**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





**QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d)**


**OF
      THE SECURITIES EXCHANGE ACT OF 1934**





**For
      the quarterly period ended September 30, 2008**





**COMMISSION
      FILE NUMBER 0-26168**





**CAREADVANTAGE,
      INC.**


**(Exact
      name of small business issuer as specified in its
      charter)**





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




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




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




Indicate
      by check mark whether the registrant (1) filed all reports required to be filed
      by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or
      for such shorter period that the registrant was required to file such reports),
      and (2) has been subject to such filing requirements for the past 90
      days.





Yesx
            Noo





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      definitions of “Large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act. (Check
      one):





Large
                accelerated filero
            Accelerated
                fileroNon-accelerated
                filero
            Smaller
                reporting companyx




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





Yeso
            Nox





The
      number of shares of Common Stock outstanding as of October 15, 2008 is
      60,861,665







**INDEX**





**Part
                I - Financial Information**Item
                1. Financial Statements·Condensed Consolidated Balance Sheets - September 30, 2008 (Unaudited)
                and
                December 31, 2007
            
            2·Condensed Consolidated Statements of Operations -Three and nine months
                ended September 30, 2008 and September 30, 2007
                (Unaudited)
            
            3·Condensed Consolidated Statements of Cash Flows -Nine months ended
                September 30, 2008 and September 30, 2007 (Unaudited)
            
            4·Notes to Unaudited Condensed Consolidated Financial
                Statements
            
            5Item
                2. Management’s Discussion and Analysis of Financial Condition and Results
                of Operations
            
            8Item
                3. Quantitative and Qualitative Disclosures About Market
                Risk
            
            12Item
                4T. Controls and Procedures
            
            12**Part
                II - Other Information**
            
            13Item
                1. Legal Proceedings
            
            13Item
                1A. Risk Factors
            
            13Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            
            13Item
                3. Defaults Upon Senior Securities
            
            13Item
                4. Submission of Matters to a Vote of Security Holders
            
            13Item
                5. Other Information
            
            13Item
                6. Exhibits
            
            13Signature
            
            14










**PART
      I - FINANCIAL INFORMATION**





**ITEM
      1. Financial Statements**





**CAREADVANTAGE,
      INC AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**




**September
                30,**
            
            
            **December
                31,****2008**
            
            
            **2007****Unaudited****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            164,000
            
            $
            508,000Accounts
                receivable
            
            
            235,000
            
            
            387,000Prepaid
                expenses
            
            
            83,000
            
            
            107,000Other
                current assets
            
            
            26,000
            
            
            41,000Total
                current assets
            
            
            508,000
            
            
            1,043,000Property
                and equipment, at cost net of accumulated depreciation
            
            
            186,000
            
            
            234,000Intangible
                assets, net of accumulated depreciation
            
            
            4,000
            
            
            6,000Security
                deposits
            
            
            167,000
            
            
            167,000Total
                Assets
            
            $
            865,000
            
            $
            1,450,000**LIABILITIES
                AND STOCKHOLDERS' (DEFICIT)/EQUITY**Current
                liabilities:Accounts
                payable
            
            $
            353,000
            
            $
            62,000Accrued
                compensation and related benefits
            
            
            72,000
            
            
            124,000Accrued
                professional fees
            
            
            158,000
            
            
            206,000Other
                current liabilities
            
            
            1,000
            
            
            14,000Deferred
                revenue
            
            
            36,000
            
            
            21,000Capital
                lease obligation - current
            
            
            58,000
            
            
            58,000Total
                current liabilities
            
            
            678,000
            
            
            485,000Long
                term liabilities:Capital
                lease obligation - long term
            
            
            93,000
            
            
            138,000Deferred
                rent
            
            
            410,000
            
            
            428,000Total
                long term liabilities
            
            
            503,000
            
            
            566,000Total
                Liabilities
            
            
            1,181,000
            
            
            1,051,000Stockholders'
                (deficit)/equity:Preferred
                stock-par value $.10 per share;authorized
                10,000,000 shares; none issuedCommon
                stock-par value $.001 per share; authorized 200,000,000
                shares;
              issued
                114,256,485 shares at September 30, 2008 and 113,256,485 at December
                31,
                2007 and outstanding 60,861,665 shares at September 30, 2008 and
                59,861,665 at December 31, 2007
            
            
            114,000
            
            
            113,000Additional
                capital
            
            
            24,129,000
            
            
            24,086,000Accumulated
                deficit
            
            
            (24,297,000
            )
            
            (23,538,000
            )Treasury
                stock at cost, 53,394,820 shares
            
            
            (262,000
            )
            
            (262,000
            )Total
                Stockholders' (Deficit)/Equity
            
            
            (316,000
            )
            
            399,000Total
                Liabilities and Stockholders' (Deficit)/Equity
            
            $
            865,000
            
            $
            1,450,000




See
      Notes
      to Unaudited Condensed Consolidated Financial Statements.




