SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended April 30, 1998

                         COMMISSION FILE NUMBER 0-26168

                               CAREADVANTAGE, INC.
             (Exact name of registrant as specified in its charter)

DELAWARE                                                              52-1849794
(State or other jurisdiction of                                 (I.R.S. Employer
Incorporation or organization)                            Identification Number)

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

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

      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 ____

                                   74,389,886
        Number of shares of Common Stock outstanding as of June 15, 1998

                  Transitional Small Business Disclosure Format
                                   Yes X No__

                           This is Page 1 of 12 Pages.


                                       1
<PAGE>

                               CAREADVANTAGE, INC
                           CONSOLIDATED BALANCE SHEETS

ASSETS                                               April 30, 
                                                       1998         October 31,
                                                    (unaudited)        1997*
                                                    -----------        -----

Current assets:
Cash and cash equivalents                          $  1,786,650    $  1,038,190
Accounts receivable-stockholder                       1,048,973       1,047,171
Accounts receivable-other                               608,086         408,348
Other current assets                                    328,219         254,688
                                                   ------------    ------------
Total current assets                                  3,771,928       2,748,397

Property and equipment, at cost less
Accumulated depreciation                              1,727,356       1,502,712
Intangible assets (net)                               1,438,507       1,649,126
Other assets                                             91,059          80,984
                                                   ------------    ------------
Total assets                                       $  7,028,850    $  5,981,219
                                                   ============    ============

LIABILITIES AND CAPITAL DEFICIENCY

Current liabilities:
Current portion of long-term debt                  $    608,493    $    574,778
Note payable-stockholder                              2,000,000       2,000,000
Accounts payable-trade                                  402,230         350,893
Due to stockholder                                      620,935          88,705
Accrued salaries and employee benefits                  752,401         562,994
Accrued expenses and other current
  liabilities (Note E)                                  588,728         871,844
Deferred revenue, current (Note F)                    1,654,173         786,007
                                                   ------------    ------------
Total current liabilities                             6,626,960       5,235,221

Capital lease obligations, less current
  portion                                               108,898         421,813
Due to stockholder, less current portion              1,241,888       1,774,118
Deferred revenue and other long-term
  liabilities                                           321,621         525,979
                                                   ------------    ------------
Total liabilities                                     8,299,367       7,957,131
                                                   ------------    ------------
Capital deficiency:
Preferred  stock-par value $.10 per share;
authorized  10,000,000 Shares;  none
issued  and  outstanding  Common  stock-par
value  $.01 per  share;  authorized
90,000,000 Shares; issued
and outstanding 74,389,886 and 74,389,886                74,390          74,390
Additional capital                                   19,640,586      19,640,091

Accumulated deficit                                 (20,985,493)    (21,690,393)
                                                   ------------    ------------
Total capital deficiency                             (1,270,517)     (1,975,912)
                                                   ------------    ------------
Total liabilities and capital deficiency           $  7,028,850    $  5,981,219
                                                   ============    ============

           *Reclassified to conform to current period classification.

        The accompanying notes are an integral part of these statements.


                                       2
<PAGE>

                               CAREADVANTAGE, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                    Three Months Ended        Six Months Ended
                                                        April 30,                 April 30,

                                                  1998          1997*        1998          1997*
                                                  ----          ----         ----          ---- 
<S>                                           <C>           <C>           <C>           <C>         
Net revenues                                  $ 4,194,640   $ 3,966,096   $ 8,197,069   $  6,335,397
Costs of services                               1,995,822     1,931,271     4,022,559      3,957,952
                                              -----------   -----------   -----------   ------------
Gross margin                                    2,198,818     2,034,825     4,174,510      2,377,445

Operating expenses:
Selling, general and administration             1,516,636     1,240,347     3,052,943      2,739,197
Depreciation and amortization                     152,035       123,931       279,917        241,950
                                              -----------   -----------   -----------   ------------
Total operating expenses                        1,668,671     1,364,278     3,332,860      2,981,147
                                              -----------   -----------   -----------   ------------
Operating income(loss)                            530,147       670,547       841,650       (603,702)
Interest                                           63,677        65,730       136,750        141,932
                                              -----------   -----------   -----------   ------------
Net income (loss)                             $   466,470   $   604,817   $   704,900   ($   745,634)
                                              ===========   ===========   ===========   ============
Pro forma net income (loss)
per share of common stock-basic and diluted   $       .01   $       .01   $       .01   ($       .01)
                                              ===========   ===========   ===========   ============
Pro forma weighted average number
of common shares outstanding                   74,389,886    74,389,886    74,389,886     74,389,886
                                              ===========   ===========   ===========   ============
</TABLE>


           *Reclassified to conform to current period classification.

