Mouras
      --------------                  ------------------------------------------
                                      Dennis J. Mouras, Chief Executive Officer,
                                      Director
                                      (Principal Executive Officer)

Date: March 30, 2001              By: /s/ R. Christopher Minor
      --------------                  ------------------------------------------
                                      R. Christopher Minor, Senior VP  &  Chief
                                      Financial Officer
                                      (Principal  Financial  and  Accounting
                                      Officer)

Date:
      --------------              By: ------------------------------------------
                                      William J. Marino, Director

Date: March 30, 2001              By: /s/ Robert J. Pures
      --------------                  ------------------------------------------
                                      Robert J. Pures, Director

Date:                             By:
      --------------                  ------------------------------------------
                                      Barry Weinberg, Director

Date: March 30, 2001              By: /s//Walter Channing, Jr.
      --------------                  ------------------------------------------
                                      Walter Channing, Jr., Director

Date:                             By:
      --------------                  ------------------------------------------
                                      David McDonnell, Director

Date: March 30, 2001              By: /s/ David Noone
      --------------                  ------------------------------------------
                                      David Noone, Director



                                       27
<PAGE>

                               CAREADVANTAGE, INC.
                                AND SUBSIDIARIES

                             CONSOLIDATED FINANCIAL
                                   STATEMENTS

                           DECEMBER 31, 2000 AND 1999



<PAGE>


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Statements                                                   Page
                                                                       ----
  Independent Auditors' Report                                          F-2

  Consolidated Balance sheets as of December 31, 2000 and 1999          F-3

  Consolidated Statements of operations for the years
  ended December 31, 2000 and 1999                                      F-4

  Consolidated Statements of stockholders' equity for the years
  ended December 31, 2000 and 1999                                      F-5

  Consolidated Statements of cash flows for the years ended
  December 31, 2000 and 1999                                            F-6

  Notes to financial statements                                         F-7

                                      F-1
<PAGE>



                          INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors
CareAdvantage, Inc.
New York, New York


We have audited the accompanying  consolidated  balance sheets of CareAdvantage,
Inc.  and  subsidiaries  as of  December  31,  2000  and  1999  and the  related
consolidated  statements of operations,  stockholders' equity and cash flows for
the two years  then  ended.  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 auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain reasonable  assurance about whether the consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  consolidated  financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall  consolidated  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, 2000 and 1999, and the consolidated  results
of their  operations  and their  consolidated  cash flows for the two years then
ended in conformity with accounting  principles generally accepted in the United
States of America.


/s/Richard A. Eisner & Company, LLP


New York, New York
February 22, 2001


                                      F-2
<PAGE>

<TABLE>
<CAPTION>

                      CAREADVANTAGE, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheets

                                                                                                        December 31,
                                                                                                        ------------
                                                                                                    2000             1999
                                                                                                    ----             ----

                                             ASSETS
Current assets:
<S>                                                                                           <C>              <C>
   Cash                                                                                       $     1,479,000  $     1,615,000
   Restricted cash                                                                                    256,000
   Accounts receivable:
      Stockholder                                                                                   1,228,000        1,135,000
      Other                                                                                         1,078,000          173,000
   Other current assets                                                                               145,000          220,000
                                                                                              ---------------  ---------------

        Total current assets                                                                        4,186,000        3,143,000

Property and equipment, at cost less accumulated depreciation                                         438,000          845,000
Intangible assets net of accumulated amortization                                                     850,000        1,283,000
Other assets                                                                                          113,000          102,000
                                                                                              ---------------  ---------------

                                                                                              $     5,587,000  $     5,373,000
                                                                                              ===============  ===============

                            LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                                           $       190,000  $       313,000
   Due to stockholder                                                                               1,532,000          393,000
   Due to customer                                                                                                     902,000
   Accrued compensation and related benefits                                                          747,000          841,000
   Accrued expenses and other current liabilities                                                     335,000          332,000
   Deferred revenue, stockholder                                                                                        98,000
                                                                                              ---------------  ---------------

        Total current liabilities                                                                   2,804,000        2,879,000

Due to stockholder, less current portion                                                                               300,000
                                                                                              ---------------  ---------------

                                                                                                    2,804,000        3,179,000
                                                                                              ---------------  ---------------