2




**CAREADVANTAGE,
      INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**(UNAUDITED)**




**Three
                Months Ended**
              **September
                30,**
            
            **Nine
                Months Ended**
              **September
                30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**License
                fees and service revenue
            
            $
            876,000
            
            $
            1,037,000
            
            $
            2,888,000
            
            $
            3,172,000Costs
                of services
            
            
            340,000
            
            
            418,000
            
            
            1,220,000
            
            
            1,276,000Gross
                profit
            
            
            536,000
            
            
            619,000
            
            
            1,668,000
            
            
            1,896,000Operating
                expenses:Selling,
                general and administrative
            
            
            791,000
            
            
            682,000
            
            
            2,407,000
            
            
            2,079,000Operating
                loss
            
            
            (255,000
            )
            
            (63,000)
            )
            
            (739,000
            )
            
            (183,000
            )Interest
                expense
            
            
            6,000
            
            
            4,000
            
            
            18,000
            
            
            13,000Gain
                on sale of assets
            
            
            -
            
            
            -
            
            
            -
            
            
            32,000Provision
                for income taxes
            
            
            1,000
            
            
            2,000
            
            
            2,000
            
            
            3,000Net
                (loss)
            
            $
            (262,000
            )
            $
            (69,000
            )
            $
            (759,000
            )
            $
            (167,000
            )Net
                (loss) per share of common stock
            
            $
            (.00
            )
            $
            (.00
            )
            $
            (.01
            )
            $
            (.00
            )Weighted
                average number of common shares outstanding -Basic
                and diluted
            
            
            60,862,000
            
            
            58,074,000
            
            
            60,836,000
            
            
            57,213,000





See
      Notes
      to Unaudited Condensed Consolidated Financial Statements.


3




**CAREADVANTAGE,
      INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**




**Nine
                Months Ended**
              **September
                30,****2008**
            
            **2007****Cash
                flows from operating activities:**Net
                loss
            
            $
            (759,000
            )
            $
            (167,000
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
                and amortization
            
            
            54,000
            
            
            52,000Stock
                based compensation
            
            
            44,000
            
            
            45,000Deferred
                revenue
            
            
            15,000
            
            
            (24,000
            )Deferred
                rent
            
            
            (18,000
            )
            
            57,000Gain
                on sale of assets
            
            
            -
            
            
            (32,000
            )**Change
                in:**Accounts
                receivable
            
            
            152,000
            
            
            129,000Prepaid
                expenses and other assets
            
            
            39,000
            
            
            (68,000
            )Accounts
                payable
            
            
            291,000
            
            
            (60,000
            )Accrued
                expenses and other liabilities
            
            
            (113,000
            )
            
            29,000Net
                cash used in operating activities
            
            
            (295,000
            )
            
            (39,000
            )**Cash
                flows from investing activity:**Capital
                expenditures
            
            
            (4,000
            )
            
            (16,000
            )Proceeds
                from sale of assets
            
            
            -
            
            
            32,000Net
                cash (used in)/provided by investing activities
            
            
            (4,000
            )
            
            16,000**Cash
                flows from financing activity:**Proceeds
                from exercise of stock options
            
            
            -
            
            
            25,000Repayment
                of capital leases
            
            
            (45,000
            )
            
            (30,000
            )Net
                cash used in financing activities
            
            
            (45,000
            )
            
            (5,000
            )Net
                decrease in cash and cash equivalents
            
            
            (344,000
            )
            
            (28,000
            )Cash
                and cash equivalents - beginning of period
            
            
            508,000
            
            
            371,000Cash
                and cash equivalents - end of period
            
            $
            164,000
            
            $
            343,000




See
      Notes
      to Unaudited Condensed Consolidated Financial Statements.




4


**Note
      A—Business:**




**[1]**  **Business
      and Basis of Presentation:**





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





As
      part
      of offering its management and consulting services, the Company has developed
      RightPath® Navigator (RPNavigator), a proprietary tool to help managed care
      plans, employers and unions better understand and forecast resource consumption,
      risk, and costs associated with their respective populations. In providing
      its
      services, the Company licenses RPNavigator to its customers and provides
      consulting services in connection with that licensing.





The
      unaudited condensed consolidated financial statements have been prepared
      assuming that the Company will continue as a going concern. The Company
      generates most of its revenue from the licensing of RPNavigator and providing
      consulting services in connection with that licensing. Based on cash on hand
      at
      September 30, 2008 and a forecast prepared by management which took into account
      executed contracts, and cost reductions planned and effectuated since September
      30, 2008, management expects the Company to be able to meet its obligations
      as they become due during the next twelve months. However, there can be no
      assurances that management’s plans, including projected revenue, will be
      attained. The Company has a history of losses and for the three and nine months
      ended September 30, 2008 it had a net loss of $262,000 and $759,000,
      respectively. Additionally, at September 30, 2008, the Company has an
      accumulated deficit of $24,297,000, stockholders deficit of $316,000 and cash
      and cash equivalents of $164,000 at September 30, 2008. These factors raise
      substantial doubt regarding the Company’s ability to continue as a going
      concern. The unaudited condensed consolidated financial statements do not
      include any adjustments that might result from the outcome of this
      uncertainty.