        The accompanying notes are an integral part of these statements.


                                       3
<PAGE>

                      CAREADVANTAGE, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                                                         Six Months Ended
                                                             April 30,
                                                       --------------------
                                                       1998           1997*
                                                       ----           -----

Cash flows from operating activities:

Net profit (loss)                                   $   704,900     ($  745,634)

Adjustments  to reconcile  net profit
(loss) to net cash provided from (used by)
operating activities:

Depreciation and amortization                           548,532         514,805

Change in assets and liabilities:

Due to/from customers/stockholders                     (201,539)     (1,406,842)
Other assets                                            (83,607)        (62,511)
Accounts payable                                         51,337        (184,536)
Accrued expenses and other liabilities                 (234,557)      1,498,486
Deferred revenue                                        805,071               0
                                                    -----------     -----------
Net cash provided from (used by)
operating activities                                  1,590,137        (386,232)
                                                    -----------     -----------
Cash flows from investing activities:

Capital expenditures                                   (562,476)       (273,667)
                                                    -----------     -----------
Net cash provided from (used by) investing
activities                                             (562,476)       (273,667)
                                                    -----------     -----------

Cash flows from financing activities:

Principal payments under long-term debt                (279,201)       (359,741)
                                                    -----------     -----------
Net cash provided from (used by) financing
activities                                             (279,201)       (359,741)
                                                    -----------     -----------
Net increase (decrease) in cash                         748,460      (1,019,640)

Cash - beginning of fiscal year                       1,038,190       1,167,147
                                                    -----------     -----------
Cash - end of period                                $ 1,786,650     $   147,507
                                                    ===========     ===========

           *Reclassified to conform to current period classification.

        The accompanying notes are an integral part of these statements.


                                       4
<PAGE>

                               CAREADVANTAGE, INC.

                    NOTES TO FINANCIAL STATEMENTS (UANUDITED)

CareAdvantage, Inc. ("CAI" or the "Company") is a holding company which, through
its  direct  and  indirect  subsidiaries,  CareAdvantage  Health  Systems,  Inc.
("CAHS")  and  Contemporary  HealthCare  Management,  Inc.  ("CHCM"),  is in the
business of providing 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 services provided 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.  The Company's services have been principally
provided to the Blue Cross/Blue Shield health service organizations operating in
all or a portion of the following  states:  Rhode Island,  Maine,  Vermont,  New
Jersey,  and in 1998  New  York (a  division  of New York  Care  Plus  Insurance
Company, Inc).

Note A--Basis of preparation:

The consolidated financial statements have been prepared by the Company and have
not  been  audited  by the  Company's  independent  auditors.  The  accompanying
financial   statements  include  all  adjustments  (which  include  only  normal
recurring  adjustments)  which in the opinion of  management  are  necessary  to
present fairly the financial  position,  results of operations and cash flows at
April 30, 1998 and for all periods presented.

Certain  information  and  note  disclosures  required  to be  included  in  the
financial  statements  prepared in accordance with generally accepted accounting
principles have been omitted.  These consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes thereto
included with the Company's  October 31, 1997 Annual Report on Form 10-KSB filed
with the Securities and Exchange  Commission on January 29, 1998. The results of
operations for the period ended April 30, 1998 are not necessarily indicative of
operating results to be expected for the full year.