Commitments and contingencies

Stockholders' equity:
   Preferred stock - par value $.10 per share; authorized 10,000,000
      shares; none issued
   Common stock - par value $.001 per share, authorized 200,000,000
      shares; issued and outstanding 83,533,752 and 82,189,883 shares                                  83,000           82,000
   Additional capital                                                                              22,238,000       22,062,000
   Accumulated deficit                                                                            (19,538,000)     (19,950,000)
                                                                                              ---------------  ---------------

                                                                                                    2,783,000        2,194,000
                                                                                              ---------------  ---------------


                                                                                              $     5,587,000  $     5,373,000
                                                                                              ===============  ===============
</TABLE>


See notes to consolidated financial statements


                                      F-3
<PAGE>

<TABLE>
<CAPTION>


                      Consolidated Statements of Operations

                                                                                                     Year Ended
                                                                                                    December 31,
                                                                                                    ------------
                                                                                               2000               1999
                                                                                               ----               ----

<S>                                                                                     <C>                 <C>
Net service revenue                                                                     $    18,237,000     $    16,410,000
Cost of services                                                                              9,164,000           8,955,000
                                                                                        ---------------     ---------------

Gross profit                                                                                  9,073,000           7,455,000
                                                                                        ---------------     ---------------

Operating expenses:
   Selling, general and administrative                                                        7,994,000           7,931,000
   Depreciation and amortization                                                                720,000             842,000
                                                                                        ---------------     ---------------

      Total operating expenses                                                                8,714,000           8,773,000
                                                                                        ---------------     ---------------

Operating income (loss)                                                                         359,000          (1,318,000)
Interest income                                                                                  96,000             104,000
Interest expense                                                                                (43,000)            (61,000)
                                                                                        ---------------     ---------------

                                  Net income (loss)                                     $       412,000     $    (1,275,000)
                                                                                        ===============     ===============

Net income (loss) per share of common
   stock - basic and diluted                                                                   $.00              $(.02)
                                                                                               ====              =====

</TABLE>

See notes to consolidated financial statements


                                      F-4
<PAGE>
                      CAREADVANTAGE, INC. AND SUBSIDIARIES

                 Consolidated Statements of Stockholders' Equity

<TABLE>
<CAPTION>
                                                             Common Stock
                                                         Number       Par
                                                          of          Value      Additional      Accumulated    Stockholders'
                                                        Shares       Amount        Capital         Deficit          Equity
                                                        ------       ------        -------         -------          ------

<S>                                                    <C>          <C>         <C>            <C>              <C>
Balance as of January 1, 1999                          82,189,883   $ 82,000    $ 22,009,000   $ (18,675,000)   $  3,416,000
Issuance of compensatory stock options                                                53,000                          53,000
Net loss for the year  ended  December 31,                                                        (1,275,000)     (1,275,000)
1999                                                  -----------   --------    ------------   -------------    ------------


Balance as of December 31, 1999                        82,189,883     82,000      22,062,000     (19,950,000)      2,194,000
Stock  option  modification   compensation                                           127,000                         127,000
expense
Exercise of stock options                               1,343,869      1,000          49,000                          50,000

Net    income    for   the   year    ended                                                           412,000         412,000
December 31, 2000                                     -----------  ---------    -----------    -------------    ------------

                                                       83,533,752   $ 83,000    $ 22,238,000   $ (19,538,000)   $  2,783,000
                                                      ===========   ========    ============   =============    ============

</TABLE>

See notes to consolidated financial statements


                                      F-5

<PAGE>

<TABLE>
<CAPTION>

                      Consolidated Statements of Cash Flows

                                                                                                         Year Ended
                                                                                                        December 31
                                                                                              ------------------------------
                                                                                                   2000              1999
                                                                                              ------------     -------------


Cash flows from operating activities:
<S>                                                                                          <C>               <C>
   Net income (loss)                                                                         $     412,000     $  (1,275,000)
   Adjustments to reconcile net income (loss) to net cash
      provided by operating activities:
        Depreciation and amortization                                                              893,000         1,277,000
        Write off of software development cost                                                                       344,000
        Compensatory stock options                                                                 127,000            53,000
        Changes in:
           Accounts receivable stockholder                                                         (93,000)          (55,000)
           Accounts receivable other                                                              (905,000)          142,000
           Other current assets                                                                     64,000            80,000
           Accounts payable                                                                       (124,000)          120,000
           Accrued expenses and other current liabilities                                          (91,000)         (269,000)
           Deferred revenue                                                                       (160,000)         (173,000)
                                                                                             -------------     -------------

              Net cash provided by operating activities                                            123,000           244,000
                                                                                             -------------     -------------