The
      Company has prepared the condensed consolidated interim financial statements
      included herein, without audit, pursuant to the rules and regulations of the
      Securities and Exchange Commission (“SEC”). Certain information and footnote
      disclosures normally included in financial statements prepared in accordance
      with generally accepted accounting principles in the United States of America
      have been omitted pursuant to such rules and regulations. In the opinion of
      management, such financial statements reflect all adjustments necessary for
      a
      fair presentation of the results for the interim periods presented and to make
      such financial statements not misleading. All adjustments necessary for a fair
      presentation of interim period results are of a normal recurring nature unless
      otherwise noted. The Company’s results of operations for the three and nine
      months ended September 30, 2008 are not necessarily indicative of the results
      to
      be expected for the full year. The Company urges you to read these interim
      financial statements in conjunction with the consolidated financial statements
      and notes thereto included in our Annual Report filed on Form 10-KSB for the
      year ended December 31, 2007.




**[2]
      Adoption of Accounting Standards:**




In
      September 2006, the Financial Accounting Standards Board issued SFAS No. 157,
      “Fair Value Measurements”, to define fair value, establish a framework for
      measuring fair value in accordance with generally accepted accounting
      principles, and expand disclosures about fair value measurements. SFAS No.
      157
      is effective for fiscal years beginning after November 15, 2007. The provisions
      under SFAS No. 157 were effective for the Company beginning January 1, 2008.
      In
      February 2008, the FASB issued FASB Staff Position No. 157-2, “Effective Date of
      FASB Statement No. 157”, which defers the effective date of SFAS No. 157 for all
      nonrecurring fair-value measurements of nonfinancial assets and liabilities
      until fiscal years beginning after November 15, 2008. The adoption of this
      pronouncement did not have a material impact on our financial position and
      results of operations.




In
      February 2007, the Financial Accounting Standards Board issued SFAS No. 159,
      “The Fair Value Option for Financial Assets and Financial Liabilities” including
      an amendment of SFAS No. 115. SFAS No. 159 provides companies with an option
      to
      report selected financial liabilities at fair value. SFAS No. 159 is effective
      for fiscal years beginning after November 15, 2007. The provisions under SFAS
      No. 159 were effective for the Company beginning January 1, 2008. The adoption
      of this pronouncement did not have a material impact on our financial position
      and results of operations.





In
      April
      2008, the Financial Accounting Standards Board issued Staff Position No. 142-3,
      “Determination of the Useful Life of Intangible Assets” (“FSP No. 142-3”). FSP
      No. 142-3 amends the factors to be considered when developing renewal or
      extension assumptions that are used to estimate an intangible asset’s useful
      life under SFAS No. 142, “”Goodwill and Other Intangible Assets”. FSP No. 142-3
      is effective for fiscal years beginning after December 15, 2008. The adoption
      of
      this pronouncement will not have a material impact on our financial position
      and
      results of operations.




5





In
      May
      2008, the Financial Accounting Standards Board issued SFAS No. 162, “The
      Hierarchy of Generally Accepted Accounting Principles”. SFAS No. 162 identifies
      the sources of accounting principles and the framework for selecting the
      principles used in the preparation of financial statements. SFAS No. 162 will
      be
      effective 60 days following the SEC’s approval of the Public Company Accounting
      Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in
      Conformity with Generally Accepted Accounting Principles”. The adoption of this
      pronouncement will not have a material impact on our financial position and
      results of operations.





In
      June
      2008, the Financial Accounting Standards Board issued Staff Position No. EITF
      03-6-1, “Determining Whether Instruments Granted in Share-Based Payment
      Transactions Are Participating Securities” (“FSP No. EITF 03-6-1”). FSP No. EITF
      03-6-1 addresses whether instruments granted in share-based payment transaction
      are participating securities prior to vesting and, therefore, need to be
      included in the earnings per share (“EPS”) calculation under the two-class
      method described in FASB Statement No. 128, “Earnings Per Share”. This FSP is
      effective for fiscal years beginning after December 15, 2008. All prior-period
      EPS data will have to be adjusted retrospectively to conform to the provisions
      of this FSP. The adoption of this pronouncement will not have a material impact
      on our financial positions and results of operations.




In
      October of 2008, the Financial Accounting Standards Board issued Staff Position
      No. 157-3, “Determining the Fair Value of a Financial Asset When the Market for
      That Asset Is Not Active,” which clarifies the application of FASB Statement No.
      157 in a market that is not active. This FSP is effective for fiscal years
      beginning after October 10, 2008. The adoption of this pronouncement will not
      have a material impact on our financial position and results of
      operations.





**Note
      B—Per share data:**




Basic
      and
      diluted net loss per share has been computed based on the weighted average
      number of outstanding shares of common stock. Potentially dilutive securities
      which were excluded from the computation of basic loss per share for the three
      and nine months ended September 30, 2008 and 2007 because they had an
      anti-dilutive impact are as follows:




**Three
                Months Ended September 30,**
            
            
            **Nine
                Months Ended September 30,****2008**
            
            
            **2007**
            
            
            **2008**
            
            
            **2007**Total
                Potential Dilutive shares
            
            
            **13,266,000**
            
            
            **16,866,000**
            
            
            **13,266,000**
            
            
            **16,866,000**





**Note
      C—Stock-Based Compensation:**




The
      Company recognizes stock-based compensation in accordance with Statement of
      Financial Accounting Standard No. 123R, “Share Based Payment” (“FAS 123R”),
      which requires that all share-based payments, including grants of stock options,
      be recognized in the statement of operations as a compensation expense,
      based on their fair values at the date of grant. Under the provisions of FAS
      123R, the estimated fair value of options granted under the Company's Employee
      Stock Option Plan and Director Stock Option Plan are recognized as compensation
      expense over the option-vesting period.