Note B--Per share data:

Net income  (loss) per share has been  computed  based on the  weighted  average
number of shares  outstanding  during the periods.  Additional  shares issued to
Blue Cross and Blue  Shield of New Jersey,  Inc.  ("BCBSNJ")  in  February  1997
pursuant  to the terms of the  promissory  note by CAHS in favor of  BCBSNJ  (as
assignee of  Enterprise  Holding  Co.,  Inc.) dated  February 22, 1996 have been
included as if outstanding from November 1, 1996. The operations of the business
of CHCM purchased by the Company from BCBSNJ have been included in the Company's
financial  statements  since  April 30,  1995.  Additional  shares  issued to CW
Ventures II, L.P. ("CW  Ventures")  in February 1997 pursuant to the  promissory
note by CAHS in favor of CW Ventures,  dated  February 22, 1996 (the "CW Note"),
have been included as if  outstanding  since  February 22, 1996,  the date of CW
Ventures' investment in the Company.  Common stock equivalents and approximately
7,800,000  shares  issuable  upon exchange of the CW Note have not been included
since they are not dilutive.

The  Company  adopted  SFAS No. 128  "Earnings  Per  Share" in the period  ended
December  31, 1997 and has  retroactively  applied  the effects  thereof for all
periods  presented.  Accordingly,  the  presentation  of per  share  information
includes  calculations of basic and diluted income (loss) per share.  The impact
on the per share amounts previously reported was not significant.

Note C--Contingencies:

Termination of employment:

A former Medical Director of CAHS had asserted a claim against the Company.  The
former  Medical  Director was employed from September 1995 through May 1996 when
he voluntarily resigned,  allegedly due to a change of control of the Company in
February  1996.  He contended  that he was entitled to: (i) a severance  payment
equal to one year  annual  base  compensation  ($190,000);  and (ii)  vesting in
75,000  qualified stock options at a strike price of $1.25 per share. The former
Medical Director based his claim on an executed written  agreement  drafted by a
placement  firm,  which  memorializes  some,  but  not  all,  of the  terms  and
conditions of his employment.  The Company  contested this matter on the grounds
that the former Medical Director (i) is not entitled to severance;  and (ii) has
no  entitlement  to  stock  options  as  the  plan  was  never  approved  by the
shareholders.  The former Medical  Director alleged claims of breach of contract
and  promissory  estoppel.  The  parties  have  agreed to submit  this  claim to
arbitration before the American Arbitration Association in an effort to amicably
resolve this matter prior to litigation. Effective February 9, 1998, the Company
entered into a settlement  agreement with this former employee.  


                                       5
<PAGE>

                               CAREADVANTAGE, INC.

                    NOTES TO FINANCIAL STATEMENTS(UNAUDITED)

Under the  terms of this  settlement  agreement  the  Company  has paid a sum of
$110,000  subject to deductions for payroll taxes as required by federal law and
the State of Connecticut.

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.

Potential uninsured exposure to litigation:

      1. On or about March 22,  1996,  an action  entitled  Francis X. Bodino v.
      BCBSNJ and CHCM (the "Bodino Action") was filed in the Law Division of the
      Superior  Court of New  Jersey in Hudson  County.  The  complaint  alleges
      misrepresentations  with  respect  to the  type  and  amount  of  coverage
      afforded by Mr. Bodino's policy with BCBSNJ,  specifically with respect to
      coverage  for heart  transplantation.  The  complaint  also  alleges  that
      representations  made on behalf of BCBSNJ by an  employee  of CHCM led Mr.
      Bodino's surgeon to believe that  contractually  excluded heart transplant
      coverage was available.  The complaint demands a variety of money damages,
      as well as punitive damages,  against both defendants.  The complaint also
      contains a claim for treble  damages and counsel fees under the New Jersey
      Consumer  Fraud Act.  BCBSNJ is presently  defending  the Bodino Action on
      behalf of itself and CHCM,  has filed a third  party  lawsuit  against Mr.
      Bodino's surgeon and the admitting  hospital,  and has denied liability in
      all respects and has specifically  denied that the policy purchased by Mr.
      Bodino covered heart  transplantation  or that any  misrepresentations  or
      fraud occurred.  BCBSNJ and CHCM have filed a motion for summary  judgment
      as to all claims.  Mr. Bodino, the surgeon and the admitting hospital have
      filed cross-motions for summary judgment against BCBSNJ and CHCM as to all
      claims.  Presently,  all motions for summary  judgment are  returnable for
      hearing  on June 26,  1998.  The  Company,  based  upon the  advice of its
      counsel,  has  insufficient  information,  at present,  to evaluate CHCM's
      potential exposure, if any, in this litigation.

