<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

(Mark One)

  X  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----
     EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002.

____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO ________.

Commission file number: 0-21145

                              COVALENT GROUP, INC.
                 (Name of small business issuer in its charter)


          Nevada                                        56-1668867

(State or other jurisdiction of           (I.R.S. Employer Identification No.)
incorporation or organization)

               One Glenhardie Corporate Center, 1275 Drummers Lane
                            Wayne, Pennsylvania 19087
                    (address of principal executive offices)


Issuer's telephone number: 610-975-9533

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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  X  No___
                                                              ---

State the number of shares outstanding of each of the issuer's classes of common
equity as of March 31, 2002.

Common Stock, Par Value $.001                                   12,506,763
-----------------------------                                   ----------
         (Class)                                                Outstanding

Transitional Small Business Disclosure Format (check one): Yes ___ No  X
                                                                      ---

                                        1

<PAGE>

     FORM 10-QSB

                              COVALENT GROUP, INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                   Page
                                                                                   ----
     <S>                                                                           <C>
     PART I. Financial Information                                                    3

          Item 1. Consolidated Financial Statements (Unaudited)                       3

              Consolidated Balance Sheet - March 31, 2002 and
                 December 31, 2001                                                    3

              Consolidated Statements of Operations - Three Months Ended
                 March 31, 2002 and 2001                                              4

              Consolidated Statements of Cash Flows - Three Months Ended
                 March 31, 2002 and 2001                                              5

              Notes to Consolidated Financial Statements                              6

          Item 2. Management's Discussion and Analysis of
                  Financial Condition and Results of Operations                      10

     PART II. Other Information                                                      15
</TABLE>

                                        2

<PAGE>



PART 1 FINANCIAL INFORMATION
     ITEM 1.

                              Covalent Group, Inc.
                           Consolidated Balance Sheets
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                             March 31, 2002      December 31, 2001
                                                             --------------      -----------------
<S>                                                          <C>                 <C>
Assets
Current Assets
   Cash and cash equivalents                                 $    1,811,407      $       3,454,543
   Restricted cash                                                  369,427                652,047
   Accounts receivable                                            3,916,722              2,092,854
   Prepaid expenses and other                                       459,619                297,202
   Costs and estimated earnings in excess of
     related billings on uncompleted contracts                   10,098,284              7,317,942
                                                             --------------      -----------------
                          Total Current Assets                   16,655,459             13,814,588
                                                             --------------      -----------------

Property and Equipment, Net                                       1,238,012              1,260,197

Other Assets                                                         35,106                 38,070
                                                             --------------      -----------------
Total Assets                                                 $   17,928,577      $      15,112,855
                                                             ==============      =================

Liabilities and Stockholders' Equity
Current Liabilities
   Accounts payable                                          $    1,909,785      $       1,582,248
   Accrued expenses                                                 283,303                561,600
   Income tax payable                                               194,971                628,898
   Obligations under capital leases                                  68,360                 66,668
   Billings in excess of related costs and
     estimated earnings on uncompleted contracts                  1,176,395                195,122
   Customer advances                                              4,435,955              2,882,360
                                                             --------------      -----------------
                          Total Current Liabilities               8,068,769              5,916,896
                                                             --------------      -----------------

Long Term Liabilities
   Obligations under capital leases                                  44,587                 62,325
   Deferred income taxes                                            244,225                244,225
                                                             --------------      -----------------
                          Total Long Term Liabilities               288,812                306,550
                                                             --------------      -----------------
Total Liabilities                                                 8,357,581              6,223,446
                                                             --------------      -----------------

Stockholders' Equity
   Common stock,  $.001 par value 25,000,000 shares
      authorized, 12,519,263  and 12,502,713
      shares issued respectively                                     12,519                 12,503
   Additional paid-in capital                                    10,571,531             10,521,132
   Accumulated deficit                                             (970,818)            (1,602,293)
   Accumulated other comprehensive income
                                                                      8,080                  8,383
                                                             --------------      -----------------
      Less:                                                       9,621,312              8,939,725
           Treasury stock, at cost, 12,500 shares                   (50,316)               (50,316)
                                                             --------------      -----------------
                 Total Stockholders' Equity                       9,570,996              8,889,409
                                                             --------------      -----------------
Total Liabilities and Stockholders' Equity                   $   17,928,577      $      15,112,855
                                                             ==============      =================
</TABLE>

                 The accompanying notes are an integral part of these
consolidated financial statements.

                                        3

<PAGE>

                              Covalent Group, Inc.
                      Consolidated Statements Of Operations
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                  Three Months Ended March 31
                                                              -----------------------------------
                                                                    2002               2001
                                                              ----------------- -----------------
<S>                                                           <C>                <C>
    Net Revenue                                                $    5,444,561    $    3,755,129
    Reimbursement Revenue                                             784,234           152,002

                                                              ----------------- -----------------
Total Revenue                                                       6,228,795         3,907,131
                                                              ----------------- -----------------

Operating Expenses
    Direct                                                          2,865,927         1,924,656
    Reimbursable out-of-pocket expenses                               784,234           152,002
    Selling, general and administrative                             1,348,977         1,039,600
    Depreciation and amortization                                     147,248           112,266

                                                              ----------------- -----------------
Total Operating Expenses                                            5,146,386         3,228,524
                                                              ----------------- -----------------

Income from Operations                                              1,082,409           678,607

Net Interest Income                                                     1,541             4,033
                                                              ----------------- -----------------

Income before Income Taxes                                          1,083,950           682,640

Income Tax Provision                                                  452,476           280,151
                                                              ----------------- -----------------