                           Cash flows from investing activities:
   Capital expenditures                                                                            (53,000)         (775,000)
                                                                                             -------------     -------------

Cash flows from financing activities:
   Proceeds from exercise of stock options                                                          50,000
   Principal payments under long-term debt                                                                          (319,000)
   Principal payments under note payable, stockholder                                                               (889,000)
   Transfer to restricted cash                                                                    (256,000)
                                                                                             -------------     -------------

              Net cash used in financing activities                                               (206,000)       (1,208,000)
                                                                                             -------------     -------------

                                   Net decrease in cash                                           (136,000)       (1,739,000)
Cash - beginning of year                                                                         1,615,000         3,354,000
                                                                                             -------------     -------------

                                    Cash - end of year                                       $   1,479,000     $   1,615,000
                                                                                             =============     =============

Supplemental disclosures of cash flow information:
   Interest paid                                                                                               $      61,000
   Income taxes paid                                                                         $      42,000     $      56,000

</TABLE>

See notes to consolidated financial statements


                                      F-6

<PAGE>


                      CAREADVANTAGE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999


NOTE A - INTRODUCTION AND BACKGROUND

CareAdvantage,  Inc.  ("CAI"  or the  "Company"),  is a holding  company  which,
through its  subsidiaries,  CareAdvantage  Health  Systems,  Inc.  ("CAHS")  and
Contemporary  HealthCare  Management,  Inc.  ("CHCM"),  operates in one business
segment, providing health care cost containment services to health care insurers
and other health service  organizations  to reduce the costs of medical services
provided to their subscribers.

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 ("Horizon BCBSNJ"). The transactions included the sale to CW Ventures
of (i)  3,903,201  shares of the Company's  common stock at a purchase  price of
$0.2562  per  share  for an  aggregate  of  $1,000,000;  and  (ii) a  $2,000,000
principal  amount 8%  Exchangeable  Note which matured on June 30, 1998 (the "CW
Note") and was then  converted  into  7,799,997  shares of the Company's  common
stock.

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.  The CHCM stock was acquired in exchange
for CAHS's $3,600,000  principal amount 8% Exchangeable Note which, in turn, was
exchanged on September 30, 1996 for  13,375,000  shares of the Company's  common
stock.

Pursuant to the terms of the CW Note and the Horizon  BCBSNJ  Note,  because the
Company  failed to realize at least $15  million in net  revenues  or  specified
earnings  before taxes for its fiscal year ended  October 31, 1996,  on February
27,  1997,  the Company  issued  50,156,559  additional  shares of common  stock
resulting in an increase of both Horizon BCBSNJ and CW Ventures equity to 45% on
a fully diluted basis.

The Company has a service  agreement  with Horizon  BCBSNJ which expired on June
30, 2000 and accounted for approximately  75% of net revenue for 2000.  Although
the  precise  terms of a contract  renewal  have not yet been agreed  upon,  the
Company has been informed by Horizon BCBSNJ that Horizon BCBSNJ will continue to
contract with the Company for care management services for the indemnity portion
of the business at least until  January 1, 2002.  The  indemnity  portion of the
business  accounts for  approximately  90% of the total Horizon BCBSNJ  contract
revenues on an annual basis.

The  Company,  Horizon  BCBSNJ and CW Ventures  are  parties to a  stockholders'
agreement dated February 22, 1996 (the  "Stockholders'  Agreement") whereby each
of  Horizon  BCBSNJ and CW  Ventures  have  agreed to vote  their  shares in the
Company with respect to the election of the  Company's  Board of Directors  for:
(i) two designees of CW Ventures;  (ii) two designees of Horizon  BCBSNJ;  (iii)
two members of the  Company's  management  acceptable to CW Ventures and Horizon
BCBSNJ; and (iv) one nonemployee  outside director acceptable to CW Ventures and
Horizon BCBSNJ.  The  Stockholders'  Agreement  prevents the Company from taking
certain  material  actions without Horizon BCBSNJ's and/or CW Ventures' or their
designated directors' consent.

On June 8, 1999, the Company  changed its fiscal year from one ending October 31
to a calendar year ending December 31.


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.  Significant  intercompany   accounts  and   transactions  have  been
     eliminated in consolidation.

