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 March 31, 2009





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. Yes xNo
o




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


Yes £No £          (Not
Applicable)





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
      filer                        o
            Accelerated
      filer                            oNon-accelerated
      filer                          o
            Smaller reporting company          x





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





The
number of shares of Common Stock outstanding as of April 22, 2009 is
62,284,442.





I N D E
X





Part
      I – Financial InformationItem
      1.
                                  
                                  Financial
      Statements·
                                  Consolidated
      Balance Sheets –March
      31, 2009 (Unaudited) and December 31, 2008
                                  
                                  
                                  2·
                                  Consolidated
      Statements of Operations –Three
      months ended March 31, 2009 and March 31,
      2008  (Unaudited)
                                  
                                  
                                  3·
                                  Consolidated
      Statements of Cash Flows –Three months ended March 31, 2009
      and March 31, 2008(Unaudited)
                                  
                                  
                                  4Notes
      to Unaudited 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
                                  
                                  
                                  11Item
      4.
                                  
                                  Controls
      and Procedures
                                  
                                  
                                  11Part
      II – Other InformationItem
      1.
                                  
                                  Legal
      Proceedings
                                  
                                  
                                  12Item
      1A.
                                  
                                  Risk
      Factors
                                  
                                  
                                  12Item
      2.
                                  
                                  Unregistered
      Sales of Equity Securities and Use of Proceeds
                                  
                                  
                                  12Item
      3.
                                  
                                  Defaults
      Upon Senior Securities
                                  
                                  
                                  12Item
      4.
                                  
                                  Submission
      of Matters to a Vote of Security Holders
                                  
                                  
                                  12Item
      5.
                                  
                                  Other
      Information
                                  
                                  
                                  12Item
      6.
                                  Exhibits
                                  
                                  
                                  12Signatures
                                  
                                  
                                  
                                  
                                  13Exhibit
      Index
                                  
                                  
                                  
                                  
                                  14









PART I –
FINANCIAL INFORMATION


ITEM
1.  Financial Statements





CAREADVANTAGE,
INC AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS





March
      31,
                            
                            
                            December
      31,2009
                            
                            
                            2008UnauditedASSETSCurrent
      assets:Cash
      and cash equivalents
                            
                            $
                            86,000
                            
                            
                            $
                            88,000Accounts
      receivable
                            
                            
                            442,000
                            
                            
                            
                            239,000Prepaid
      expenses and other current assets
                            
                            
                            106,000
                            
                            
                            
                            102,000Total
      current assets
                            
                            
                            634,000
                            
                            
                            
                            429,000Property
      and equipment, at cost net of accumulated depreciation
                            
                            
                            155,000
                            
                            
                            
                            170,000Intangible
      assets, net of accumulated depreciation
                            
                            
                            3,000
                            
                            
                            
                            4,000Security
      deposits
                            
                            
                            167,000
                            
                            
                            
                            167,000Total
      Assets
                            
                            $
                            959,000
                            
                            
                            $
                            770,000LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      liabilities:Accounts
      payable
                            
                            $
                            456,000
                            
                            
                            $
                            454,000Accrued
      compensation and related benefits
                            
                            
                            77,000
                            
                            
                            
                            73,000Accrued
      professional fees
                            
                            
                            88,000
                            
                            
                            
                            50,000Other
      current liabilities
                            
                            
                            1,000
                            
                            
                            
                            1,000Deferred
      revenue
                            
                            
                            254,000
                            
                            
                            
                            33,000Capital
      lease obligation – current
                            
                            
                            58,000
                            
                            
                            
                            58,000Total
      current liabilities
                            
                            
                            934,000
                            
                            
                            
                            669,000Long
      term liabilities:Capital
      lease obligation – long term
                            
                            
                            61,000
                            
                            
                            
                            76,000Deferred
      rent
                            
                            
                            373,000
                            
                            
                            
                            404,000Total
      Liabilities
                            
                            
                            1,368,000
                            
                            
                            
                            1,149,000Stockholders'
      deficit: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
      115,679,262 shares and 62,284,442 outstanding at March 31, 2009 and
      115,534,262 shares and 62,139,442 outstanding at December 31,
      2008
                            
                            
                            116,000
                            
                            
                            
                            115,000Additional
      paid in capital
                            
                            
                            24,143,000
                            
                            
                            
                            24,138,000Accumulated
      deficit
                            
                            
                            (24,406,000
                            )
                            
                            
                            (24,370,000
                            )Treasury
      stock at cost, 53,394,820 shares
                            
                            
                            (262,000
                            )
                            
                            
                            (262,000
                            )Total
      Stockholders' Deficit
                            
                            
                            (409,000
                            )
                            
                            
                            (379,000
                            )Total
      Liabilities and Stockholders' Deficit
                            
                            $
                            959,000
                            
                            
                            $
                            770,000





See Notes
to Unaudited Condensed Consolidated Financial Statements.