      At the  time of the  events  underlying  the  Bodino  Action,  CHCM  was a
      subsidiary  of BCBSNJ and had been  engaged by the  Company  and CAHS,  to
      provide  certain  staff  and  assistance  to CAHS  in  support  of  CAHS's
      obligation  to provide  specified  services for BCBSNJ,  all in accordance
      with the terms of an Interim Services  Agreement dated as of April 1, 1995
      by and among BCBSNJ,  CHCM,  the Company and CAHS (the  "Interim  Services
      Agreement").  By letter dated  February 15, 1996,  counsel for Mr.  Bodino
      gave  written  notice  to CHCM  contesting  the  denial  of  coverage  and
      threatening  litigation  against  CHCM and  BCBSNJ.  The  Company and CAHS
      purchased  CHCM on  February  22,  1996.  The  Company  did  not  maintain
      insurance  coverage that would cover claims against BCBSNJ or CHCM arising
      from events occurring prior to February 22, 1996, which might constitute a
      breach under the Interim Services Agreement. The Company has been informed
      by BCBSNJ  that  BCBSNJ  has  notified  its  carrier  of the claim and the
      carrier  has  advised  BCBSNJ  that  certain  policy   exclusions  may  be
      applicable to preclude  coverage for the claimed damages,  either in whole
      or in part.  BCBSNJ has further asserted that it does not believe any such
      exclusions are applicable and that it has furnished additional information
      to the carrier in support of its  position.  The  Company,  based upon the
      advice of counsel,  is not presently able to determine  whether the Bodino
      Action might result in any loss to the Company or CHCM and, if so, whether
      any such loss would be material.

      There  have been  discussions  among the  parties  as to their  respective
      responsibilities if BCBSNJ or CHCM are found liable in or choose to settle
      the Bodino Action.  These  discussions  resulted in a settlement  offer by
      BCBSNJ to the Company and CAHS, whereby BCBSNJ would accept responsibility
      for  any  liability  of  BCBSNJ  and  CHCM,  except  for  retention  of an
      amount not to exceed  $50,000.  The Company and CAHS are willing to accept
      this offer, subject to preparation of documents acceptable to all parties.


                                       6
<PAGE>

                               CAREADVANTAGE, INC.

                    NOTES TO FINANCIAL STATEMENTS(UNAUDITED)

      However, there can be no assurances that such documents will be acceptable
      and that any settlement among the parties will be reached.

2.    On or about  January 16, 1998, an action  entitled Mary  DeStefano v. CAI,
      Carol Manzella,  and Thomas P. Riley (the "DeStefano Action") was filed in
      the Law Division of the Superior Court of New Jersey in Middlesex  County.
      The  complaint  alleges (i) that the  plaintiff  was  terminated  from her
      employment  with the Company in retaliation  for her complaints  regarding
      alleged  violations  of state  and  federal  labor  laws and (ii) that the
      Company  violated the New Jersey  Wiretapping and Electronic  Surveillance
      Control Act. The complaint  did not demand an amount of specific  monetary
      damages. The defendants have denied liability in all respects. The Company
      is in the process of requesting  director and officer  insurance  coverage
      for Mr.  Riley's  alleged  actions.  It does not appear  that the  Company
      maintained  insurance to cover the Company or the other defendants in this
      matter.  The Company,  based upon advice of its counsel,  has insufficient
      information,  at present, to evaluate its potential  exposure,  if any, in
      this, litigation.