For
      the
      three and nine months periods ended September 30, 2008, the Company included
      approximately $2,000 and $44,000, respectively, of share-based compensation
      in
      the Company’s statement of operations. For the three and nine months ended
      September 30, 2007, the Company included approximately $13,000 and $45,000,
      respectively, of shared-based compensation in the Company’s statement of
      operations. For the nine months ended September 30, 2008, the total share based
      compensation included approximately $20,000 stock charge related to a stock
      bonus grant of one million shares to an employee.





FAS
      123R
      requires cash flows resulting from the tax benefits of tax deductions in excess
      of the compensation cost recognized upon exercise for those options (excess
      tax
      benefits) to be classified as financing cash flows. The Company did not realize
      any tax benefits from stock options during the three and nine months ended
      September 30, 2008 and 2007.





As
      of
      September 30, 2008, there was approximately $19,000 of total unrecognized
      compensation cost related to non-vested share-based compensation arrangements
      granted under existing stock option plans. This cost is expected to be
      recognized over the weighted average remaining vesting period of .62
      years.





**Note
      D—Contingencies:**




*Alan
      Fontes v. CareAdvantage, Inc.* ,
      pending
      in Superior Court of New Jersey, Chancery Division, Monmouth County, was
      commenced in June 2004 by a former employee of the Company seeking compensation
      under various legal theories. In October 2005, the court dismissed the claim
      under all theories except express contract. The Company believes that Mr.
      Fontes’s claim, which is for approximately $42,500, is without merit and is
      contesting the matter vigorously. Moreover, the Company filed a counterclaim
      for
      damages against Mr. Fontes claiming Mr. Fontes induced another employee to
      quit
      his employment with the Company and in October 2005, pursuant to court order,
      amended its counterclaim to seek equitable relief and damages against Mr. Fontes
      and Integrated eCare Solutions, LLC, claiming Mr. Fontes misappropriated and
      used certain Company property. This matter is presently being tried before
      a
      judge; it is not certain when the trial is expected to
      conclude.


6


**Note
      E—Concentration of Credit Risk:**




Financial
      instruments that potentially subject the Company to credit risk consist of
      cash
      and accounts receivable. The Company maintains its cash balances in high quality
      financial institutions. At times, the amount of cash maintained in a given
      financial institution may exceed the federally insured limits.





**Note
      F—Leased Space:**




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





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





Under
      the
      Second Amendment to Lease Agreement **,** the
      Company is required to meet the following conditions: (1) the Company cannot
      assign the lease except for an assignment of the lease or a sublet provided
      under the original lease; (2) the Company is not in default under any terms
      and
      conditions of the original lease. In the event the Company fails to meet these
      conditions, the reduction in base rent, real estate taxes and operating expenses
      will be nullified and entirely forfeited, and the Company will be immediately
      required to pay the landlord additional rent for the difference in the base
      rent, and additional rent for all escalations provided in the Second Amendment
      to Lease Agreement and the original lease as extended. As of January 1, 2005,
      the additional rent attributable to the difference in base rent is
      $1,257,000.




Effective
      April 19, 2007 (the “Recapture Date”), the Company’s landlord “recaptured”
certain portions of the leased premises pursuant to the provisions of the Second
      Amendment to Lease Agreement dated January 10, 2005 (the “Second Amendment”).
      This recapture did not reduce or modify, in any respect, the Company’s
      obligations to pay to the landlord monthly rent or, in the event the Company
      fails to meet above conditions, additional rent. Effective as of the
      Recapture Date, the premises leased by the Company under the lease is deemed
      to
      be and refer only to 15,629 rentable square feet.





As
      of
      March 26, 2008, the Company and landlord entered into a Third Amendment of
      Lease
      which provided that the reduction in base rent and the waiver of escalations
      based on increases in real estate taxes and operating expenses shall be deemed
      to be amortized on a straight line basis over the period commencing January
      1,
      2005 and ending March 31, 2011.





At
      September 30, 2008, the additional rent that would be due if the Company failed
      to meet the conditions of the Second Amendment to Lease Agreement would be
      $503,000. The additional base rent that would be due at December 31 of the
      next
      three years if the Company failed to meet the conditions of the Second Amendment
      is as follows:




**Year
                  Ending**
            
            **Additional**
                **Rent**2008
            
            $
            452,0002009
            
            $
            251,0002010
            
            $
            50,000




7





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




**Cautionary
      Statements:**




Statements
      in this Form 10-Q may constitute “forward-looking statements” within the meaning
      of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), including
      statements concerning management's plans, intentions and expectations with
      respect to future financial performance and future events, particularly relating
      to revenues from performance-based services and re-negotiations of existing
      and
      new contracts with customers. Many of these statements involve known and unknown
      risks, uncertainties and contingencies, many of which are beyond our control,
      which could cause actual results and outcomes to differ materially from those
      expressed in this 10-Q. For a more complete discussion of these risk factors,
      please see “Cautionary Statements” in Item 6 of the Company’s Form 10-KSB for
      the fiscal year ended December 31, 2007. Although we believe that our plans,
      intentions and expectations reflected in these forward-looking statements are
      reasonable, we can give no assurance that our plans, intentions or expectations
      will be achieved.