2


CAREADVANTAGE,
INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(UNAUDITED)





Three
      Months EndedMarch
      31,2009
                
                
                2008License
      fees and service revenue
                
                $
                970,000
                
                
                $
                1,113,000Costs
      of services
                
                
                330,000
                
                
                
                450,000Gross
      profit
                
                
                640,000
                
                
                
                663,000Operating
      expenses:Selling,
      general and administrative
                
                
                671,000
                
                
                
                890,000Operating
      loss
                
                
                (31,000
                )
                
                
                (227,000
                )Interest
      expense
                
                
                (5,000
                )
                
                
                (7,000
                )Net
      loss
                
                $
                (36,000
                )
                
                $
                (234,000
                )Net
      loss per share of common stock – Basic and diluted
                
                $
                (.00
                )
                
                $
                (.00
                )Weighted
      average number of common shares outstanding –Basic
      and diluted
                
                
                62,254,000
                
                
                
                60,785,000





See Notes
to Unaudited Condensed Consolidated Financial Statements.


3


CAREADVANTAGE, INC. AND
SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS


(UNAUDITED)





Three
      Months Ended March 31,2009
                
                
                2008Cash
      flows from operating activities:Net
      loss
                
                $
                (36,000
                )
                
                $
                (234,000
                )Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Depreciation
      and amortization
                
                
                16,000
                
                
                
                19,000Stock
      based compensation
                
                
                5,000
                
                
                
                32,000Deferred
      revenue
                
                
                221,000
                
                
                
                (11,000
                )Deferred
      rent
                
                
                (31,000
                )
                
                
                (6,000
                )Changes
      in:Accounts
      receivable
                
                
                (203,000
                )
                
                
                62,000Prepaid
      expenses and other current assets
                
                
                (4,000
                )
                
                
                13,000Accounts
      payable
                
                
                2,000
                
                
                
                230,000Accrued
      expenses and other current liabilities
                
                
                42,000
                
                
                
                (48,000
                )Net
      cash provided by operating activities
                
                
                12,000
                
                
                
                57,000Cash
      flows from investing activity:Capital
      expenditures
                
                
                -
                
                
                
                (1,000
                )Net
      cash used in investing activities
                
                
                -
                
                
                
                (1,000
                )Cash
      flows from financing activity:Proceeds
      from exercise of stock options
                
                
                1,000Repayment
      of capital leases
                
                
                (15,000
                )
                
                
                (16,000
                )Net
      cash used in financing activities
                
                
                (14,000
                )
                
                
                (16,000
                )Net
      (decrease)/increase in cash
                
                
                (2,000
                )
                
                
                40,000Cash
      and cash equivalents - beginning of period
                
                
                88,000
                
                
                
                508,000Cash
      and cash equivalents - end of period
                
                $
                86,000
                
                
                $
                548,000





See Notes
to Unaudited Condensed Consolidated Financial Statements.


4


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




Note
A—Business:




[1]
            Business
      and Basis of Presentation:





CareAdvantage,
Inc. (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 healthcare consulting services, data
warehousing and analytic services designed to enable integrated health care
delivery systems, healthcare plans, employee benefit consultants, other care
management organizations, self insured employers and unions to reduce the costs,
while improving the quality, of medical services provided to the healthcare
participants. The services include care management program enhancement services,
executive and clinical management services, training programs, risk
stratification and predictive modeling. The Company operates in one business
segment.





As part
of offering its healthcare consulting services, the Company has developed
RightPath® Navigator (RPNavigator), a proprietary tool to help its customers
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 March 31, 2009 and a forecast prepared by management, which takes
into account executed contracts, and cost reductions planned and effectuated
since March 31, 2009, 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 in prior periods, and for the
three months ended March 31, 2009, the Company had a net loss of
$36,000.  Additionally, at March 31, 2009, the Company has an
accumulated deficit of $24,406,000, stockholders deficit of $409,000 and cash
and cash equivalents of $86,000. 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. For further information,
see Note A(2) to the audited consolidated financial statements included in the
Company’s Annual Report on Form 10-K for the year ended December 31,
2008.