                                      F-7
<PAGE>


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (CONTINUED)

[2]  Revenue recognition:

     For its services,  the Company is compensated either (i) on a fixed-fee per
     subscriber basis; (ii) on a performance-based  method whereby the Company's
     compensation is based on achieving certain defined benchmarks; (iii) on the
     basis of a combination  of both fixed fee and  performance-based  fees; and
     (iv) on a fee-for-service basis.  Accordingly,  the Company has adopted the
     following  accounting  policies for revenue recognition under each contract
     category:

     (a)  Revenue  under  the  fixed-fee   arrangements   and  fee  for  service
          arrangements  is  recognized  as the  services  are  provided  and the
          related costs of services are incurred.

     (b)  Revenue  under the  partial  fixed  fee/incentive-type  agreements  is
          initially  recognized  for the  monthly  fixed fee  component  only as
          services  are provided  and related  costs of services  are  incurred.
          Incentives  based upon  performance  are estimated and recorded in the
          period earned.

[3] Depreciation and amortization:

     Depreciation  is computed by the  straight-line  method and is based on the
     estimated  useful lives of the various  assets.  Estimated  useful lives of
     depreciable assets range from three to seven years.  Leasehold improvements
     are amortized using the straight-line method over the remaining term of the
     related lease.  Depreciation  expense amounted to $530,000 and $637,000 for
     the years ended December 31, 2000 and 1999, respectively.

     Intangible assets are amortized over their expected useful lives of five to
     seven years on the straight-line method (see Note C).

     Depreciation and amortization expense of $173,000 and $435,000 are included
     in cost of services for December 31, 2000 and 1999, respectively.

[4]  Per share data:

     Basic net income (loss) per share has been  computed  based on the weighted
     average number of shares outstanding during the periods.  Dilutive earnings
     per share  reflects  the  potential  dilution  that could occur if dilutive
     options and warrants  outstanding  were exercised and converted into common
     stock.

<TABLE>
<CAPTION>

                                                                        December 31,
                                                                   -----------------------
                                                                     2000          1999
                                                                   ----------   ----------

<S>                                                                <C>          <C>
          Weighted average common shares outstanding - basic       83,090,000   82,190,000
          Effect of dilutive options                                6,522,000
                                                                   ----------   ----------

          Weighted average common shares outstanding - diluted     89,612,000   82,190,000
                                                                   ==========   ==========
</TABLE>

      Options and warrants outstanding at December 31, 2000 and 1999 to purchase
      approximately   2,871,000   and   14,616,000   shares  of  common   stock,
      respectively,  were not  included in the  diluted  per share  computation.
      During the year ended  December  31, 2000,  some of the options'  exercise
      prices were  greater  than the average  market  price of the common  stock
      during the period and, therefore, the effect would be antidilutive. During
      the year ended December 31, 1999,  including those potential common shares
      would reduce the loss per-share amount and therefore be antidilutive.

                                      F-8
<PAGE>


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (CONTINUED)

[4]  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.  The Company markets its
     services  primarily to Blue Cross and Blue Shield companies.  Collateral is
     not required to support financial instruments.

[5]  Estimates:

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  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.

[6]  Fair value of financial instruments:

     The fair value of financial instruments approximates their carrying amount.

[7]  Major customers:

     Two of the Company's  customers  accounted for  approximately  75% (Horizon
     BCBSNJ) and 12% of net  revenues  for the year ended  December 31, 2000 and
     approximately  80%  (Horizon  BCBSNJ) and 10% of net  revenues for the year
     ended December 31, 1999. The loss of any one of these  customers would have
     a material adverse impact on the Company's business.

[8]  Stock-based compensation:

     The Financial Accounting Standard Board's Statement of Financial Accounting
     Standards  No.123 ("SFAS 123"),  "Accounting for Stock-Based  Compensation"
     encourages, but does not require, companies to record compensation cost for
     stock-based  employee  compensation  plans at fair  value.  The Company has
     elected to continue to account for its stock-based compensation plans using
     the  intrinsic  value method  prescribed  by  Accounting  Principles  Board
     Opinion No. 25 ("APB  No.25"),  "Accounting  for Stock Issued to Employees"
     and to disclose  the pro forma  effects on net income  (loss) and  earnings
     (loss)  per share had the fair value of options  been  expensed.  Under the
     provisions of APB No. 25,  compensation  cost for stock options is measured
     as the excess,  if any, of the quoted market price of the Company's  common
     stock at the date of the  grant  over the  amount an  employee  must pay to
     acquire the stock (see Note G).

