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 September 30, 1999



                         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___



                                   82,189,883
       Number of shares of Common Stock outstanding as of November 10, 1999

                  Transitional Small Business Disclosure Format
                                  Yes___ No_X_









<PAGE>




                      CareAdvantage, Inc. and Subsidiaries
                                   Form 10-QSB
                  For the nine months ended September 30, 1999


                                    I N D E X
                                    ---------


Part I - Financial Information

    Item 1.    Financial Statements

          o   Condensed Consolidated Balance Sheets -
              September 30, 1999 (Unaudited) and December 31, 1998 (Audited)...2

          o   Condensed Consolidated Statements of Operations (Unaudited) -
              Three and Nine months ended September 30, 1999 and
              October 31, 1998.................................................3

          o   Condensed Consolidated Statements of Cash Flows (Unaudited) -
              Nine months ended September 30, 1999 and October 31, 1998........4

          o   Notes to Condensed Consolidated Financial Statements.............5
              (Unaudited)

    Item 2.    Management's Discussion and Analysis of
               Financial Condition and Results of Operations...................8



Part II - Other Information

    Item 1.    Legal Proceedings..............................................14

    Item 2.    Changes in Securities..........................................14

    Item 3.    Defaults Upon Senior Securities............................... 14

    Item 4.    Submission of Matters to a Vote of Security Holders............14

    Item 5.    Other Information .............................................15

    Item 6.    Exhibits and Reports on Form 8-K...............................15

    Signature.................................................................16




<PAGE>



PART I - FINANCIAL INFORMATION
ITEM 1.  Financial Statements
<TABLE>
<CAPTION>

                               CAREADVANTAGE, INC
                           CONSOLIDATED BALANCE SHEETS


                                                                September 30,                    December 31,
                                                                   1999                             1998
            ASSETS                                               Unaudited                        Audited
                                                                 ---------                        -------
<S>                                                              <C>                              <C>
Current assets:
     Cash and cash equivalents                                   $1,786,000                       $3,354,000
     Accounts receivable for services:
         Stockholder                                              1,094,000                        1,080,000
         Other                                                      158,000                          315,000
     Other current assets                                           187,000                          159,000
                                                                    -------                          -------
                  Total current assets                            3,225,000                        4,908,000

Property and equipment, at cost less accumulated depreciation       916,000                        1,279,000
Intangible assets                                                 1,565,000                        1,695,000
Other assets                                                        263,000                          243,000
                                                                    -------                          -------
Total Assets                                                     $5,969,000                       $8,125,000
                                                                ===========                       ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

     Current portion of capital lease obligation                 $        0                        $ 319,000
     Accounts payable                                               174,000                          193,000
     Due to stockholder                                             927,000                        1,153,000
     Due to customer                                                902,000                          902,000
     Accrued salaries and employee benefits                         807,000                          959,000
     Accrued expenses and other current liabilities                 163,000                          483,000
     Deferred revenue, current                                      141,000                          184,000
                                                                    -------                        ---------
                  Total current liabilities                       3,114,000                        4,193,000

Due to stockholder, less current portion                                  0                          429,000
Deferred revenue and other liabilities, less current portion              0                           87,000
                                                                         --                       ----------
Total Liabilities                                                 3,114,000                        4,709,000
                                                                  ---------                        ---------

Stockholders' equity (capital deficiency):
     Preferred stock-par value $.10 per share;
         authorized 10,000,000 shares; none issued
     Common stock-par value $.001 per share;
         authorized 103,600,000 shares; issued
         and outstanding 82,189,883 and 82,189,883                   82,000                           82,000
     Additional capital                                          22,052,000                       22,009,000
     Accumulated deficit                                        (19,279,000)                     (18,675,000)
                                                                ------------                   -------------
Total Stockholders' Equity                                        2,855,000                        3,416,000
                                                                  ---------                    -------------
Total Liabilities and Stockholders' Equity                      $ 5,969,000                     $  8,125,000
                                                                ===========                    =============

</TABLE>

        The accompanying notes are an integral part of these statements.

                                       2
<PAGE>
<TABLE>
<CAPTION>

                               CAREADVANTAGE, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


                                           Three Months Ended                        Nine Months Ended
                                        Sept 30,           Oct 31,                Sept 30,          Oct 31,
                                          1999              1998                  1999               1998
                                          ----              ----                  ----               ----


<S>                                       <C>               <C>                   <C>                <C>
Net revenues                              $4,184,000         $6,025,000           $12,013,000        $14,900,000

Costs of services                          2,339,000          1,940,000             6,585,000          5,876,000
                                          ----------         ----------             ---------          ---------


Gross margin                               1,845,000          4,085,000             5,428,000          9,024,000
                                           ---------          ---------             ---------          ---------

Operating expenses:

Selling, general and administration        1,643,000          2,032,000             5,435,000          5,416,000
Depreciation and amortization                213,000            173,000               629,000            477,000
                                             -------            -------               -------            -------

Total operating expenses                   1,856,000          2,205,000             6,064,000          5,893,000
                                           ---------          ---------             ---------          ---------

Operating  (loss)/income                     (11,000)         1,880,000              (636,000)         3,131,000

Net interest income/(expense)                 14,000             (8,000)               32,000           (122,000)
                                             -------            -------                ------          ---------


Net (loss)/income before provision             3,000          1,872,000              (604,000)         3,009,000
for taxes


Provision for taxes                                             101,000                                  165,000
                                               -----         ----------             ---------          ---------

Net  (loss)/income                             3,000          1,771,000              (604,000)         2,844,000
                                               =====          =========             =========          =========

Net  (loss)/income
per share of common stock-basic and diluted     $.00               $.02                 ($.01)              $.04
                                                ====               ====                 =====               ====

Weighted average number
of common shares outstanding              93,700,000         82,190,000            82,190,000         77,857,000
                                          ==========         ==========            ==========         ==========
</TABLE>


        The accompanying notes are an integral part of these statements.

                                       3
<PAGE>
<TABLE>
<CAPTION>


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

                                                                      Nine Months Ended
                                                                  Sept 30,            Oct 31,
                                                                    1999                1998
                                                                    ----                -----
<S>                                                               <C>                   <C>
Cash flows from operating activities:

Net  (loss)/profit                                                $(604,000)            $2,844,000

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

Depreciation and amortization                                       961,000                882,000
Compensation due to option issuance                                  43,000                      0

Change in assets and liabilities:

Due to/from customers/stockholders                                  183,000               (193,000)
Other assets                                                        (48,000)               170,000
Accounts payable                                                    (19,000)              (477,000)
Accrued expenses and other liabilities                             (472,000)               728,000
Deferred revenue                                                   (130,000)              (310,000)
                                                                  ---------              ---------

Net cash  (used by) /provided from
operating activities                                                (86,000)             3,644,000
                                                                   --------             ---------

Cash flows from investing activities:

Capital expenditures                                               (468,000)             (772,000)
                                                                  ---------              --------

Net cash  (used by) investing
activities                                                         (468,000)             (772,000)
                                                                  ---------             ---------

Cash flows from financing activities:

Principal payments to stockholder                                  (695,000)                   (0)
Principal payments under long-term debt                            (319,000)             (438,000)
                                                                  ---------             ---------

Net cash (used by) financing
Activities                                                       (1,014,000)             (438,000)
                                                               ------------             ---------

Net  (decrease)/increase in cash                                 (1,568,000)            2,434,000

Cash - beginning of fiscal year                                   3,354,000             1,311,000
                                                                  ---------             ---------

Cash - end of period                                             $1,786,000            $3,745,000
                                                                 ==========            ==========
</TABLE>



        The accompanying notes are an integral part of these statements.

                                       4
<PAGE>


                               CAREADVANTAGE, INC.
                        NOTES TO THE FINANCIAL STATEMENTS

Note A--Basis of preparation:

Fiscal Year Change:

On June 8, 1999, CareAdvantage, Inc. ("CAI" or the "Company") changed its fiscal
year from one ending  October  31 to a calendar  year  ending  December  31. The
Company has not recast data for the comparative periods as such recasting is not
practicable.  Additionally,  the Company does not experience  seasonality in its
results  of  operations  and  cash  flows  and  such a  restatement  is not cost
justified.  The Company has prepared its financial  statements  for the calendar
quarters ended  September 30, 1999 compared to the fiscal quarters ended October
31,  1998 (for the most  recent  three- and nine-month  periods).  The Company
believes  such a comparison  to the periods  ended  October 31, 1998  provides a
reliable basis for comparing changes in its results of operations and cash flows
for the periods ended September 30, 1999.

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
September 30, 1999 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, 1998 Annual Report on Form 10-KSB filed
with the Securities  and Exchange  Commission on January 29, 1999 and the 10-KSB
for the Transition  period  November 1, 1998 through  December 31, 1998 filed on
September 3, 1999.

The  results of  operations  for the period  ended  September 30, 1999 are not
necessarily indicative of operating results to be expected for the full year.

Note B--Per share data:

Basic net  income  per share has been  computed  based on the  weighted  average
number of shares outstanding during the periods. In the 1998 periods and for the
three months ended  September 30, 1999, the dilutive  effect of stock options is
included in the  calculation  of diluted  earnings  per share using the treasury
stock  method.  For the nine months  ended  September  30,  1999, common stock
equivalents are anti-dilutive.