**GENERAL
      OVERVIEW:**




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





As
      part
      of offering its management and consulting services, the Company has developed
      RightPath® Navigator (RPNavigator), a proprietary tool to help managed care
      plans, employers and unions better understand and forecast resource consumption,
      risk, and costs associated with their respective populations. In providing
      its
      services, the Company licenses RPNavigator to its customers and provides
      consulting services in connection with that licensing. The tool uses 3M’s
      Clinical Risk Groups (CRGs), a classification methodology that groups members
      according to risk related to the individual’s clinical history and demographic
      information. Using RPNavigator, the Company enables its customers
      to:





**•**
            access
                meaningful information via an Internet-based portal;**•**
            track
                population and member-related disease status and severity over
                time;**•**
            compare
                client sub-populations;**•**
            profile
                providers using case mix and severity-adjusted
                techniques;**•**
            select
                and prioritize members who would best benefit from care management
                interventions;**•**
            understand
                adverse selection associated with existing and/or newly-obtained
                business
                as well as understand the impact of a plan’s overall turnover in terms of
                stayers and leavers;**•**
            reduce
                the dependence on internal resources to develop and produce required
                reports to accomplish these tasks




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




Management
      believes it must continue refinement of its current service lines in order
      to
      continue adding value to existing and potential customers. Management intends
      to
      continue its evaluation of each service in light of anticipated changes in
      the
      health care industry, the cost to enter each such service line as well as the
      availability and timeliness of competent resources. To further expand its line
      of services, the Company contemplates pursuing alternatives to its internal
      product and service development efforts by entering into strategic alliances
      and
      joint ventures.




8


***RESULTS
      OF OPERATIONS:***




The
      following discussion compares the Company’s results of operations for the three
      and nine months ended September 30, 2008, with those for the three and nine
      months ended September 30, 2007. The Company’s condensed consolidated financial
      statements and notes thereto included elsewhere in this report contain detailed
      information that should be referred to in conjunction with the following
      discussion.





***Three
      Months Ended September 30, 2008, Compared to Three Months Ended September 30,
      2007***




**Revenues:**




The
      Company's total operating revenues for the three-month periods ended September
      30, 2008 and September 30, 2007 were approximately $876,000 and $1,037,000,
      respectively. The revenue was generated primarily from licensing and consulting
      fees earned during these periods. The current revenue amount represents a
      decrease of approximately $161,000 for the three-month period ended September
      30, 2008 from the corresponding period of the prior year. The decrease for
      the
      three months ended September 30, 2008 was primarily attributable to a decrease
      of approximately $265,000 largely due to decreased membership of one existing
      customer, offset by an increase in business of approximately $41,000 from other
      existing customers and increased revenue of approximately $63,000 in new
      business.





**Cost
      of services:**




The
      Company’s total direct cost of services for the three-month periods ended
      September 30, 2008 and September 30, 2007 was approximately $340,000 and
      $418,000, respectively. This represents a decrease of approximately $78,000
      for
      the three-month period ended September 30, 2008 over the corresponding period
      of
      the prior year. The decrease in the cost of services for the three-month period
      ended September 30, 2008 was primarily due to decreased personnel costs of
      approximately $81,000 due to employee terminations and travel costs of
      approximately $3,000, offset by an increase of approximately $6,000 in
      professional costs.




**Selling,
      general and administrative expenses:**




The
      Company’s total selling, general, and administrative costs for the three-month
      periods ended September 30, 2008 and September 30, 2007 were approximately
      $791,000 and $682,000, respectively. This represents an increase of
      approximately $109,000 for the three-month period ended September 30, 2008
      over
      the corresponding period of the prior year. This increase for the three-month
      period ended September 30, 2008 is primarily due to increases in personnel
      costs
      of approximately $45,000, increased professional costs of approximately $117,000
      related to the Fontes litigation, offset by decreased facility costs of
      approximately $9,000, travel costs of approximately $4,000 and a decrease of
      approximately $40,000 in other general and administrative costs, which include
      a
      reduction in insurance costs of approximately $26,000 and decreased stock
      compensation charge of approximately $12,000.





***Nine
      Months Ended September 30, 2008, Compared to Nine Months Ended September 30,
      2007***




**Revenues:**




The
      Company's total operating revenues for the nine-month periods ended September
      30, 2008 and September 30, 2007 were approximately $2,888,000 and $3,172,000,
      respectively. This represents a decrease of approximately $284,000 for the
      nine-month period ended September 30, 2008 from the corresponding period of
      the
      prior year. The decrease for the nine months ended September 30, 2008 was
      primarily attributable to decreased revenue of approximately $550,000 due to
      decreased membership of one existing customer, offset by increased revenue
      of
      approximately $55,000 in business from other existing customers and
      approximately $211,000 in new business.





