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 June 30, 1999



                         COMMISSION FILE NUMBER 0-26168


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


<TABLE>
<CAPTION>
<S>                                                                                               <C>
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)
</TABLE>


       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 August 13, 1999

                  Transitional Small Business Disclosure Format
                                   Yes X No__









<PAGE>

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


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


Part I - Financial Information

    Item 1.    Financial Statements

<TABLE>
<CAPTION>
<S>                                                                                            <C>
           Condensed Consolidated Balance Sheets -
           June 30, 1999 (unaudited) and October 31, 1998.....................................   2

           Condensed Consolidated Statements of Operations -
           Three and Six-months ended June 30, 1999 and July 31, 1998.........................   3
           (Unaudited)

           Condensed Consolidated Statements of Cash Flows -
           Six-months ended June 30, 1999 and July 31, 1998...................................   4
           (Unaudited)

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

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

    Item 3.    Quantitative and Qualitative Disclosures about Market Risk ....................  14


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 .............................................................  14

    Item 6.    Exhibits and Reports on Form 8-K...............................................  14

    Signature.................................................................................  15

</TABLE>


<PAGE>

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

                               CAREADVANTAGE, INC
                           CONSOLIDATED BALANCE SHEETS


                                                                  June 30,                        October 31,
                     ASSETS                                        1999                              1998
                                                                 Unaudited                         Audited
                                                                 ---------                        ----------
<S>                                                             <C>                               <C>
Current assets:
     Cash and cash equivalents                                  $ 1,994,000                         3,745,000
     Accounts receivable for services:
         Stockholder                                                986,000                         1,080,000
         Other                                                      409,000                           667,000
     Other current assets                                           279,000                            75,000
                                                                -----------                       -----------
                  Total current assets                            3,668,000                         5,567,000

Property and equipment, at cost less accumulated depreciation       932,000                         1,374,000
Intangible assets                                                 1,656,000                         1,768,000
Other assets                                                        103,000                            91,000
                                                                -----------                       -----------

Total Assets                                                    $ 6,359,000                       $ 8,800,000
                                                                ===========                       ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

     Current portion of capital lease obligation                          0                          422,000
     Accounts payable                                               152,000                          163,000
     Due to stockholder                                           1,217,000                        1,153,000
     Due to customer                                                902,000                          902,000
     Accrued salaries and employee benefits                         541,000                        1,211,000
     Accrued expenses and other current liabilities (Note E)        521,000                          455,000
     Deferred revenue, current                                      184,000                          184,000
                                                                -----------

                  Total current liabilities                       3,517,000                        4,490,000

Due to stockholder, less current portion                                  0                          710,000
Deferred revenue and other liabilities, less current portion              0                          116,000
                                                                -----------                       ----------

Total Liabilities                                                 3,517,000                        5,316,000
                                                                -----------                       ----------

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 90,000,000 shares; issued
         and outstanding 82,189,883 and 82,189,883                   82,000                           82,000
     Additional capital                                          22,042,000                       22,009,000
     Accumulated deficit                                        (19,282,000)                     (18,607,000)
                                                               ------------                      -----------

Total Stockholders' Equity                                        2,842,000                        3,484,000
                                                               ------------                      -----------
Total liabilities and Stockholders' Equity                      $ 6,359,000                      $ 8,800,000
                                                               ============                      ===========
</TABLE>


        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
                                                                June 30,        July 31,     June 30,       July 31,
                                                                1999            1998         1999           1998
                                                                ----            ----         ----           ----

<S>                                                         <C>                <C>         <C>             <C>
Net revenues                                                $3,795,000         $4,681,000  7,829,000       8,875,000

Costs of services                                            2,214,000          2,032,000  4,246,000       4,194,000
                                                             ---------          ---------  ---------       ---------


Gross margin                                                 1,581,000          2,649,000  3,583,000       4,681,000
                                                             ---------          ---------  ---------       ---------

Operating expenses:

Selling, general and administration                          1,863,000          1,931,000  3,791,000       3,448,000
Depreciation and amortization                                  211,000             61,000    415,000          46,000
                                                               -------             ------    -------          ------

Total operating expenses                                     2,074,000          1,992,000  4,206,000       3,494,000
                                                             ---------          ---------  ---------       ---------

Operating  (loss)/income                                      (493,000)           657,000   (623,000)      1,187,000

Net interest income/(expense)                                   10,000            (50,000)    17,000        (114,000)


Net  (loss)/income                                            (483,000)           607,000   (606,000)      1,073,000
                                                              ========            =======   ========       =========

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

Weighted average number
of common shares outstanding                                82,190,000         76,990,000 82,190,000      74,390,000
                                                            ==========         ========== ==========      ==========

</TABLE>

        The accompanying notes are an integral part of these statements.

                                       3
<PAGE>


                      CAREADVANTAGE, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                          Six-Months Ended
                                                                June 30,                  July 31,
                                                                   1999                     1998
                                                                   ----                     -----

Cash flows from operating activities:

<S>                                                             <C>                   <C>
Net  (loss)/profit                                              $ (606,000)           $ 1,073,000

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

Depreciation and amortization                                      668,000               573,000
Compensation due to option issuance                                 32,000                     0

Change in assets and liabilities:

Due to/from customers/stockholders                                  40,000              (287,000)
Other assets                                                        19,000               (53,000)
Accounts payable                                                   (41,000)             (109,000)
Accrued expenses and other liabilities                            (380,000)              188,000
Deferred revenue                                                   (87,000)            1,631,000
                                                                  --------             ---------

Net cash  (used by) /provided from
operating activities                                              (355,000)            3,016,000
                                                                  --------             ---------

Cash flows from investing activities:

Capital expenditures                                              (282,000)             (454,000)
                                                                  ---------              --------

Net cash  (used by) investing
activities                                                        (282,000)             (454,000)
                                                                  ---------             ---------

Cash flows from financing activities:

Principal payments to stockholder                                 (405,000)                   (0)
Principal payments under long-term debt                           (319,000)             (287,000)
                                                                  ---------             ---------

Net cash (used by) financing
Activities                                                        (724,000)             (287,000)
                                                                ----------             ---------

Net  (decrease)/increase in cash                                (1,361,000)            2,275,000

Cash - beginning of fiscal year                                  3,355,000             1,311,000
                                                                 ---------             ---------

Cash - end of period                                            $1,994,000            $3,586,000
                                                                ==========            ==========

</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, 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 June 30, 1999 compared to
the fiscal quarters ended July 31, 1998 (for the most recent three and six month
periods).  The Company  believes such a comparison to the periods ended July 31,
1998  provides  a  reliable  basis  for  comparing  changes  in its  results  of
operations and cash flows for the periods ended June 30, 1999.

The consolidated financial statements have been prepared by CareAdvantage,  Inc.
("CAI" or 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 June 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. The results of
operations for the period ended June 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,  the
dilutive  effect of stock  options is  included  in the  calculation  of diluted
earnings  per share using the  treasury  stock  method.  For 1999,  common stock
equivalents have not been included since they are not 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  complaint  seeks  compensation   allegedly  due  under  the
     consulting  arrangement and other damages. 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 to pay their  reasonable
     defense  costs.  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.


<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  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 six months ended June
30, 1999 and July 31, 1998:

                                                    June 30,       July 31,
                                                    --------       --------

                                                        1999           1998
                                                        ----           ----

Income taxes paid                                    104,000         13,000

Interest paid, IBM capital lease obligations          11,000         44,000

Interest paid, Horizon BCBS-NJ Note                   31,000              0



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
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.  In
connection  with this grant,  and  subject to  stockholder  approval,  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.

                                       6
<PAGE>

                              CAREADVANTAGE, INC.
                       NOTES TO THE FINANCIAL STATEMENTS


On January 26, 1999,  the Board granted stock  options,  subject to  stockholder
approval,  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, and subject to stockholder approval,  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 (now known as 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,  subject to  stockholder  approval,  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.