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. 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 months ended March 31, 2009 are not necessarily
indicative of the results to be expected for the full year or any future interim
period.  These interim financial statements should be read in
conjunction with the audited consolidated financial statements and the notes
thereto included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008.




[2]     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. 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
these pronouncements did not have a material impact on the Company’s financial
position and results of operations.


5





In
October 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 did not have a material impact on the Company’s
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
did not have a material impact on the Company’s financial position and results
of operations.





Note
B—Per share data:




Basic
loss per share is calculated by dividing net loss by the weighted average number
of common shares outstanding during the period.  Diluted loss per
share is calculated by dividing net loss by the weighted average number of
common shares outstanding during the period, adjusted for the dilutive effect of
outstanding stock options and awards. Potentially dilutive securities which were
excluded from the computation of basic loss per share because they had an
anti-dilutive impact are as follows:




March
      31,2009
                  
                  
                  2008Total
      Potential Dilutive Shares
                  
                  
                  12,357,000
                  
                  
                  
                  16,266,000




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 equity-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 months periods ended March 31, 2009 and 2008, the Company included
approximately $5,000 and $32,000, respectively, of equity-based compensation in
its operating expenses (Selling, general and administrative)  in the
Company’s statement of operations.  For the quarter ended March 31,
2008, the total equity-based compensation included approximately $20,000
one-time stock charge related to a stock bonus grant of 1,000,000 shares of
common stock to an employee.





FAS 123R
requires cash flows resulting from the tax benefits of tax deductions in excess
of the compensation cost recognized 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 months ended March 31, 2009
and 2008.





As of
March 31, 2009, there was approximately $3,000 of total unrecognized
compensation cost related to non-vested equity-based compensation arrangements
granted under existing stock option plans.  This cost is expected to
be recognized over the weighted average remaining vesting period of .13
years.





During
the three months ended March 31, 2009, the exercise of certain stock options
resulted in the issuance of 145,000 shares of common stock for proceeds of
approximately $1,000.




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 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 chancery judge.


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 10 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.





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. (With respect to the
option granted the landlord, as a result of the Company’s ceasing to provide
services to Horizon BCBSNJ, the Company no longer neededthis
space.)The expiration date of the lease, March 31, 2011,
remains unchanged by this Second 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 landlord “recaptured” certain
portions of the leased premises pursuant to the provisions of the Second
Amendment to Lease Agreement. This recapture does 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 March
31, 2009, the additional rent that would be due if the Company failed to meet
the conditions of the Second Amendment to Lease Agreement would be
$402,000.  The additional base rent that would be due at December 31
of the next two years if the Company failed to meet the conditions of the Second
Amendment is as follows:





Year
                    Ending
                  
                  Additional
                    Rent2009
                  
                  $
                  251,0002010
                  
                  
                  50,000





Note
G – Subsequent Event:




During
the first quarter of 2009, the Company signed a sublease agreement effective May
1, 2009 for approximately 3,700 square feet of its office space which calls for
monthly rental payments of approximately $7,000 to the Company from the
sublessee.  The term of the sublease runs twenty-three months through
March 31, 2011.


7


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




Forward-Looking
Information:




Portions
of this Quarterly Report on Form 10-Q “contain forward-looking statements”
within the meaning of  The Private Securities Litigation Reform Act of
1995.  Statements that are not historical in nature, including
statements that include the words “anticipate”, “estimate”, “should”, “expect”,
“believe”, “intend”, and similar expressions, are expressions about our
confidence, policies, and strategies, the adequacy of capital levels, and
liquidity and are not guarantees of future performance.  Such
forward-looking statements involve certain risks and uncertainties, including
economic conditions, competition in the geographic and business areas in which
the Company operates, inflation, fluctuations in interest rates, legislation,
and governmental regulation.  These risks and uncertainties are
described in detail in the section of the periodic reports that CareAdvantage,
Inc. (the “Company”) files with the Securities and Exchange Commission (the
“SEC”) entitled “Risk Factors” (see Item 1A of Part II of this
report).  Actual results may differ materially from such
forward-looking statements, and the Company assumes no obligation to update
forward-looking statements at any time except as required by law.