[10]  Recently issued accounting standards:

     In December 1999, the  Securities  and Exchange  Commission  ("SEC") issued
     Staff  Accounting  Bulletin  ("SAB")  No.  101,  "Revenue   Recognition  in
     financial   Statements,"   which  provides   guidance  related  to  revenue
     recognition  and was  effective  the first  fiscal  quarter of fiscal years
     beginning  after  December 15 1999,  and  requires  companies to report any
     changes in revenue  recognition  as a  cumulative  change in an  accounting
     principle at the time of implementation, in accordance with APB Opinion 20,
     "Accounting Changes".  Subsequently,  SAB Nos. 101A and 101B were issued to
     delay the  implementation  of SAB No.  101.  Management  believes  that the
     adoption had no effect on the Company's revenue recognition  policies.  The
     Company  adopted this  pronouncement  during the fiscal year ended December
     31, 2000.


                                      F-9
<PAGE>

                      CAREADVANTAGE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (CONTINUED)

[10] Recently issued accounting standards:  (continued)

     In  2000,  the  Financial   Accounting   Standards  Board  ("FASB")  issued
     interpretation No. 44, "Accounting for Certain Transactions Involving Stock
     Compensation",  an  interpretation  of APB Opinion No. 25, "Stock Issued to
     Employees".  Interpretation  No. 44 clarifies the application of APB No. 25
     for the  definition of an employee for purposes of applying APB No. 25, the
     criteria for  determining  whether a plan  qualifies  as a  noncompensatory
     plan, the accounting  consequences of various modifications to the terms of
     previously  granted  stock  options or awards,  and the  accounting  for an
     exchange  of stock  compensation  awards  in a  business  combination.  The
     Company is applying this interpretation on the financial statements for the
     fiscal year ended December 31, 2000.


NOTE C - INTANGIBLE ASSETS

Intangible assets net of accumulated amortization consist of the following:

                                                          December 31,
                                               -----------------------------
                                                      2000           1999
                                               -------------   -------------

        Service agreement                      $   1,100,000   $   1,100,000
        License fees                               1,100,000       1,100,000
        Software development cost                    536,000         606,000
                                               -------------   -------------

                                                   2,736,000       2,806,000

        Less accumulated amortization              1,886,000       1,523,000
                                               -------------   -------------

                                               $     850,000   $   1,283,000
                                               =============   =============


Amortization expense for the years ended December 31, 2000 and 1999 was $363,000
and $640,000, respectively.

[1]  Service agreement:

     This amount represents the Company's service agreement with Horizon BCBSNJ,
     which was recorded  upon the  acquisition  of CHCM.  The remaining net book
     value amounts to $591,000 at December 31, 2000.

[2]  License agreement:

     The Company  signed a five year agreement  commencing  November 1, 1994 for
     products and services (the "License Agreement") with a software development
     company which required an advance  payment of  $1,000,000.  Pursuant to the
     License Agreement,  the Company was granted a license for 100 users under a
     non-exclusive  five year license for the use of certain existing  software.
     In December 1998,  the Company  upgraded the software and extended the term
     through  the later of  October  31,  2001 or the  termination  of a license
     agreement  that a  subsidiary  of  Horizon  BCBSNJ  has with such  software
     development company which runs through November 2003.

                                      F-10
<PAGE>
                      CAREADVANTAGE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999

NOTE C - INTANGIBLE ASSETS (CONTINUED)

[3]  Software development costs:

     Software  development  costs are  capitalized  when  project  technological
     feasibility  is established  and  concluding  when the product is ready for
     release. Research and development costs related to software development are
     expensed as incurred.  Amortization of software  development costs amounted
     to $195,000 and  $412,000  for the years ended  December 31, 2000 and 1999,
     respectively.


NOTE D - PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

                                                            December 31,
                                                   ---------------------------
                                                       2000            1999
                                                   ------------   ------------

  Computer equipment                               $  2,276,000   $  2,190,000
  Furniture and fixtures                                485,000        472,000
  Office machines and telephone equipment               467,000        453,000
  Leasehold improvements                                537,000        527,000
                                                   ------------   ------------

                                                      3,765,000      3,642,000
  Less accumulated depreciation and amortization     (3,327,000)    (2,797,000)
                                                   ------------    -----------

                                                   $    438,000   $    845,000
                                                   ============   ============



NOTE E - DUE TO CUSTOMER

The amount due to  customer of $902,000  at  December  31, 1999  represented  an
estimate due based upon cash advanced  under a contract  between the Company,  a
customer, and a subsidiary of Horizon BCBSNJ. In November 1998, the contract was
terminated  and as a result of the ensuing  litigation,  a joint  settlement was
reached  between  the  three  parties  in  August  2000.  Under the terms of the
settlement,  the Company  agreed to pay  Horizon  BCBSNJ  $839,000.  The Company
signed a  promissory  note that  provides  for two equal  payments  of  $419,500
payable  on  November  1, 2000 and  February  9, 2001.  interest  accrues at the
five-year U.S.  Treasury  yield,  adjusted  quarterly.  At December 31, 2000 the
amount is classified as due to  stockholder  in the  accompanying  balance sheet
(see Note F).