Note D: --Supplemental Cash Flow Information

Below is  supplemental  cash flow  information  related to the six- months ended
April 30, 1998 and 1997:

                                                              April 30,
                                                     -------------------------  
                                                     1998                 1997
                                                     ----                 ----

Income Taxes Paid                                       0                    0

Interest Paid, IBM capital lease obligations       50,145               79,282

Note E--Accrued expenses and other current liabilities:

 Accrued  expenses and other  current  liabilities  consist of the  following at
April 30, 1998 and October 31, 1997:

                                       April 30, 1998          October 31, 1997
                                       --------------          ----------------
Accrued Interest                              452,248                   329,626

Accrued Professional Fees                      69,099                   125,000

Other accrued expenses                         67,381                   417,218
                                            ---------                   -------

Total                                         588,728                   871,844
                                              =======                   =======

Note F-- Deferred Revenue:

As of April 30, 1998 revenue  received in connection with the  renegotiation  of
two of the  Company's  contracts  during the prior  fiscal  year  ended  October
31,1997  has  been  deferred  over  the  term  of  the   respective   contracts.
Additionally,  the Company has deferred a portion of fees advanced in connection
with  a  joint  service   agreement.   The  agreement  provides  for  additional
compensation based on exceeding a certain level of performance. The Company will
recognize these fees when earned.



                                       7
<PAGE>

                               CAREADVANTAGE, INC.

         MANAGEMENT'S DISUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS

General developments of business:

Certain   statements  in  this  Form  10QSB  may   constitute   "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of  1995,  including  those  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.  Such statements
involve known and unknown risks, uncertainties and contingencies,  many of which
are beyond the control of the  Company,  which could  cause  actual  results and
outcomes to differ materially from those expressed herein.  Although the Company
believes that its plans,  intentions and expectations  reflected in such forward
looking  statements  are  reasonable,  it can give no assurance that such plans,
intentions or expectations will be achieved. Certain risk factors exist, such as
the  Company's  inability to prevent its  customers  from  terminating  existing
contracts by invoking standard  termination  clauses,  as well as other inherent
contractual risks, which are beyond the control of the Company.

For  fiscal  years  prior to  1997,  the  Company  has  experienced  significant
operating  losses on a consolidated  basis. At April 30, 1998, the Company had a
working capital deficit of  approximately  $2,855,000,  a capital  deficiency of
approximately $1,271,000 and an accumulated deficit of approximately $20,985,000
since its inception. By continuing to provide high quality care cost containment
services to its  existing  customer  base of five BCBS plans and pursuant to the
joint service agreement with Allied Health Group, Inc.,  management  believes it
can continue to market its reputation to other similar customers.  This strategy
is  particularly  significant  given the current health care  environment  where
large  third-party  payers are merging in an effort to protect their  respective
franchises and expand their market reach.  The various BCBS plans throughout the
country are no  exception  to this  phenomenon  and the Company  believes it can
leverage its core competencies to participate in this consolidating environment.

Management is of the opinion that it must continue to refine its current service
lines in order to  continue to add value to existing  and  potential  customers.
Additionally,  the Company  intends to broaden its services  offered with unique
and  complimentary  cost-containment  strategies.  Management will evaluate each
service with regard to anticipated changes in the health care industry, the cost
to enter any such  line of  service  as well as the  availability  of  competent
resources. To further expand its line of services, the Company intends to pursue
alternatives  to its  internal  products  and  service  development  efforts  by
entering  into  strategic  alliances  and  joint  ventures  as well  as  through
acquisitions.

      Net revenues:

                                                   Six Months Ended
                                        ----------------------------------------
                                         April 30, 1998        April 30, 1997*
                                        ------------------    ------------------
                                        Amount     Percent    Amount     Percent
                                        ------     -------    ------     -------
Revenues from fixed fee                                                
  arrangements                        $7,795,000     95%    $5,999,000     95%
                                                                        
Revenues from performance-                                                      
   based arrangements                    396,000      5%       314,000      5%
                                                                        
Other revenues                             6,000      0%        22,000      0%
                                      ----------    ---     ----------    --- 
Total revenues                        $8,197,000    100%    $6,335,000    100%
                                      ==========    ===     ==========    ===

           *Reclassified to conform to current period classification.


                                       8
<PAGE>

                               CAREADVANTAGE, INC.

         MANAGEMENT'S DISUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS

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  is  working
closely with its  customers  to secure more timely and accurate  data to improve
the  accuracy  of  reporting of its  revenues,  including,  in some  cases,  the
re-negotiation  of  the  contract  itself.  Management  believes  its  estimated
performance-based  revenues  contained in reported revenues for the three months
ended April 30, 1998 are accurate  based upon the data  available to management.
However,  information  received  by the  Company  after the  filing of this Form
10-QSB  could result in an  adjustment  of its  estimates  of  performance-based
revenues (which would be reflected in subsequent quarters, if necessary).