Note C--Contingencies:

Potential uninsured exposure to litigation:

a) 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,  AND HORIZON BLUE CROSS BLUE SHIELD OF NEW JERSEY,  INC. 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 for
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. The parties to this
litigation are currently taking  discovery.  Until discovery has been completed,
the Company has  insufficient  information  regarding its potential  exposure in
this matter.


                                       5
<PAGE>



b) On or about  January 16,  1998,  an action  entitled  MARY  DESTEFANO  v.CARE
ADVANTAGE,  INC., CAROL MANZELLA,  and THOMAS P. RILEY (the "DeStefano  Action")
was filed in the Superior  Court of New Jersey.  The complaint  alleges that (i)
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) the  Company  violated  the New  Jersey  Wire  Tapping  and  Electronic
Surveillance  Control  Act. The  complaint  did not demand an amount of specific
monetary damages. The defendants have denied liability in all respects.  On July
7, 1998, the Company was advised by its insurance carrier that it will provide a
defense  to all  defendants  named  in the  complaint.  However,  the  Company's
insurance  carrier has also advised that it will not pay any judgment adverse to
the insured which establishes the act of deliberate  dishonesty committed by the
insured  with actual  dishonest  purpose and intent and material to the cause of
the action so adjudicated. Under the terms of the policy, "insured" includes the
Company and its  officers  and  directors.  The Company  has  retained  separate
counsel to  represent  it in the  litigation  for  purposes  of this  exclusion.
Plaintiff  has  advised the  Company  that her  damages  are  believed to exceed
$250,000 and she has also asserted a claim for punitive damages.  The Company is
contesting this lawsuit vigorously. The parties to this litigation are currently
taking  discovery,  and no trial  date has been set.  Until  discovery  has been
completed,  the Company has  insufficient  information  regarding  its potential
exposure in this matter.

Note D - Supplemental Cash Flow Information:

Below is  supplemental  cash flow  information  related to the nine months ended
September 30, 1999 and October 31, 1998:

                                             September 30,         October 31,

                                                1999                  1998
                                                ----                  ----

Income taxes paid                            115,000               113,000

Interest paid                                 53,000                64,000



Note E - Stock Option Grant and 1996 Stock Option Plan Amendment

On January 8, 1999,  the Board of  Directors  of the Company  ("Board")  granted
stock  options  for  3,600,000  shares of Common  Stock of the  Company to David
Noone, its Chief Executive  Officer,  in connection with Mr. Noone's  employment
agreement. The options have an exercise price of $.03 per share and a term of 10
years. Options for 1,800,000 shares shall become exercisable as follows: (a) 1/3
on December 31, 1999;  and (b) the  remaining  2/3 shall become  exercisable  in
equal  monthly  amounts over the period  January 1, 2000,  to December 31, 2001.
Options for the remaining 1,800,000 shares originally were to become exercisable
over a period  of 3 years  commencing  January  8, 2000 if  certain  performance
criteria  were met. On February  24,  1999,  the Board  approved an amendment to

                                       6
<PAGE>

these  options.  Under the terms of this amendment the options for the remaining
1,800,000 shares shall become exercisable in three equal annual  installments on
the  fourth,  fifth  and  sixth  anniversary  of the  date of grant  subject  to
acceleration  upon  achievement  of certain  performance  targets.  The  Company
realized compensation costs related to this amendment of approximately  $252,000
and is  amortizing  this cost over the six year  vesting  period of the options,
unless achievement of performance targets mandates accelerated amortization.  In
connection  with this grant,  the Board amended the Company's  1996 Stock Option
Plan (the "Stock  Option  Plan") to provide  the Board (or a Committee  thereof)
with  increased  discretion in the terms and  conditions of stock options it may
award.

On January 26, 1999, the Board granted stock options,  constituting an aggregate
of 10,556,000  shares of Common Stock of the Company,  to various  employees,  a
director  and a former  employee of the  Company.  The options  have an exercise
price of $.08 per share and a term of 10 years  subject to  earlier  termination
upon  certain  events.  A  portion  of the  options  vests  immediately  and the
remainder vests over 3 years. In connection with these grants, the Board amended
the Stock Option Plan to increase the number of shares  authorized  for issuance
from 10% to 18% of the Company's  authorized  Common  Stock,  and it amended the
Company's 1996 Directors Stock Option Plan (the  "Directors  Stock Option Plan")
to provide the Board with  increased  discretion in the terms and  conditions of
stock options it may award.

In addition, on January 26, 1999, the Board amended the Company's Certificate of
Incorporation to increase the number of shares of the Company's Common Stock for
issuance from 90,000,000 shares to 103,600,000 shares.