GENERAL
OVERVIEW:




The
Company and its direct and indirect subsidiaries, CAHS and CHCM, are in the
business of providing healthcare consulting services, data warehousing and
analytic services designed to enable integrated health care delivery systems,
healthcare plans, employee benefit consultants, other care management
organizations, self-insured employers and unions to reduce the costs, while
improving the quality, of medical services provided to their health plan
participants. The services include care management program enhancement services,
executive and clinical management services, training programs, risk
stratification and predictive modeling.  The Company operates in one
business segment.





As part
of offering its healthcare consulting services, the Company has developed
RightPath® Navigator (RPNavigator), a proprietary tool to help its customers
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
Group (CRGs), a classification methodology that groups members according to risk
related to the individual’s clinical history and demographic information.
RPNavigator, offers customers:





•
            actionable
      financial and utilization data
analytics;


•
            clinical
      analyses of health status and medical cost
  trends;


•
            identification
      of key management and quality
opportunities;


•
            enhanced
      group-/segment-specific reporting;


•
            transparent
      methodology;


•
            measurement
      of internal and external vendors;
and


•
            reduced
      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 that
license 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
memberper 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 that the Company 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


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 the Company’s 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.  The Company’s most critical accounting policies are
discussed in Note B to the audited financial statements presented in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2008 and
relate to revenue recognition, and equity-based
compensation.  Management continuously monitors the Company’s
application of these policies to its operations and makes changes as
necessary.





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 that
license 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 accounts for stock-based compensation in accordance with Statement of
Financial Accounting Standard No. 123R, “Share Based Payment” (FAS123R), which
requires that all equity-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 equity-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 FAS 123R, 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. 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 the Company’s financial
position and results of operations.




In
October 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 did not have a material impact on the Company’s financial position
and results of operations.


9


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
did not have a material impact on the Company’s financial position and results
of operations.





RESULTS
OF OPERATIONS:




The
following discussion compares the Company’s results of operations for the three
months ended March 31, 2009 with those for the three months ended March 31,
2008.This discussion should be read in conjunction with the
unaudited consolidated financial statements and related notes presented in this
report, as well as the audited consolidated financial statements and related
notes included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008.




Three
Months Ended March 31, 2009, Compared to Three Months Ended March 31,
2008




Revenues:




The
Company's total operating revenues for the three-month periods ended March 31,
2009 and March 31, 2008 were approximately $970,000 and $1,113,000,
respectively.  The revenue was generated primarily from license and
consulting fees earned during the periods.  The decrease in revenue
for the three months ended March 31, 2009 over the same period last year was
primarily attributable to a decrease of approximately $188,000 in membership
fees, largely due to one existing customer and decreased revenue of
approximately $66,000 due to one-time engagements in 2008 that did not reoccur
in 2009, offset by an increase of approximately $111,000 in current customer
business.





Cost
of services:




The
Company’s total direct cost of services for the three-month periods ended March
31, 2009 and March 31, 2008 was approximately $330,000 and $450,000,
respectively.  The decrease in the cost of services for the
three-month period ended March 31, 2009 when compared to the first quarter of
March 31, 2008 was primarily due to decreases in personnel costs largely due
employee terminations.




Selling,
general and administrative expenses:




The
Company’s total selling, general, and administrative costs for the three-month
periods ended March 31, 2009 and March 31, 2008 were approximately $671,000 and
$890,000, respectively. The decrease for the three-month period ended March 31,
2009 when compared to the same period last year is primarily due to decreases in
professional fees of approximately $118,000 largely relating to decreased legal
costs, decreases in personnel costs of approximately $55,000 largely due to an
employee termination and $20,000 relating to a stock bonus grant to one employee
in 2008, decreases of approximately $38,000 in other general and administrative
costs, decreases in both facility and travel costs of approximately $3,000 each
and decreases in depreciation and amortization costs of approximately
$2,000.




LIQUIDITY, FINANCIAL CONDITION AND
CAPITAL RESOURCES:




General
overview:




At March
31, 2009, the Company had negative working capital of approximately $300,000,
stockholders deficit of approximately $409,000 and an accumulated deficit of
approximately $24,406,000.





Financial
condition:




At March
31, 2009, the Company had cash of $86,000 as compared to $88,000 as of December
31, 2009.  The decrease in cash was primarily due to $14,000 of net
cash used in financing activities offset by net cash provided by operating
activities of $12,000.  Financing activities primarily relates to the
repayment of capital leases.