Revenues:

Net  revenue  for the three  and six  month  periods  ended  April 30,  1998 was
approximately $4,195,000 and $8,197,000,  respectively, compared to net revenues
in  the  corresponding  periods  of  the  prior  fiscal  year  of  approximately
$3,966,000 and $6,335,000.  This represents increases of approximately  $229,000
and  $1,862,000  for the three  and six  month  periods  ended  April 30,  1998,
respectively.  This increase is due largely to increased revenue from one of the
Company's major  customer-stockholders  as a result of its re-negotiation of the
contract on terms more favorable to the Company.  Additionally,  the Company has
entered into a joint services  agreement with Allied Health Group,  Inc.,  which
has  contributed  approximately  $591,000  to  the  Company's  improved  revenue
position for the six months ended April 30, 1998.

Revenues from at-risk  performance-based  service  contracts  generally  tend to
follow a pattern whereby  significant  revenues are generated during the initial
term of the  contract,  as  savings  opportunities  are the  greatest.  Revenues
decline thereafter,  as the opportunity for additional savings diminishes.  As a
result,  the  Company's  ability  to  increase  revenues  and gross  margins  is
dependent upon its ability to enter into additional contracts with new customers
and/or expand the services provided to existing customers.

Cost of services:

Cost of services  for the three and six month  periods  ended April 30, 1998 was
approximately  $1,996,000 and $4,023,000,  respectively,  compared to $1,931,000
and  $3,958,000  in the  corresponding  periods of the prior fiscal  year.  This
represents  an increase of  approximately  $65,000 and $65,000 for the three and
six month periods ended April 30, 1998, respectively.  This increase in the cost
of   services   for  six  month   period   ended  April  30,  1998  was  due  to
(increases)/decreases   in   personnel   costs   of   approximately   ($95,000),
professional and consulting costs of  approximately  ($29,000),  information and
communication  costs of  approximately  $36,000,  travel costs of  approximately
$19,000,  and depreciation and amortization  allocations of approximately $4,000
for the six month  period   ended  April 30, 1998  compared  with the six months
ended April 30, 1997.

Operating expenses:

Selling, general and administrative:

Selling,  general,  and administrative costs for the three and six month periods
ended April 30, 1998 were approximately $1,517,000 and $3,053,000, respectively,
compared to $1,240,000 and $2,739,000 in the corresponding  periods of the prior
fiscal year. This represents  increases of  approximately  $277,000 and $314,000
for the three and six month  periods  ended April 30, 1998,  respectively.  This
increase   for  the  six  month   period   ended   April  30,  1998  is  due  to
(increases)/decreases  in personnel costs of approximately  ($57,000),  facility
costs  of  approximately  $15,000,  travel  costs  of  approximately  ($17,000),
information and communication costs of approximately ($59,000), professional and
consulting costs of  approximately  ($178,000),  and general and  administrative
costs of approximately  ($18,000) for the six month period  ended April 30, 1998
compared with the six months ended April 30, 1997.

While  management  intends  to take steps in the  future to reduce  general  and
administrative  costs,  such reduction in costs may be offset to some extent, by
anticipated increases in selling, marketing and service development costs. There
is no  assurance,  however,  that the  Company  will be  successful  in reducing
general and administrative costs.


                                       9
<PAGE>

                               CAREADVANTAGE, INC.

         MANAGEMENT'S DISUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS

Depreciation and amortization:

Depreciation  and  amortization  costs for the three and six month periods ended
April 30, 1998 were approximately $286,000 and $549,000  respectively,  compared
to $258,000 and $515,000 in the  corresponding  period of the prior fiscal year.
Approximately  $134,000 and $269,000  and $134,000 and  $273,000,  respectively,
were included in cost of services for such periods.