On July 7, 1999, the Company's stockholders approved the foregoing amendments to
the Company's Stock Option Plan, the amendments to the Company's Directors Stock
Option Plan and the amendment to the  Company's  Certificate  of  Incorporation.
(See Part II, item 4)


                                       7
<PAGE>


                               CAREADVANTAGE, INC.
            MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

ITEM 2. Management's Discussion  and Analysis of Financial Condition and Results
        of Operations

FORWARD LOOKING STATEMENTS:

Certain   statements  in  this  Form  10-QSB  may  constitute   "forward-looking
statements"  contemplated under 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 and the outcome
of pending litigation,  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,  and 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 ability to generate new business,  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,  could have a material
adverse  impact on the Company or prevent the Company from  achieving the growth
or obtaining the results discussed.  For a more complete discussion of these and
other risk factors, please see "Cautionary Statements in Item 6 of the Company's
Form 10-KSB for the fiscal year ended October 31, 1998 filed with the Securities
and Exchange  Commission  on January 29, 1999 and the 10-KSB for the  Transition
period November 1, 1998 through December 31, 1998 filed on September 3, 1999.

GENERAL OVERVIEW:

The Company is a holding company which, through its 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 provide optimal levels of care 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 several of Blue Cross/Blue  Shield health services
organizations in the Northeastern United States.

RESULTS OF OPERATIONS:

The following  discussion  compares the Company's  results of operations for the
three and nine months ended  September  30,  1999,  with those for the three and
nine months ended October 31, 1998.



Three Months Ended September 30,1999,  Compared to Three Months Ended October
31, 1998

Revenues:

The  Company's  total  operating  revenues  for the  three-month  periods  ended
September  30,  1999 and  October 31,  1998 were  approximately  $4,184,000  and
$6,025,000, respectively. This represents a decrease of approximately $1,841,000
for the  three-month  period  ended  September  30, 1999 from the  corresponding
period of the prior  fiscal  year.  The  decrease  for the  three  months  ended
September 30, 1999 is largely due to decreased revenue of approximately $470,000
on account of the termination of the Allied Health Group,  Inc.  agreement,  and
decreased revenue of approximately $1,435,000 from the Company's major customers
related to the  realization of one-time  performance  revenues  during the prior
fiscal year.

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. Although the Company is pursuing an
aggressive  marketing and sales  campaign to increase its revenues,  including a
proposal to  Michigan  Blue Cross and Blue  Shield  ("Michigan  BCBS") to assume
responsibility for its entire care management program, there can be no assurance
that the Company will enter into an agreement with Michigan BCBS or otherwise be
successful in increasing its revenues.



                                       8

<PAGE>

Cost of services:

The Company's  total direct cost of services for the  three-month  periods ended
September  30,  1999 and  October  31,  1998 was  approximately  $2,339,000  and
$1,940,000,  respectively. This represents an increase of approximately $399,000
for the  three-month  period  ended  September  30, 1999 over the  corresponding
period of the prior fiscal year.  This  increase in the cost of services for the
three-month  period ended  September  30, 1999 was primarily due to increases in
personnel  costs related to additional  hiring of  operational  staff to support
increased membership.

Operating expenses:

Selling, general, and administrative:

The  Company's  total  selling,   general,  and  administrative  costs  for  the
three-month  periods  ended  September  30,  1999  and  October  31,  1998  were
approximately  $1,643,000  and  $2,032,000,  respectively.  This  represents  an
decrease of  approximately  $389,000 for the three-month  period ended September
30, 1999 over the  corresponding  period of the prior fiscal year. This decrease
for the three-month  period ended September 30, 1999 is largely due to decreases
in personnel costs of approximately $243,000,  professional and consulting costs
of  approximately  $107,000,  and  other  general  and  administrative  costs of
approximately $181,000 of which a decrease of approximately $40,000 for fees and
licenses is included,  offset by an increase in  information  and  communication
costs of  approximately  $142,000.  Management  has  taken and  intends  to take
additional  steps  to  reduce  general  and  administrative  costs.  There is no
assurance,  however, that the Company will be successful in reducing general and
administrative costs by any significant amount.

Depreciation and amortization:

The Company's  total  depreciation  and  amortization  costs for the three-month
periods  ended  September  30,  1999 and  October  31,  1998 were  approximately
$307,000 and  $308,000,  respectively.  Approximately  $94,000 and $135,000 were
included in cost of services for such periods.

Interest expense:

The Company's total net interest  income/(expense)  for the three-month  periods
ended  September  30, 1999 and October  31, 1998 was  approximately  $14,000 and
($8,000),  respectively.  This represents a decrease of approximately $22,000 in
net interest  expense for the three-month  periods ended September 30, 1999 from
the corresponding  period of the prior fiscal year. The decrease in net interest
expense is largely due to  decreased  interest  costs of  approximately  $14,000
under the  Master  Lease  Agreement  with IBM  Credit  Corporation  ("IBM")  and
decreased interest costs of approximately  $23,000 related to the Horizon BCBSNJ
Note,  offset by decreased  interest  income of  approximately  $15,000 from the
Company's short-term investments.