**Cost
      of services:**




The
      Company’s total direct cost of services for the nine-month periods ended
      September 30, 2008 and September 30, 2007 was approximately $1,220,000 and
      $1,276000, respectively. This represents a decrease of approximately $56,000
      for
      the nine-month period ended September 30, 2008 over the corresponding period
      of
      the prior year. This decrease for the nine-month period ended September 30,
      2008
      is primarily due to decreases in personnel costs of approximately $52,000 due
      to
      employee terminations and travel costs of approximately $6,000, offset by
      increases of approximately $2,000 in professional costs.




9


**Selling,
      general and administrative expenses:**





The
      Company’s total selling, general, and administrative costs for the nine-month
      periods ended September 30, 2008 and September 30, 2007 were approximately
      $2,407,000 and $2,079,000, respectively. This represents an increase of
      approximately $328,000 for the nine-month period ended September 30, 2008 over
      the corresponding period of the prior year. This increase for the nine-month
      period ended September 30, 2008 is primarily due to increases in personnel
      costs
      of approximately $157,000, an increase in professional costs of approximately
      $231,000 related to the Fontes litigation and a combined increase in information
      and communication costs of approximately $6,000, offset by decreases in facility
      costs of approximately $9,000, travel costs of approximately $9,000, and
      decreases of approximately $48,000 in other general and administrative costs
      which include a reduction in insurance costs of approximately
      $58,000.





**Net
      Loss:**





The
      Company’s net loss for the nine month period ended September 30, 2007 includes a
      gain on sale of fixed assets of approximately $32,000.





***LIQUIDITY,
      FINANCIAL CONDITION AND CAPITAL RESOURCES*** *:*





**General
      overview:**





At
      September 30, 2008, the Company had negative working capital of approximately
      $170,000, stockholders deficit of approximately $316,000 and an accumulated
      deficit of approximately $24,297,000.





**Financial
      condition:**




At
      September 30, 2008, the Company had cash of approximately $164,000 and a
      negative working capital of approximately $170,000. At December 31, 2007, the
      Company had cash of approximately $508,000 and working capital of approximately
      $558,000.




Net
      cash
      used in operating activities amounted to approximately $295,000 for the
      nine-month period ended September 30, 2008. The cash used in operating
      activities is largely due to changes in operating assets and liabilities
      relating primarily to the collection of accounts receivable of approximately
      $152,000 and an increase in accounts payable of approximately $291,000 largely
      due to increases in professional costs, stock compensation charges and
      depreciation and amortization charges, offset by the Company’s nine-month loss
      of approximately $759,000.





Net
      cash
      used in investing activities for the nine-month period ended September 30,
      2008
      was approximately $4,000 related to capital expenditures.





Net
      cash
      used in financing activities for the nine-month period ended September 30,
      2008
      was approximately $45,000 related to payments on capital leases for
      equipment.




The
      Company generates most of its revenue from the licensing of RPNavigator and
      providing consulting services in connection with that licensing. Based on cash
      on hand at September 30, 2008 and cash flow from operations based on a forecast
      prepared by management, management expects the Company to be able to meet its
      obligations as they become due during the next twelve months. Such forecast
      includes contracts with new customers as well as expanding business with current
      customers that is expected to start in the next three to six months. However,
      there can be no assurances that management’s plans, including projected revenue,
      will be attained. The Company has a history of losses and for the three and
      nine
      months ended September 30, 2008 it had a net loss of $262,000 and $759,000,
      respectively. Additionally, at September 30, 2008, the Company has an
      accumulated deficit of $24,297,000, stockholders deficit of $316,000 and cash
      and cash equivalents of $164,000 at September 30, 2008. These factors raise
      substantial doubt regarding the Company’s ability to continue as a going
      concern.





**Critical
      Accounting Policies:**





The
      Company’s financial statements have been prepared in accordance with accounting
      principles generally accepted in the United States of America. The preparation
      of these financial statements requires management to make estimates and
      assumptions that affect the reported amounts of assets, liabilities, revenue
      and
      expenses, and related disclosure of contingent assets and liabilities.
      Management bases its estimates on historical experience and on various other
      assumptions that are believed to be reasonable under the circumstances, the
      results of which form the basis for making judgments about the carrying values
      of assets and liabilities that are not readily apparent from other sources.
      Estimates and assumptions about future events and their effects cannot be
      determined with certainty. These estimates may change as new events occur,
      as
      additional information is obtained and as our operating environment changes.
      These changes have historically been minor and have been included in the
      consolidated financial statements as soon as they became known. In addition,
      our
      management is periodically faced with uncertainties, the outcomes of which
      are
      not within our control and will not be known for prolonged periods of time.
      Actual results may differ from these estimates under different assumptions
      or
      conditions.





Certain
      accounting policies have a significant impact on amounts reported in financial
      statements. A summary of those significant accounting policies can be found
      in
      Note B to the Company’s audited financial statements filed on the Company’s Form
      10-KSB for the fiscal year ended December 31, 2007.




10


A
      critical accounting policy is one that is both important to the portrayal of
      the
      Company's financial condition or results of operations and requires significant
      judgment or a complex estimation process. The Company believes the following
      fit
      that definition:





*Revenue
      recognition*





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




*Accounting
      for stock-based compensation*





The
      Company recognizes stock-based compensation in accordance with Statement of
      Financial Accounting Standard No. 123R, “Share Based Payment” (“FAS 123R”),
      which requires that all share-based payments, including grants of stock options,
      be recognized in the statement of operations as compensation expense, based
      on
      their fair values at the date of grant. Under the provisions of FAS 123R, the
      estimated fair value of options granted under the Company's Employee Stock
      Option Plan and Director Stock Option Plan are recognized as compensation
      expense over the service period which is generally the same as the
      option-vesting period.