NOTE F - DUE TO STOCKHOLDER

The amount of  $1,532,000  due to  stockholder  at December 31, 2000  represents
$693,000 owed to Horizon  BCBSNJ  pursuant to a $1,862,823  promissory  note and
$839,000 pursuant to the promissory note discussed in Note E.

The  $1,862,823  promissory  note  dated  April 1, 1997  bears  interest  at the
five-year U.S. Treasury yield, adjusted quarterly.  The Company had an agreement
with Horizon BCBSNJ to suspend payments.

                                      F-11
<PAGE>

                     CAREADVANNTAGE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999


NOTE F - DUE TO STOCKHOLDER  (CONTINUED)

On November 1, 2000,  the Company and Horizon BCBSNJ signed a  "Satisfaction  of
Debt  Agreement".  Under the terms of the  agreement,  the Company  will pay and
satisfy the above outstanding amounts due to the stockholder (Horizon BCBSNJ) of
$1,532,000  plus accrued  interest of  approximately  $46,000 by issuance of its
common stock. Based on the number of shares to be issued the Company will become
more than a 50 percent owned subsidiary of Horizon BCBSNJ.  The number of shares
to be  issued  will be  equal  to the sum of (A) the  amount  of the  obligation
divided by the greater of (i) the average mean between the closing bid and asked
price per share of common  stock  for the 20  trading  days  ending of the fifth
business  day  preceding  the closing of the  settlement,  or (ii) twelve  cents
($.12),  plus (B) that number of additional  shares of common stock equal to 20%
of the number of shares specified in (A) above.

The transaction is subject to approval from the New Jersey Department of Banking
and Insurance and depending on the approval  process is expected to close by the
end of the second quarter 2001.


NOTE G - STOCKHOLDERS' EQUITY

[1]  Authorized shares:

     On  November  30, 2000 the Board of  Directors  approved an increase to the
     authorized number of shares of common stock from 103,600,000 to 200,000,000
     shares.

[2]  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.

[3]  Stock option plans:

     The Board of Directors initially adopted the Stock Option Plan (the "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.

     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.

                                      F-12
<PAGE>


NOTE G - STOCKHOLDERS' EQUITY  (CONTINUED)

[3]  Stock option plans:  (continued)

     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. Prior to the Plan Amendment,  the Plan reserved an
     aggregate  of  18,648,000  of the  Company's  authorized  common  stock for
     issuance under the Plan.

     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. 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.

                                      F-13
<PAGE>

                      CAREADVANTAGE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999

NOTE G - STOCKHOLDERS' EQUITY  (CONTINUED)

[3]  Stock option plans:  (continued)

     The Company adopted the Director Stock Option Plan (the "Director Plan") on
     June 6, 1996, and amended it on July 24, 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  (other than
     directors  appointed by CW Ventures or Horizon  BCBSNJ 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 (equal to 2,072,000 shares of common stock) is reserved for issuance.

     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.  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.

     The following is a summary of stock option  activity during the years ended
     December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                                     2000                           1999
                                                          -------------------------     --------------------------
                                                                           Weighted                       Weighted
                                                                            Average                       Average
                                                                           Exercise                       Exercise
                                                            Shares           Price          Shares         Price
                                                        -------------     ---------     -------------    ---------

<S>                                                        <C>                <C>           <C>             <C>
          Outstanding at beginning of year                 14,449,000         $.21          1,420,000       $1.44
          Granted                                           4,705,000          .18         15,279,000        0.08
          Exercised                                        (1,344,000)         .04
          Cancelled                                        (2,513,000)         .10         (2,250,000)       0.12
                                                        -------------                   -------------

          Outstanding at end of year                       15,297,000          .23         14,449,000        0.21
                                                        =============                   =============

          Exercisable at end of year                        7,373,000          .32          2,528,000        0.65
                                                        =============                   =============
</TABLE>

                                      F-14
<PAGE>


NOTE G - STOCKHOLDERS' EQUITY  (CONTINUED)
-----------------------------------------

[3] Stock option plans:  (continued)