Nine Months Ended September 30, 1999,  Compared to Nine Months Ended October 31,
1998



Revenues:

The  Company's  total  operating  revenues  for  the  nine-month  periods  ended
September  30,  1999 and October 31,  1998 were  approximately  $12,013,000  and
$14,900,000,   respectively.   This  represents  a  decrease  of   approximately
$2,887,000  for  the  nine-month  period  ended  September  30,  1999  over  the
corresponding  period of the prior fiscal year.  The decrease for the nine-month
period  ended  September  30,  1999  is  largely  due to  decreased  revenue  of
approximately  $1,187,000 related to the termination of the Allied Health Group,
Inc.  agreement  and  decreased  revenue of  approximately  $1,660,000  from the
Company's  major customers  related to the  realization of one-time  performance
revenues during the prior fiscal year.


                                       9

<PAGE>

Cost of services:

The  Company's  total direct cost of services for the  nine-month  periods ended
September  30, 1999 and October  31,  1998,  was  approximately  $6,585,000  and
$5,876,000,  respectively. This represents an increase of approximately $709,000
for the nine-month period ended September 30, 1999 over the corresponding period
of the  prior  fiscal  year.  This  increase  in the  cost of  services  for the
nine-month  period ended  September  30, 1999 was  primarily due to increases in
personnel  costs related to additional  hiring of  operational  staff to support
increased membership.

Operating expenses:

Selling, general and administrative:

The  Company's  total  selling,   general,  and  administrative  costs  for  the
nine-month   periods  ended  September  30,  1999  and  October  31,  1998  were
approximately  $5,435,000  and  $5,416,000,  respectively.  This  represents  an
increase of approximately  $19,000 for the nine-month period ended September 30,
1999 over the  corresponding  period of the prior fiscal year. This increase for
the nine-month  period ended September 30, 1999 is due to increases in personnel
costs of  approximately  $76,000,  travel costs of  approximately  $80,000,  and
information  and  communication  costs  of  approximately  $184,000,  offset  by
decreases  in  professional  and  consulting  costs of  approximately  $284,000,
including  approximately $150,000 due to decreased legal fees, and other general
and  administrative  costs of  approximately  $37,000.  The Company  experienced
increased marketing and sales costs during the nine-month period ended September
30, 1999. This increase is attributable to the Company's increased marketing and
sales efforts, as well as increased emphasis on new product development.



Depreciation and amortization:

The Company's  total  depreciation  and  amortization  costs for the  nine-month
periods  ended  September  30,  1999 and  October  31,  1998 were  approximately
$1,004,000 and $882,000,  respectively.  This increase of approximately $122,000
is largely due to amortization related to internally developed software costs of
approximately  $216,000,  offset by decreases in amortization related to license
fees of  approximately  $55,000  and  decreased  depreciation  of  approximately
$34,000 related to computer equipment.  Approximately $375,000 and $405,000 were
included in costs of services for such periods.

Interest expense:

The Company's net interest  income/(expense)  for the  nine-month  periods ended
September  30,  1999  and  October  31,  1998  was  approximately   $32,000  and
($122,000),  respectively. This represents a decrease in net interest expense of
approximately  $154,000 for the nine-month periods ended September 30, 1999 from
the corresponding  period of the prior fiscal year. The decrease in net interest
expense  is largely  due to  decreased  interest  costs  under the Master  Lease
Agreement  with  IBM of  approximately  $47,000,  decreased  interest  costs  of
approximately  $67,000  related to the CW Note,  which was  converted  to common
stock on June 30, 1998,  and decreased  interest  costs under the Horizon BCBSNJ
Note  of  approximately   $49,000,   offset  by  increased  interest  income  of
approximately $9,000 from the Company's short-term investments.



LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCES:



General overview:

At September  30,  1999,  the Company had net working  capital of  approximately
$111,000,  stockholders  equity of  approximately  $2,855,000 and an accumulated
deficit  since its  inception of  approximately  $19,279,000.  By  continuing to
provide  high quality care cost  containment  services to its existing  customer
base of five BCBS  plans,  management  believes  it can  continue  to market its
products to other BCBS plans.  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

                                       10

<PAGE>

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  complementary  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.



Financial condition:

At September 30, 1999, the Company had cash of approximately  $1,786,000 and net
working capital of approximately $111,000. At December 31, 1998, the Company had
cash of  approximately  $3,354,000  and a net working  capital of  approximately
$715,000.