For
      the
      purposes of determining estimated fair value under FAS 123R, the Company has
      computed the fair values of all share-based compensation using the Black-Scholes
      option pricing model. This model requires the Company to make certain estimates
      and assumptions. The Company calculated expected volatility based on the
      Company's historical stock volatility. The computation of expected life is
      determined based on historical experience of similar awards, giving
      consideration to the contractual terms of the stock-based awards, vesting
      schedules and expectations of future employee behavior. The risk-free interest
      rate is based on the U.S. Treasury yield curve in effect at the time of grant.
      Under FAS123R, forfeitures are estimated at the time of valuation and reduce
      expense ratably over the vesting period. This estimate is adjusted periodically
      based on the extent to which the actual forfeitures differ, or are expected
      to
      differ, from the previous estimate.





*Recent
      Accounting Pronouncements*





In
      September 2006, the Financial Accounting Standards Board issued SFAS No. 157,
      “Fair Value Measurements”, to define fair value, establish a framework for
      measuring fair value in accordance with generally accepted accounting
      principles, and expand disclosures about fair value measurements. SFAS No.
      157
      is effective for fiscal years beginning after November 15, 2007. The provisions
      under SFAS No. 157 were effective for the Company beginning January 1, 2008.
      In
      February 2008, The FASB issued FASB Staff Position No. FAS 157-2, “Effective
      Date of FASB Statement No. 157”, which provides a one year deferral of the
      effective date of SFAS No. 157 for non-financial assets and non-financial
      liabilities, except those that are recognized or disclosed in the financial
      statements at fair value. The adoption of this pronouncement did not have a
      material impact on our financial position and results of
      operations.




In
      February 2007, the Financial Accounting Standards Board issued SFAS No. 159,
      “The Fair Value Option for Financial Assets and Financial Liabilities” including
      an amendment of SFAS No. 115. SFAS No. 159 provides companies with an option
      to
      report selected financial liabilities at fair value. SFAS No. 159 is effective
      for fiscal years beginning after November 15, 2007. The provisions under SFAS
      No. 159 were effective for the Company beginning January 1, 2008. The adoption
      of this pronouncement did not have a material impact on our financial position
      and results of operations.


In
      April
      2008, the Financial Accounting Standards Board issued Staff Position No. 142-3,
      “Determination of the Useful Life of Intangible Assets” (“FSP No. 142-3”). FSP
      No. 142-3 amends the factors to be considered when developing renewal or
      extension assumptions that are used to estimate an intangible asset’s useful
      life under SFAS No. 142, “”Goodwill and Other Intangible Assets”. FSP No. 142-3
      is effective for fiscal years beginning after December 15, 2008. The adoption
      of
      this pronouncement will not have a material impact on our financial position
      and
      results of operations.





In
      May
      2008, the Financial Accounting Standards Board issued SFAS No. 162, “The
      Hierarchy of Generally Accepted Accounting Principles”. SFAS No. 162 identifies
      the sources of accounting principles and the framework for selecting the
      principles used in the preparation of financial statements. SFAS No. 162 will
      be
      effective 60 days following the SEC’s approval of the Public Company Accounting
      Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in
      Conformity with Generally Accepted Accounting Principles”. The adoption of this
      pronouncement will not have a material impact on our financial position and
      results of operations.





In
      June
      2008, the Financial Accounting Standards Board issued Staff Position No. EITF
      03-6-1, “Determining Whether Instruments Granted in Share-Based Payment
      Transactions Are Participating Securities” (“FSP No. EITF 03-6-1”). FSP No. EITF
      03-6-1 addresses whether instruments granted in share-based payment transaction
      are participating securities prior to vesting and, therefore, need to be
      included in the earnings per share (“EPS”) calculation under the two-class
      method described in FASB Statement No. 128, “Earnings Per Share”. This FSP is
      effective for fiscal years beginning after December 15, 2008. All prior-period
      EPS data will have to
      be
      adjusted retrospectively to conform to the provisions of this FSP. The adoption
      of this pronouncement will not have a material impact on our financial positions
      and results of operations.




11




In
      October of 2008, the Financial Accounting Standards Board issued Staff Position
      No. 157-3, “Determining the Fair Value of a Financial Asset When the Market for
      That Asset Is Not Active,” which clarifies the application of FASB Statement No.
      157 in a market that is not active. The adoption of this pronouncement will
      not
      have a material impact on our financial position and results of
      operations.





**ITEM
      3. Quantitative and Qualitative Disclosures About Market
      Risk**





We
      are a
      smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
      Act of 1934 and are not required to provide the information under this
      item.