Note F - Subsequent Event

The Company held its Annual Meeting of Stockholders on July 7, 1999 at which the
stockholders  elected six directors,  approved amendments to the Company's Stock
Option  Plan and  Directors'  Option  Plan,  and  approved an  amendment  to the
Certificate  of  Incorporation  increasing  the number of  authorized  shares of
common stock to 103,600,000 shares.

                                       7

<PAGE>


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


ITEM 2.  Management  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.

GENERAL OVERVIEW:

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
several of the statewide 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
six and three  months  ended  June 30,  1999,  with  those for the six and three
months ended July 31, 1998.



Three Months Ended June 30, 1999, Compared to Three Months Ended July 31, 1998



Revenues:

The Company's  total operating  revenues for the three-month  periods ended June
30,  1999  and July 31,  1998  were  approximately  $3,795,000  and  $4,681,000,
respectively.  This  represents  a decrease of  approximately  $886,000  for the
three-month  period  ended June 30,  1999 over the  corresponding  period of the
prior  fiscal  year.  The  decrease  for the three months ended June 30, 1999 is
largely due to  decreased  revenue of  approximately  $370,000 on account of the
termination of the Allied Health Group, Inc. agreement, and decreased revenue of
approximately  $500,000  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.  While the Company is pursuing an
aggressive  marketing and sales campaign to increase its revenues,  there can be
no assurance that the Company will be successful in increasing its revenues.



                                       8

<PAGE>

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


Cost of services:

The Company's  total direct cost of services for the  three-month  periods ended
June 30, 1999 and July 31, 1998 were  approximately  $2,214,000 and  $2,032,000,
respectively.  This  represents  an increase of  approximately  $182,000 for the
three-month  period  ended June 30,  1999 over the  corresponding  period of the
prior fiscal  year.  This  increase in the cost of services for the  three-month
period ended June 30, 1999 was primarily  due to increases in personnel  related
to  increased  staffing  for the  Company's  product  and  business  development
processes.

Operating expenses:

Selling, general, and administrative:

The  Company's  total  selling,   general,  and  administrative  costs  for  the
three-month  periods  ended June 30, 1999 and July 31,  1998 were  approximately
$1,863,000  and  $1,931,000,   respectively.  This  represents a decrease  of
approximately  $68,000 for the  three-month  period ended June 30, 1999 over the
corresponding period of the prior fiscal year. This decrease for the three-month
period  ended June 30,  1999 is largely due to  decreases  in  professional  and
consulting  costs of  approximately  $193,000,  offset by increases in personnel
costs  of  approximately   $68,000,   travel  costs  of  approximately  $53,000,
information and communication costs of approximately $37,000, and other costs of
approximately $35,000. 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 June 30, 1999 and July 31, 1998 were  approximately  $355,000 and
$286,000,  respectively.  This increase is largely due to increased amortization
related  to  internally  developed  software  costs  of  approximately  $77,000.
Approximately  $144,000 and $134,000 were included in costs of services for such
periods.

Interest expense:

The Company's total net interest  income/(expense)  for the three-month  periods
ended June 30, 1999 and July 31, 1998 was  approximately  $10,000 and ($50,000),
respectively.  This  represents  a decrease  of  approximately  $60,000  for the
three-month  periods  ended June 30, 1999 over the  corresponding  period of the
prior  fiscal  year.  The  decrease  in net  interest  expense is largely due to
decreased  interest  costs of  approximately  $16,000  under  the  Master  Lease
Agreement  with IBM Credit  Corporation  ("IBM"),  decreased  interest  costs of
approximately  $27,000  related  to the 8%  Exchangeable  Note  in the  original
principal  amount of  $2,000,000,  issued by the Company to CW Ventures II, L.P.
(the "CW Note")  which  matured and was  converted  to common  stock on June 30,
1998,   and  decreased   interest   costs  under  the  Horizon  BCBSNJ  Note  of
approximately  $7,000.  In addition,  the Company  realized  increased  interest
income of approximately $10,000 from the Company's short-term investments.