10


The
Company had negative working capital at March 31, 2009 of approximately $300,000
as compared to negative working capital of approximately $240,000 at December
31, 2008. The increase in negative working capital was primarily due to an
increase in current liabilities of $265,000 relating to deferred revenue of
approximately $250,000 for one new customer, offset by increases in current
assets of $205,000 largely relating to an increase in accounts receivable due to
aging on one customer, of which subsequent payment has been
received.





There
were no cash flows from investing activity for the three-month period ended
March 31, 2009.





During
the first quarter of 2009, the Company signed a sublease agreement effective May
1, 2009 for approximately 3,700 square feet of its office space which calls for
monthly rental payment of approximately $7,000 to the Company from the sub
lessee.




The
Company generates most of its revenue from the licensing of RPNavigator and
providing consulting services in connection with that
licensing.  Management believes that its cash on hand at March 31,
2009 and cash flow from operations based on a forecast prepared by management,
which takes into account executed contracts, and cost reductions planned and
effectuated as of March 31, 2009, should enable the Company to meet its
obligations as they become due during the next 12 months.  However,
there can be no assurances that management’s plans, including projected revenue,
will be attained.    If the Company is unsuccessful in
increasing its business, obtaining additional financing, or curtailing
operational costs to the point that net revenues are sufficient to offset
expenses, the Company will continue to operate at a loss and will be required to
wind up its operations, sell its assets, restructure the business, or liquidate,
as a result of which there is substantial doubt about its ability to continue as
a going concern.  No adjustments have been made to the accompanying
financial statements with respect to such
uncertainty.  Notwithstanding the foregoing, the Company is cautiously
optimistic about opportunities in its business and currently plans to pursue
those opportunities.  The Company has a history of losses and for the
three months ended March 31, 2009, it had a net loss of $36,000. Additionally,
at March 31, 2009, the Company has an accumulated deficit of $24,406,000,
stockholders deficit of $409,000 and cash and cash equivalents of $86,000.




Item
3.  Quantitative and Qualitative Disclosures About Market
Risk





The
Company is a smaller reporting company as defined by Rule 12b-2 of the
Securities Exchange Act of 1934 (the “Exchange Act”) and is not required to
provide the information under this item.





ITEM
4.  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 the Company’s 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 quarter
ended March 31, 2009, the Company carried out an evaluation under the
supervision and with the participation of management, including the Chief
Executive Officer, who is also the acting Principal Financial Officer, of the
effectiveness of the design and operation of the Company’s disclosure controls
and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange
Act.  Based on that evaluation, the Chief Executive Officer has
concluded that the Company’s disclosure controls and procedures are, in fact,
effective at the reasonable assurance level.





(b) Changes
in Internal Control Over Financial Reporting





During
the quarter ended March 31, 2009, there were no changes in the Company’s
internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect the Company’s internal control over
financial reporting.


11


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 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 was seeking declaratory relief, including damages arising
out the termination of the Agreement, and equitable relief and damages with
respect to defendants’ hiring a physician formerly employed by the Company.
  On January 21, 2009, the parties agreed to dismiss
with prejudice all claims and counterclaims.





For a
description of additional legal proceedings, see Note D to the unaudited
consolidated financial statements presented elsewhere in this report. With the
exception of the legal proceedings described above and in Note D to the
unaudited consolidated financial statements, there are no material pending legal
proceedings other than ordinary routine litigation incidental to the business of
the Company.





Item
1A.  Risk Factors





The risks
and uncertainties to which the Company’s financial condition and results of
operations are subject are discussed in detail in Item 1A of Part I of the
Company’s Annual Report on Form 10-K for the year ended December 31,
2008.  Management does not believe that any material changes in such
risk factors have occurred since they were last disclosed.





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 March 31, 2009.




Item
5.  Other Information




None.




Item
6. Exhibits




The
exhibits that are filed or furnished with this report are listed in the Exhibit
Index which immediately follows the signatures to this report, which Exhibit
Index is incorporated herein by reference.




12


SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.




CareAdvantage,
      IncMay
      11, 2009
              /s/ Dennis J. MourasDennis
      J. MourasChief
      Executive Officer andActing
      Principal Financial
Officer


13




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
      (filed herewith)32
              Certifications
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002 (furnished
  herewith)


14