Net cash (used by)/provided from operating  activities amounted to approximately
($86,000) and $3,644,000 for the nine-month periods ended September 30, 1999 and
October 31, 1998,  respectively.  The cash used by 1999 operating  activities is
largely due to a $604,000  net loss,  a decrease in accrued  expenses  and other
liabilities of approximately  $472,000, and a decrease of approximately $130,000
in deferred revenue, offset by non-cash charges of approximately $1,004,000, and
a decrease in customer receivable of approximately $183,000.

Net cash used in investing  activities  amounted to  approximately  $468,000 and
$772,000  for the  nine-month  periods  ended  September  30,  1999 and  October
31,1998,  respectively.  The decrease in cash used of approximately  $304,000 is
due to decreased capital outlays for  computer-related  equipment and internally
developed  software costs incurred during the nine-month  period ended September
30, 1999.

Net cash used in financing  activities amounted to approximately  $1,014,000 and
$438,000 for the  nine-month  periods  ended  September 30, 1999 and October 31,
1998,  respectively.  The  increase  in cash used of  approximately  $576,000 is
largely  due  to  increased  principal  payments  to a  stockholder/customer  of
approximately  $695,000 offset by decreased  principal  payments  related to the
Master Lease Agreement with IBM of approximately $119,000.

While there can be no  assurances,  management  believes  that its cash on hand,
projected future cash flows from operations and the Company's borrowing capacity
under its credit  facility  with Summit Bank,  which expires on January 31, 2000
(see discussion  below under Capital  Resources),  will provide adequate capital
resources to support the  Company's  anticipated  cash needs for the next twelve
months.


Capital resources:

Pursuant to the Horizon BCBSNJ Note, the Company owes $887,000 to Horizon BCBSNJ
as of September 30, 1999. The Horizon BCBSNJ Note provides that principal  shall
be amortized  through  equal  monthly  payments of principal  and interest  from
October 1, 1998 through June 30, 2000,  at which time the  principal of the note
is scheduled  to be paid in full.  The Horizon  BCBSNJ Note bears  interest at a
five-year  U.S.  treasury  yield,  adjusted  quarterly.  While  there  can be no
assurances  that  future  operating  results  will be  sufficient  to fund  this
obligation of the Company,  management expects such amounts to be funded through
operations.

The Company has a credit  facility  with Summit Bank (the "Bank") that  provides
for a $1,500,000 working capital revolver to be used for general working capital
needs,  which  has been  extended  through  January  31,  2000.  Horizon  BCBSNJ
currently  guarantees this obligation for the Company,  however,  Horizon BCBSNJ
has verbally notified the Company that it will not guarantee this facility after
the January 31, 2000 expiration date. The Company is in the process of seeking a
credit facility from another lender,  however,  there are no guarantees that the
Company will be  successful  in securing an  additional  credit  facility  after
January 31, 2000. In September of 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

                                       11
<PAGE>

lease.  This letter of credit is issued under the Company's  credit facility and
the availability is thus reduced by the face amount of the letter of credit. The
remainder of the credit facility is available to the Company.

In connection with  management's  intention to more  effectively  streamline its
operations, 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  leasehold  improvement,
software and computer  hardware costs during the fourth quarter of calendar 1999
of  approximately  $100,000.  Such costs are  expected to be  financed  with the
Company's current cash reserves and future operating cash flows.


YEAR 2000:

POTENTIAL IMPACT OF YEAR 2000 COMPUTER ISSUES OVERVIEW:

  The year 2000  computer  problem is the  inability of computer  systems  which
store  dates by using the last two digits of the year (i.e.  "98" for "1998") to
reliably  recognize  that dates after  December 31, 1999 are later than, and not
before,  1999.  For  instance,  the date  January  1,  2000,  may be  mistakenly
interpreted as January 1, 1900, in calculations  involving dates on systems that
are non-year 2000 compliant. The Company relies on information technology ("IT")
systems and other systems and  facilities  such as telephones,  building  access
control systems and heating and ventilation  equipment  ("Embedded  Systems") to
conduct its  business.  These  systems are  potentially  vulnerable to year 2000
problems  due to their use of date  information.  The Company  also has business
relationships  with  customers  and health  care  providers  and other  critical
vendors who are themselves  reliant on IT and Embedded  Systems to conduct their
businesses.