       The  following  table  summarizes  information  about  stock  options  at
December 31, 2000:
<TABLE>
<CAPTION>


                                                    Options Outstanding                       Options Exercisable
                                              ----------------------------------           --------------------------
                                                           Weighted
                                                           Average
                                                          Remaining         Weighted                        Weighted
                                                         Contractual        Average                         Average
                    Range of             Number              Life           Exercise        Number          Exercise
                 Exercise Price        Outstanding         In Years          Price        Exercisable        Price
                ----------------      -------------      ------------       ---------    ------------       --------
<S>              <C>                    <C>                  <C>             <C>          <C>                <C>
                 $0.03 to $0.11         11,538,000           8.5             $0.07        5,500,000          $0.07
                 $0.18 to $0.27          1,727,000           8.8              0.22          587,000           0.25
                     $0.40                 746,000           9.2              0.40
                     $0.78                 625,000           6.6              0.78          625,000           0.78
                 $1.32 to $1.68            332,000           5.7              1.59          332,000           1.59
                     $2.82                 329,000           5.7              2.82          329,000           2.82
                                     -------------                                      -------------

                                        15,297,000                            0.23        7,373,000           0.32
                                     =============                                      ===========


</TABLE>

       The weighted  average fair value of options  granted in 2000 and 1999 was
       approximately $.18 and $.06, respectively, using the Black-Scholes Option
       Pricing model utilizing the following assumptions:

                                                December 31,
                                         -------------------------
                                            2000            1999
                                           ------          -------

        Dividend yield                        0               0
        Volatility                          217.8%           67.7%
        Risk free interest rate           5.74-6.49%       6.8-6.95%
        Expected life in years                5              10

       Had the Company elected to recognize  compensation cost based on the fair
       value of the options at the date of grant as  prescribed by SFAS 123, pro
       forma net loss for the years ended  December 31, 2000 and 1999 would have
       been  approximately  $(26,000)  and  $(1,559,000)  or $.00 and $(.02) per
       share, respectively.

[4] Warrants:

       The Company issued 166,667  warrants in 1996 to CW Ventures in connection
       with a bridge  financing.  The warrants  expired  unexercised in February
       2001.

                                      F-15

<PAGE>


NOTE H - INCOME TAX

The tax effects of temporary  differences that give rise to significant portions
of the deferred tax assets are as follows:

<TABLE>
<CAPTION>
                                                                                December 31,
                                                                       -----------------------------
                                                                           2000              1999
                                                                       -----------        ----------
<S>     <C>                                                           <C>              <C>

      Current deferred tax assets:
         Accrued liabilities                                          $       254,000  $       287,000
         Deferred revenue                                                                       39,000
                                                                      ---------------  ---------------

                                                                              254,000          326,000
                                                                      ---------------  ---------------

      Noncurrent deferred tax assets:
         Net operating loss carryforwards                                   5,262,000        5,385,000
         Excess of tax basis over book basis of fixed assets                  216,000           43,000
         Intangibles                                                        1,276,000        1,414,000
         Alternative minimum tax credit                                        55,000           55,000
                                                                      ---------------  ---------------

                                                                            6,809,000        6,897,000

      Deferred tax assets                                                   7,063,000        7,223,000
      Valuation allowance                                                  (7,063,000)      (7,223,000)
                                                                      ---------------  ---------------

                                                                      $             0  $             0
                                                                      ===============  ===============

</TABLE>

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  $13,154,000  at December  31,  2000,  expiring
through  2019.  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.  As of  December  31,  2000,
$8,570,000  of  the  net  operating  loss  carryforwards  are  subject  to  such
limitation.  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  $521,000 and  $426,000 for the years ended  December 31, 2000 and
1999, respectively.

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

                                                             Year Ended
                                                            December 31,
                                                    ---------------------------
                                                        2000           1999
                                                    ------------   ------------

        Income taxes at federal statutory rate      $    150,000   $   (434,000)
        Permanent differences                             10,000          8,000
        Change in valuation reserve                     (160,000)       426,000
                                                    ------------   ------------

                                                    $          0   $          0
                                                    ============   ============


                                      F-16

<PAGE>


NOTE I - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS

[1] Potential uninsured exposure to litigation:

      The  Company  has been  named as a party in an action  entitled  Robert T.
      Caruso v. Care  Advantage,  Inc.,  John J. Petillo,  Vincent M. Achillare,
      Lawrence A. Whipple,  Horizon  BCBSNJ et al.,  which was filed in Superior
      Court of New Jersey. Messrs. Petillo,  Achillare and Whipple were officers
      of the Company and may have claims for  indemnification  for  expenses and
      for any  judgments  against  them.  Mr.  Caruso  was a  consultant  to the
      Company.  The complaint  alleges  breach of contract,  fraud,  conspiracy,
      promissory  estoppel and negligent  misrepresentation  in connection with,
      among other things, the termination of Mr. Caruso's consulting arrangement
      with the Company.  The  plaintiff  seeks  treble and other  damages for an
      unspecified  amount and claims actual damages in the approximate amount of
      $1.8 - $2.0 million. The Company received notice from two of its insurance
      carriers  that they have denied  coverage on this matter,  but the Company
      plans to vigorously  contest  these  coverage  decisions.  The Company has
      received a written claim for indemnification  for defendants,  Petillo and
      Achillare  and,  subject to their having acted in good faith,  the Company
      has  agreed  to  indemnify  them and  defendant  Whipple  and to pay their
      reasonable  defense  costs.  The parties to this  litigation are currently
      taking  discovery.  The court  dismissed  this action with  prejudice with
      respect to defendant  Achillare;  this matter has been scheduled for trial
      on April 30, 2001 with respect to the  remaining  defendants.  The Company
      believes that plaintiff's claims are without merit and plans to vigorously
      contest  them at trial.  The  Company has  recorded a  provision  for this
      contingency.  There  can be no  assurance  that  this  provision  will  be
      sufficient to satisfy this claim.

[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.

[3] Operating leases:

       Minimum annual lease payments  office space and equipment for each of the
       next five years ending December 31 and thereafter are as follows:

                Year
               Ending                              Payments
             -----------                         ------------

              2001                            $     717,000
              2002                                  742,000
              2003                                  710,000
              2004                                  704,000
              2005                                  704,000
              Thereafter                          3,849,000
                                              -------------

                                              $   7,426,000
                                              =============

       Rent expense for the years ended  December 31, 2000 and 1999 was $725,000
and $479,000, respectively.

                                      F-17
<PAGE>


NOTE I - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS  (CONTINUED)

[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 $216,000 and $186,000 for the
       years ended December 31, 2000 and 1999, respectively.


NOTE J - CREDIT FACILITY

The Company had a credit  facility  with a bank that  provided for a $1,500,000,
working capital revolver to be used for general working capital needs, which was
effective through June 30, 2000. The Company did not renew such credit facility.


NOTE K - STAND BY LETTER OF CREDIT

In September 1998, the bank issued an irrevocable letter of credit in the amount
of $250,000, for the account of the Company in favor of a vendor as security for
the Company's obligation under a non-cancelable  operating lease. This letter of
credit was issued under the Company's credit  facility.  As of December 31, 2000
the $250,000 irrevocable letter of credit is secured by a certificate of deposit
in the amount of  $250,000.  On February  15,  2001,  the vendor  cancelled  the
irrevocable letter of credit.


NOTE L - SHAREHOLDER OPTION AGREEMENT

In June 1997, CW Ventures  granted to Horizon  BCBSNJ an option to purchase from
it  10,031,238  shares of common stock at $0.38 per share (the " Horizon  BCBSNJ
Option"). The Horizon BCBSNJ Option would have been exercisable in the event the
Company had achieved  certain goals for defined periods  through  February 2000,
which goals were not achieved.  The option was granted by CW Ventures to Horizon
BCBSNJ in consideration  of Horizon BCBSNJ revising its Services  Agreement with
the Company,  entering into a joint services  agreement  between Horizon BCBSNJ,
the Company and an unrelated party, and an agreement to guaranty the Summit Bank
Credit Agreement.



                                      F-18

<PAGE>


                                  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).

3.11   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.

<PAGE>

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 10-KSB 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 10-KSB  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 10-KSB 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).

                                       2
<PAGE>


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.

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<PAGE>


10.41  Settlement  Agreement Settlement Agreement dated August 9, 2000 among the
       Company, Horizon Healthcare of New Jersey, Inc. and Allied Specialty Care
       Services, Inc.

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  Debt  Satisfaction  Agreement among Horizon Blue Cross Blue Shield of New
       Jersey,  Horizon  Healthcare  of  New  Jersey,  Inc.,  and  the  Company,
       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.

16     Letter  regarding  change in  accountants,  incorporated  by reference to
       Exhibit 16.1 filed on the Company Form 8-K dated June 6, 1996.

23     Consent of Independent Auditors*


--------------------------------------------
*filed herewith

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