Interest expense:

Net interest  expense for the three and six month  periods  ended April 30, 1998
was  approximately  $64,000 and $137,000 compared to $66,000 and $142,000 in the
corresponding  period  of the prior  fiscal  year  representing  a  decrease  of
approximately  $5,000  for the six  month  period  ended  April 30,  1998.  This
decrease is due to a reduction in interest related to the Company's master lease
agreement  with IBM Credit  Corporation,  which is  offset by interest  accruing
under a promissory note between a customer/stockholder  and the Company, calling
equal payments of principal and interest commencing in October 1998.

Net income from operations:

Results of  operations in the future are  dependent on  management's  ability to
increase  revenues and reduce both direct costs of services  selling and general
and administrative costs. While there can be no assurance that such efforts will
be successful, management believes that opportunities exist to increase revenues
and reduce costs in areas that will not adversely  affect the  operations of the
Company.  Further, during fiscal year 1997, the Company re-negotiated two (2) of
its key  contracts  and executed a joint  service  agreement  with Allied Health
Group,  Inc.,  and an  additional  agreement  with New York Care Plus  Insurance
Company, Inc.

Financial condition:

Liquidity and capital resources:

At April 30,  1998,  the  Company  had cash of  approximately  $1,787,000  and a
working capital deficiency of approximately $2,855,000. At October 31, 1997, the
Company had cash of approximately $1,038,000 and a working capital deficiency of
approximately $2,487,000. There was an increase in working capital deficiency of
approximately $368,000 despite the Company's ability to generate cash flows from
operations  during the six-month  period ended April 30, 1998.  These cash flows
are offset (i) by the  reclassification  of a  promissory  note to BCBSNJ in the
approximate  amount of  $532,000  as a current  liability,  (ii) an  increase in
deferred revenue of approximately  $632,000 associated with two of the Company's
customers;  whereby additional revenue is earned for meeting certain performance
targets,  from such customers and accordingly such  performance  revenue will be
recognized when earned.

Net cash  provided/(used)  from operating  activities  amounted to approximately
$1,590,000  and  ($386,000)  for the six month  periods ended April 30, 1998 and
1997, respectively. This improvement is primarily due to the increased operating
income generated during the second quarter of fiscal year 1998.

Net cash used in investing  activities amounted to approximately  ($562,000) and
($274,000)   for  the  six  month   periods  ended  April  30,  1998  and  1997,
respectively.  The increase in cash (used) of approximately ($288,000) is due to
increased  capital outlays for computer  related  equipment  incurred during the
current fiscal year.

Net cash used in financing  activities amounted to approximately  ($279,000) and
($360,000)   for  the  six  month   periods  ended  April  30,  1998  and  1997,
respectively.  The decrease in cash (used) of approximately ($81,000) is largely
due to decreased  principal  payments of approximately  ($111,000)  related to a
note payable  issued to a vendor which was retired during the prior fiscal year,
offset in part by  increased  principal  payments  related to the  master  lease
agreement with IBM Credit Corporation of approximately $30,000.

While there can be no assurances,  management believes that its cash on hand and
projected  future  cash flows from  operations  will  provide  adequate  capital
resources to support the Company's anticipated cash needs for the balance of the
fiscal year which ends on October 31,  1998.  This  projection  assumes that the
Company's  operations  and revenues will continue at their current  levels.  The
Company has assessed its various information and technology systems and does not
believe that it will be required to incur any  significant  costs to correct any
Year 2000 deficiencies.


                                       10
<PAGE>

                               CAREADVANTAGE, INC.

         MANAGEMENT'S DISUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS

Financing:

Amounts  payable  pursuant to long-term  financing  arrangements as of April 30,
1998 were  approximately  $717,000,  consisting  of  capital  lease  obligations
pursuant  to a Master  Lease  Agreement  with  IBM  Credit  Corporation  for the
financing  of computer  and  telephone  equipment,  installation,  software  and
related system integration expenses.  The term of the Master Lease is four years
expiring in 1999,  and bears  interest at 11.39% per annum.  Blue Cross and Blue
Shield of New Jersey, Inc. ("BCBSNJ") guarantees the Company's obligations under
this lease arrangement.