STATE OF READINESS:

  The  Company's  IT systems are largely  centralized,  with  substantially  all
systems  maintained  in the  Company's  corporate  headquarters  in Iselin,  New
Jersey,  the Company has  developed  its own standards for systems which include
both  purchased  and  internally-developed  software.  The Company's IT hardware
infrastructure is built mainly around mid-range  computers and IBM PC-compatible
servers and desktop systems. The Company's principal means of ensuring year 2000
readiness for purchased software has been the replacement,  upgrade or repair of
non-compliant  systems.  This replacement process would have been undertaken for
business reasons irrespective of the year 2000 problem;  however, it would, more
than likely,  have been  implemented over a longer period of time. The Company's
internally-developed  software  was either  designed  to be year 2000 ready from
inception  or is in the  process  of  being  modified  to be  year  2000  ready.
Substantially all of the Company's  mid-range IT hardware has been remediated to
a state of year 2000 readiness, with the remainder scheduled to be remediated by
the  end  of the  fourth  calendar  quarter  of  1999.  Most  of  the  Company's
non-compliant  IBM PC-compatible  servers and desktops have been replaced,  with
the remainder  expected to be replaced by the end of fiscal 1999.  The Company's
plan   for   IT   systems   consists   of   several   phases,   primarily:   (i)
Inventory--identifying  all IT systems and the magnitude of year 2000  readiness
risk  of  each   according  to  its  potential   business   impact;   (ii)  Date
assessment--identifying  IT systems that use date  functions and assessing  them
for year 2000  functionality;  (iii)  Remediation--reprogramming,  replacing  or
upgrading where necessary, inventoried items to ensure they are year 2000 ready;
and (iv)  Testing  and  certification--testing  the code  modifications  and new
inventory with other associated  systems,  including  extensive date testing and
performing  quality  assurance  testing to ensure  successful  operation  in the
post-1999 environment. The Company has substantially completed the inventory and
assessment  phases for  substantially  all of its IT systems.  The  Company's IT
systems are currently in the remediation and testing and  certification  phases.
The Company plans to complete the remediation,  testing and certification of all
of its IT systems by the end of calendar year 1999.  The Company  leases most of
the office space in which its reliance on Embedded  Systems presents a potential
problem and is  currently  working with the  respective  lessors to identify and
correct any potential year 2000 problems related to these Embedded Systems.  The
Company believes that its year 2000 projects generally are on schedule.


                                       12

<PAGE>

EXTERNAL RELATIONSHIPS:

 The Company also faces the risk that one or more of its  critical  suppliers or
customers  ("External  Relationships")  will  not be able to  interact  with the
Company due to the third party's  inability to resolve its own year 2000 issues,
including those associated with its own External  Relationships.  The Company is
attempting  to  determine  the  overall  year  2000  readiness  of its  External
Relationships.  In the  case  of  significant  customers  and  mission  critical
suppliers such as banks, telecommunications providers and other utilities and IT
vendors,  the Company is engaged in  discussions  with the third  parties and is
attempting to obtain  detailed  information as to those parties' year 2000 plans
and  state  of  readiness.  The  Company,  however,  does  not  have  sufficient
information  at the current time to predict  whether its External  Relationships
will be year 2000 ready.

YEAR 2000 COSTS:

 Total costs incurred solely for remediation of potential year 2000 problems are
currently estimated to be approximately  $100,000 in calendar year 1999. A large
majority of these costs are expected to be  incremental  expenses  that will not
recur in the year 2000 or thereafter. The Company capitalizes certain costs that
extend the useful life of such  assets and expense  costs that do not extend the
assets life.  Year 2000  readiness  is critical to the Company.  The Company has
re-deployed some resources from non-critical system enhancements to address year
2000 issues.  Due to the  importance  of IT systems to the  Company's  business,
management has deferred  non-critical  systems  enhancements to become year 2000
ready. The Company does not expect these  redeployments  and deferrals to have a
material impact on the Company's financial condition or results of operations.

RISKS AND CONTINGENCY/RECOVERY PLANNING:

 If the Company's year 2000 issues were unresolved,  the most reasonably  likely
worst case scenario would include,  among other possibilities,  the inability to
accurately  and  timely  authorize  and  process  benefits  and  medical  stays,
accurately  bill  customers,   assess  claims  exposure,   determine   liquidity
requirements,  report  accurate  data to  management,  stockholders,  customers,
regulators and others,  business  interruptions or shut downs, financial losses,
reputational  harm,  loss  of  significant  customers,   increased  scrutiny  by
regulators and litigation related to year 2000 issues. The Company is attempting
to limit the potential impact of the year 2000 by monitoring the progress of its
own year 2000 project and those of its critical  External  Relationships  and by
developing contingency/recovery plans. The Company cannot guarantee that it will
be able to resolve all of its year 2000  issues.  Any critical  unresolved  year
2000 issues at the Company or its External Relationships,  however, could have a
material  adverse effect on the Company's  results of  operations,  liquidity or
financial   condition.   The   Company   has   developed,   or  is   developing,
contingency/recovery plans aimed at ensuring the continuity of critical business
functions  before and after  December 31,  1999.  As part of that  process,  the
Company has substantially  completed the development of manual work alternatives
to automated  processes which will both ensure business continuity and provide a
ready  source  of  input to  affected  systems  when  they  are  returned  to an
operational  status.  These manual  alternatives  presume,  however,  that basic
infrastructure  such as  electrical  power  and  telephone  service,  as well as
purchased  systems  which  are  advertised  to  be  year  2000  ready  by  their
manufacturers  (primarily  personal  computers and  productivity  software) will
remain unaffected by the year 2000 problem.