Six Months Ended June 30, 1999, Compared to Six Months Ended July 31, 1998



Revenues:

The Company's total operating  revenues for the six-month periods ended June 30,
1999  and  July  31,  1998  were   approximately   $7,829,000  and   $8,875,000,
respectively.  This  represents a decrease of  approximately  $1,046,000 for the
six-month period ended June 30, 1999 over the corresponding  period of the prior
fiscal year.  The decrease for the six-month  ended June 30, 1999 is largely due
to decreased revenue of approximately $717,000 related to the termination of the
Allied Health Group, Inc. agreement, decreased revenue of approximately $734,000
from the  Company's  major  customers  related  to the  realization  of one time
performance  revenues realized during the prior fiscal year, offset by increased
revenue of approximately  $405,000 due to re-negotiations of the Company's major
customer contracts.

                                       9


<PAGE>

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


Cost of services:

The Company's total direct cost of services for the six-month periods ended June
30,  1999 and July 31,  1998,  were  approximately  $4,246,000  and  $4,194,000,
respectively.  This  represents  an  increase of  approximately  $52,000 for the
six-month period ended June 30, 1999 over the corresponding  period of the prior
fiscal  year.  This  increase in the cost of services for the  six-month  period
ended June 30, 1999 was primarily due to increases in personnel costs.

Operating expenses:

Selling, general and administrative:

The Company's total selling, general, and administrative costs for the six-month
periods ended June 30, 1999 and July 31, 1998 were approximately  $3,791,000 and
$3,448,000,  respectively. This represents an increase of approximately $343,000
for the six-month  period ended June 30, 1999 over the  corresponding  period of
the prior fiscal year.  This  increase for the  six-month  period ended June 30,
1999  is  due  to  increases  in  personnel  costs  of  approximately  $320,000,
information and communication  costs of approximately  $42,000,  travel costs of
approximately   $94,000,   and  other  general  and   administrative   costs  of
approximately  $118,000,  offset by decreases in facility costs of approximately
$18,000 and professional and consulting  costs of  approximately  $213,000.  The
increase in general and  administrative  costs is largely  due to  increases  of
approximately  $35,000 in investor  relations  and  marketing  materials  costs,
approximately  $32,000  related  to stock  compensation  expense,  approximately
$44,000  related  to  clinical   guidelines   licenses  and  other  general  and
administrative costs of approximately  $7,000. The Company experienced increased
marketing and sales costs during the six-month  period ended June 30, 1999. This
increase is attributable to the Company's increased marketing and sales efforts,
as well as increased emphasis on new product development.

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  six-month
periods  ended June 30, 1999 and July 31, 1998 were  approximately  $668,000 and
$573,000, respectively. This increase of approximately $95,000 is largely due to
amortization  related to internally  developed  software costs of  approximately
$140,000. Approximately $282,000 and $527,000 were included in costs of services
for such periods.

Interest expense:

The Company's net interest income/(expense) for the six-month periods ended June
30,  1999  and  July  31,  1998  was   approximately   $17,000  and  ($114,000),
respectively.  This  represents  a decrease of  approximately  $131,000  for the
six-month periods ended June 30, 1999 over 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
$32,000,  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  $14,000.  In
addition,  the  Company  realized  increased  interest  income of  approximately
$18,000 from the Company's short-term investments.


RESULTS FOR THE QUARTER:

The above  factors  resulted  in a net loss of  approximately  $483,000  for the
second  quarter  ended June 30, 1999 and such loss is  primarily  due to charges
related to the following:

Severance   charges  of   approximately   $160,000  related  to  the  employment
termination of an executive officer,  $70,000 of software development costs that
were  written off due to the  abandonment  of the  project,  $75,000  related

                                       10

<PAGE>


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


to additional  legal support for on-going legal disputes,  and $50,000 of travel
and lodging  expenses  related to the  Company's  increased  marketing and sales
efforts.


LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCES:


General overview:

At June 30, 1999, the Company had working capital of approximately  $151,000,  a
stockholders equity of approximately $2,842,000 and an accumulated deficit since
its  inception  of  approximately  $19,282,000.  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  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 June 30, 1999, the Company had cash of  approximately  $1,994,000 and working
capital of approximately $151,000.  At October 31, 1998, the Company had cash
of approximately $3,745,000 and a working capital of approximately $1,077,000.

Net cash (used by)/provided from operating  activities amounted to approximately
($355,000) and $3,016,000 for the six-month periods ended June 30, 1999 and July
31, 1998,  respectively.  The cash used by 1999 operating  activities is largely
due to, a decrease in accounts payable of approximately  $41,000,  a decrease in
accrued expenses and other liabilities of approximately  $380,000, a decrease of
approximately  $87,000 in deferred  revenue and a $606,000  net loss,  offset by
non-cash  charges of  approximately  $700,000,  an increase  in other  assets of
approximately  $19,000 and an increase in customer  receivable of  approximately
$40,000.

 Net cash used in investing  activities  amounted to approximately  $282,000 and
$454,000  for the  six-month  periods  ended  June 30,  1999  and July  31,1998,
respectively.  The  decrease  in cash used of  approximately  $172,000 is due to
decreased  capital outlays for  computer-related  equipment  incurred during the
six-month period ended June 30, 1999.

Net cash used in financing  activities  amounted to  approximately  $724,000 and
$287,000  for the  six-month  periods  ended  June 30,  1999 and July 31,  1998,
respectively. The increase in cash used of approximately $437,000 is largely due
to  increased  principal  payments to a  stockholder/customer  of  approximately
$405,000 and increased  principal payments related to the Master Lease Agreement
with IBM of approximately $32,000.

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 (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:

There are no amounts payable pursuant to long-term financing  arrangements as of
June 30, 1999. The term of the Master Lease Agreement  expired June 30, 1999, at
which time,  pursuant to its terms the Company  purchased all such items for one
dollar.

                                       11

<PAGE>


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


Pursuant to the Horizon  BCBSNJ  Note,  the Company owes  $1,177,000  to Horizon
BCBSNJ as of June 30, 1999.  The Horizon  BCBSNJ Note provides for equal monthly
payments of principal  and interest  from October 1, 1998 through June 30, 2000,
at which time the principal of the note is payable and due 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 September 3, 1999. 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  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 third and fourth  quarter of
calendar 1999 of approximately  $300,000. 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 third quarter of fiscal 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

                                       12

<PAGE>

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


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 fiscal 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.

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  fiscal  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  expenses  these  costs as
incurred and funds these costs through operating cash flows. 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.

ITEM 3.  Quantitative and Qualitative Disclosures about Market Risk

As of June 30, 1999,  the Company's  investments  are not adversely  impacted by
change in market  interest  rates.  The Company does not believe that changes in
interest  rates will have a  material  impact on future  earnings  or cash flows
during the next twelve months.


PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

For a description of legal proceedings,  see Note C to the Financial Statements.
With the exception of the legal proceedings described 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

None.

Item 5.  Other Information

None.

Item 6. Exhibits and reports on Form 8-K


  (a)   Exhibits

        (27)   Financial Data Schedule

  (b)   Reports on Form 8-K

On June 25, 1999 a Form 8-K/A, dated June 8, 1999, was filed to report that the
Board of Directors of CareAdvantage,  Inc. elected to change its fiscal year end
from October 31 to December 31.


                                       14
<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



August 16, 1999                  /s/ David G. Noone
                                 ----------------------------------------------
                                 David G. Noone

                                 Chief Executive Officer



August 16, 1999                  /s/ David G. DeBoskey
                                 ----------------------------------------------
                                 David G. DeBoskey

                                 Principal Financial and Accounting Officer







                                       15
<PAGE>