In  connection  with the  re-negotiation  of the amended and  restated  services
agreement  with BCBSNJ,  which was completed in June 1997,  the Company issued a
promissory note to BCBSNJ in the approximate  amount of $1,863,000 with interest
accruing  beginning in April 1997 and equal  monthly  payments of principal  and
interest commencing on October 1, 1998. For the six-month period ended April 30,
1998,  approximately $621,000 has been reclassified as a current liability.  The
promissory  note bears interest at a five-year  U.S.  treasury  yield,  adjusted
quarterly,  and matures on June 30, 2000.  While there can be no assurances that
future  operating  results will be  sufficient  to fund this  obligation  of the
Company,  management  expects such amounts be funded  through  operations and no
outside financing is anticipated for this obligation.

The  Company  has an 8%  Exchangeable  Note  (the  "CW  Note")  in the  original
principal of $2,000,000 in favor of CW Ventures II, LP ("CW Ventures")  maturing
on June 30, 1998.  On such date, CW Ventures is required to exchange the CW Note
for shares of the Company's common stock absent of any events of default, as set
forth therein.

As of April 30, 1998, the Company had $1.5 million of available credit under the
Summit Bank Credit  Agreement,  which  expired on June 12,  1998.  The term loan
availability  under the Credit Agreement expired on or about March 12, 1998. The
Company is in the process of  negotiating  an extension  of its credit  facility
with Summit Bank.

Future financing needs:

In connection with  management's  decision to adopt and implement a new and more
comprehensive  clinical  software  product,  as well as  increased  emphasis  on
developing  in-house data management  capabilities  and training and educational
programs  for its clinical  staff and  customers,  the Company  expects to incur
additional software and computer hardware costs of approximately $400,000 during
the third and fourth  quarter of fiscal  1998.  Such  costs are  expected  to be
financed with the future operating cash flows of the Company.

Item 1. Legal proceedings

Termination of employment:

A former  Medical  Director of CAHS has  asserted a claim  against the  Company,
which was discussed in the Company's Form 10-KSB for the year, ended October 31,
1997.  Effective  February  9,  1998,  the  Company  entered  into a  settlement
agreement  with  this  former  employee.  Under  the  terms  of this  settlement
agreement  the  Company  has paid a sum of $110,000  ("the  Settlement  Amount")
subject to deductions for payroll taxes as required by federal law and the State
of Connecticut.

The Company is involved  in an action  entitled  Francis X. Bodino v. BCBSNJ and
CHCM (the "Bodino Action"), which was discussed in the Company's Form 10-KSB for
the fiscal year ended October 31, 1997. BCBSNJ is presently defending the Bodino
Action on behalf of itself and CHCM, has filed a third party lawsuit against Mr.
Bodino's  surgeon and the admitting  hospital,  and has denied  liability in all
respects and has  specifically  denied that the policy  purchased by Mr.  Bodino
covered heart transplantation or that any  misrepresentations or fraud occurred.
BCBSNJ and CHCM have filed a motion for summary  judgment as to all claims.  Mr.
Bodino,  the surgeon and the  admitting  hospital have filed  cross-motions  for
summary  judgment  against  BCBSNJ  and CHCM as to all  claims.  Presently,  all
motions for summary judgment are returnable for hearing on June 26, 1998.


                                       11
<PAGE>

There  have  been   discussions   among  the  parties  as  to  their  respective
responsisbilities  if BCBSNJ or CHCM are found liable in or choose to settle the
Bodino Action. These discussions resulted in a settlement offer by BCBSNJ to the
Company and CAHS,  whereby BCBSNJ would accept  responsibility for any liability
of BCBSNJ and CHCM, except for retention of an amount not to exceed $50,000. The
Company and CAHS are willing to accept this  offer,  subject to  preparation  of
documents  acceptable to all parties.  However,  there can be no assurances that
such documents will be acceptable and that any settlement among the parties will
be reached.

Item 6. Exhibits and reports on Form 8-K

Exhibit 27--Financial Data Schedule

Reports on Form 8-K--None


                                       12
<PAGE>

                                   SIGNATURES

Pursuant  to the  requirements  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

June 15, 1998                         /s/ Thomas P. Riley
                                      -------------------------------
                                      Thomas P. Riley

                                      President and Chief Executive Officer

June 15, 1998                         /s/ David G. DeBoskey
                                      ---------------------
                                      David G. DeBoskey
                                      Principal Financial and Accounting Officer


                                       13