                                       13

<PAGE>


                               CAREADVANTAGE, INC.
PART II--OTHER INFORMATION

Item 1.  Legal Proceedings

On October 19,  1999,  the Company was  advised  that it may be  impleaded  as a
third-party  defendant in a lawsuit entitled  HORIZON  HEALTHCARE OF NEW JERSEY,
INC. vs. ALLIED  SPECIALTY  CARE  SERVICES,  INC.,  pending in the United States
District  Court for the  District  of New Jersey.  This  lawsuit  seeks  damages
arising out of an  agreement  between  Horizon  Healthcare  of New Jersey,  Inc.
("Horizon")  and Allied  Specialty Care Services,  Inc.  ("Allied").  One of the
claims  made by Horizon is that it is entitled to damages on account of Allied's
agreement  to repay  certain  monies  ("Risk  Amounts")  to Horizon in the event
certain charges for medical claims exceeded certain capitation amounts. Allied's
third-party  complaint  against the Company seeks to enforce an agreement  among
Horizon, Allied and the Company wherein it is claimed that the Company agreed to
pay Allied  one-half of any Risk Amounts that Allied  "owed" to Horizon,  but no
more than certain funds received by the Company on account of such agreement. (A
copy of the agreement  among  Horizon,  Allied and the Company has been filed as
Exhibit  10(e) to Form 10-QSB dated April 30,  1997.) The parties to the lawsuit
and the Company are  presently  attempting  to resolve  their  disputes  through
mediation.  However,  the  can  be  no  assurance  that  such  efforts  will  be
successful.  The Company has  previously  established a reserve that  management
believes is  sufficient to satisfy any liability the Company may have on account
of Allied's claim.

For a description of additional legal  proceedings,  see Note C to the Financial
Statements.  With the exception of the legal proceedings described herein and in
Note  C to  the  Financial  Statements,  there  are no  material  pending  legal
proceedings other than ordinary routine litigation incidental to the business of
the Company.

Item 2.  Changes in Securities

None.

Item 3.  Defaults Upon Senior Securities

None.

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

On July 7, 1999,  the  Company  held the Annual  Meeting  of  stockholders.  The
purposes  of the  meeting  were  (1) to  elect  six  directors,  (2) to  approve
amendments to the Company's Stock Option Plan, (3) to approve  amendments to the
Company's  Directors'  Stock Option Plan,  and (4) to approve an increase in the
total  number  of  authorized   shares  of  Common  Stock  from   90,000,000  to
103,600,000.


<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------
     Matters Voted Upon                    For                        Against                    Not Voting
---------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                            <C>                        <C>
---------------------------------------------------------------------------------------------------------------------
1.   Election of Directors
---------------------------------------------------------------------------------------------------------------------
          William Marino               75,234,840                        0                       6,955,043
---------------------------------------------------------------------------------------------------------------------
          Robert J.Pures               75,234,840                        0                       6,955,043
---------------------------------------------------------------------------------------------------------------------
          Barry Weinberg               75,234,840                        0                       6,955,043
---------------------------------------------------------------------------------------------------------------------
          David McDonnell              75,234,840                        0                       6,955,043
---------------------------------------------------------------------------------------------------------------------
          Walter Channing, Jr.         75,234,840                        0                       6,955,043
---------------------------------------------------------------------------------------------------------------------
          David Noone                  75,234,840                        0                       6,955,043
---------------------------------------------------------------------------------------------------------------------
2.   Amendments to Stock               75,234,840                        0                       6,955,043
     Option Plan
---------------------------------------------------------------------------------------------------------------------
3.   Amendments to Directors'          75,234,840                        0                       6,955,043
     Stock Option Plan
---------------------------------------------------------------------------------------------------------------------
4.   Increase in authorized            75,234,840                        0                       6,955,043
     Common Stock
---------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       14

<PAGE>

Item 5.  Other Information

None.


Item 6. Exhibits and reports on Form 8-K

(a) Exhibits

(27)    Financial Data Schedule


                                       15
<PAGE>


                                   SIGNATURES



In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed  on its  behalf  by the  undersigned  thereunto  duly
authorized.



                              CareAdvantage, Inc



November 12, 1999              /s/ David G. Noone
                              ------------------------

                              David G. Noone
                              Chief Executive Officer



November 12, 1999              /s/ David G. DeBoskey
                              ---------------------------

                              David G. DeBoskey
                              Chief Financial Officer



                                       16


<PAGE>

Exhibit Index
-------------

27          Financial Data Schedule


<PAGE>