**ITEM
      4T. Controls and Procedures**




(a)
      Disclosure Controls and Procedures




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





In
      accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period
      covered by this Quarterly Report on Form 10-Q, we carried out an evaluation
      under the supervision and with the participation of our management, including
      our Chief Executive Officer, who is also the acting Principal Financial Officer,
      of the effectiveness of the design and operation of our disclosure controls
      and
      procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act
      the
      end of the period covered by this report. Based on that evaluation, our Chief
      Executive Officer, who is also the acting Principal Financial Officer, concluded
      that certain control deficiencies as described below existed in our internal
      control over financial reporting as of September 30, 2008. As a result of these
      deficiencies, our Chief Executive Officer, who is also the acting Principal
      Financial Officer, has concluded that our disclosure controls and procedures
      are
      not effective at the reasonable assurance level as of September 30,
      2008.





We
      previously reported two control deficiencies that constituted material
      weaknesses in our internal control over financial reporting as of December
      31,
      2007, which were described in Item 8A(T), *Management’s Report on Internal Control over Financial
      Reporting* in our
      Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007. A
      material weakness is a deficiency, or a combination of deficiencies, in internal
      control over financial reporting such that there is a reasonable possibility
      that a material misstatement of the annual or interim financial statements
      will
      not be prevented or detected on a timely basis.





The
      material weaknesses identified were as follows:





·
            We
                had inadequate staffing within the bookkeeping and accounting operations
                and a lack of financial accounting expertise at our
                Company.




·
            We
                had one person, Dennis J. Mouras, performing the roles of the chief
                executive officer and principal financial officer.  As a result,
                we did not maintain adequate segregation of duties within our critical
                financial reporting applications, the related modules and financial
                reporting processes





A
      more
      detailed discussion of these control deficiencies can be found Item
      8A(T), *Management’s Report on Internal Control over Financial
      Reporting* in our
      Annual Report on Form 10-KSB for the fiscal year ended December 31,
      2007.





As
      indicated in paragraph (b) of this Item 4T, for the quarter beginning July
      1,
      2008, the Company retained an independent consultant with financial
      accounting expertise to supplement its staff in providing bookkeeping and
      accounting operations.    As a result, management believes that
      the first identified material weakness did not exist as of September 30,
      2008.




Even
      though management is not aware of any instance in which the Company failed
      to
      identify or resolve a disclosure matter or failed to perform a timely and
      effective review, the second control deficiency described above could result
      in
      a misstatement of balance sheet and income statement accounts and statements
      of
      cash flow in our interim or annual consolidated financial statements that would
      not be prevented or detected. Accordingly, management determined that this
      control deficiency constitutes a material weakness. Our management believes
      that
      this material weakness still existed as of September 30, 2008.





Notwithstanding
      management’s determination that a material weakness identified above existed in
      our disclosure controls and procedures as of September 30, 2008, we believe
      that the condensed consolidated financial statements included in this Quarterly
      Report on Form 10-Q correctly present in all material respects our financial
      position, results of operations and cash flows for the periods covered
      therein.




12





(b) Changes
      in Internal Control Over Financial Reporting




During
      the quarter ended September 30, 2008, the Company retained an
      independent consultant with financial accounting expertise to supplement
      its staff in providing bookkeeping and accounting operations.  Except for
      the foregoing, there have been no changes in our internal controls over
      financial reporting that have materially affected, or are reasonably likely
      to
      materially affect, these controls.





As
      stated
      above, Management believes that the second material weakness described under
      the
      caption “Item 8A(T) — Controls and Procedures” in the Company’s Annual Report on
      Form 10-KSB for the fiscal year ended December 31, 2007 existed as
      of September 30, 2008 (i.e., a single person performs the roles of the
      chief executive officer and principal financial officer).   
Although we will continue to evaluate and monitor the potential impact that
      this
      deficiency presents, our present intention is to not hire a separate principal
      financial officer unless and until our revenue and net income levels and/or
      the
      complexity of our operations warrant such a change. Certain of these remediation
      actions are described under the caption “Item 8A(T) — Controls and Procedures”
in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December
      31, 2007.  Efforts to remediate and test our internal control over
      financial reporting are continuing and are expected to continue throughout
      fiscal 2008 and beyond.





**PART
      II—OTHER INFORMATION**





**Item
      1. Legal Proceedings**





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





The
      Company is subject to an additional material legal proceeding, a description
      of
      which is found in Note D to the Unaudited Condensed Consolidated Financial
      Statements contained elsewhere in this report and incorporated herein by
      reference. With the exception of these legal proceedings, there are no material
      pending legal proceedings other than ordinary routine litigation incidental
      to
      the business of the Company.




**Item
      1A. Risk Factors**





We
      are a
      smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
      Act of 1934 and are not required to provide the information under this
      item.




**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds**




None.





**Item
      3. Defaults Upon Senior Securities**




None.





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




No
      matters were submitted to a vote of the Company’s security holders during the
      quarter ended September 30, 2008.




**Item
      5. Other Information**




None.




**Item
      6. Exhibits**




(a)
            Exhibits




See
      Exhibit Index.




13





**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/s/
                Dennis J. MourasNovember
                14, 2008
            Dennis
                J. MourasChief
                Executive Officer and acting Principal Financial
                Officer




14





EXHIBIT
      INDEX




31
            Certifications
                pursuant to Rule 13a-14(a), promulgated under the Securities Exchange
                Act
                of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of
                2002*




32
            Certifications
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 **







*
            filed
                herewith




**
            furnished
                herewith




15