Net Income                                                     $      631,474    $      402,489
                                                              ================= =================

Net Income per Common Share
Basic:                                                         $         0.05    $         0.03
Diluted:                                                       $         0.05    $         0.03

Weighted Average Common and Common Equivalent Shares Outstanding
Basic                                                              12,501,499        12,320,857
Diluted                                                            13,188,334        12,784,556
</TABLE>


                     The accompanying notes are an integral
                 part of these consolidated financial statements

                                        4

<PAGE>

                              Covalent Group, Inc.
                      Consolidated Statements of Cash Flows
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                              Three Months Ended March 31,
                                                              ----------------------------
                                                                  2002            2001
                                                                  ----            ----
<S>                                                            <C>            <C>
Operating Activities:

Net Income                                                     $   631,474    $   402,489
           Adjustments to reconcile net income to
           net cash provided by operating activities
           Depreciation and amortization                           147,248        112,266
           Changes in assets and liabilities
           Decrease (increase) in -
           Restricted cash                                         282,620       (475,017)
           Accounts receivable                                  (1,823,868)    (1,745,134)
           Prepaid expenses and other                             (162,417)      (152,872)
           Costs and estimated earnings in excess
             of related billings on uncompleted contracts       (2,780,342)      (971,400)
           Other assets                                              2,964            162
           Increase (decrease) in -
           Accounts payable                                        327,537        100,113
           Accrued expenses                                       (278,297)       236,635
           Income taxes payable                                   (433,927)       (67,133)
           Billings in excess of related costs and
             estimated earnings on uncompleted contracts           981,273        184,026
           Customer advances                                     1,553,595        867,090
                                                               -----------    -----------
Net Cash Used In Operating Activities                           (1,552,140)    (1,508,775)
                                                               -----------    -----------

Investing Activities:

Purchases of property and equipment                               (125,063)       (47,004)
                                                               -----------    -----------
Net Cash Used In Operating Activities                             (125,063)       (47,004)
                                                               -----------    -----------

Financing Activities:
Principal repayments of obligations under capital leases           (16,046)        (8,410)
Borrowings under short term debt                                        --      1,260,694
Proceeds from exercise of stock options and warrants                50,416        294,223
                                                               -----------    -----------
Net Cash Provided By Financing Activities                           34,370      1,546,507
                                                               -----------    -----------

Effect of Exchange Rate Changes on Cash and Cash Equivalents          (303)         2,327

Net Decrease In Cash and Cash Equivalents                       (1,643,136)        (6,945)

Cash and Cash Equivalents, Beginning of Period                   3,454,543         86,977
                                                               -----------    -----------

Cash and Cash Equivalents, End of Period                       $ 1,811,407    $    80,032
                                                               ===========    ===========
</TABLE>

                     The accompanying notes are an integral
                part of these consolidated financial statements

                                        5

<PAGE>

                              Covalent Group, Inc.
                   Notes To Consolidated Financial Statements
                                   (Unaudited)


1.       DESCRIPTION OF BUSINESS

         In this discussion, the terms "Company," "we," "us" and "our" refer to
         Covalent Group, Inc. and our subsidiaries, except where it is made
         clear otherwise.

         We are a leader in the design and management of complex clinical trials
         for the pharmaceutical, biotechnology and medical device industries.
         Our mission is to provide our clients with high quality, full-service
         support for their clinical trials. We offer therapeutic expertise,
         experienced team management and advanced technologies.

         Our current clients consist of many of the well-known, largest and most
         demanding companies in the pharmaceutical and biotechnology industries.
         From clinical program development, to proven patient recruitment, to
         managing the regulatory submission process, we have the resources to
         implement full-scale studies as well as selected aspects of Phase I
         through IV clinical trials and to deliver clinical programs on time and
         within budget. We have clinical trial experience across a wide variety
         of therapeutic areas. We currently have operational capabilities in the
         United States, Canada, Western Europe, Eastern Europe and Scandinavia.

         We incorporated in August 1989 as West End Ventures, Inc. in the state
         of Nevada. In September, 1989, we acquired Future Medical Technologies,
         Inc. ("FMT"), a New Jersey corporation, and in February 1995, we
         acquired Covalent Research Alliance Corp ("CRA"), a Pennsylvania
         corporation. In 1996, we disposed of the stock of FMT. In 1999, we
         changed our name to Covalent Group, Inc. and merged with CRA to form
         the current entity.

         In November 2000, we established Covalent Group Ltd, a wholly owned
         subsidiary in the United Kingdom, to support existing contracts on
         clinical trials and expand our presence internationally.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Consolidation
         -------------

         The consolidated financial statements for 2002 and 2001 include our
         accounts and the accounts of our wholly owned subsidiaries.
         Intercompany transactions and balances have been eliminated in
         consolidation.

         Use of Estimates
         ----------------

         The preparation of consolidated financial statements are in conformity
         with accounting principles generally accepted in the United States of
         America ("generally accepted accounting principles") and require
         management to make estimates and assumptions that

                                        6

<PAGE>

     affect the reported amounts of assets and liabilities and disclosure of
     contingent assets and liabilities at the date of the financial statements
     and the reported amounts of revenues and expenses during the period. Actual
     results could differ from those estimates.

     Basis of Presentation
     ---------------------

     The financial statements for the three months ended March 31, 2002 and 2001
     have been prepared without audit and, in the opinion of management, reflect
     all adjustments necessary (consisting only of normal recurring adjustments)
     to present fairly our financial position at March 31, 2002 and December 31,
     2001 and the results of our operations and our cash flows for the interim
     periods presented. Such financial statements do not include all of the
     information and footnotes required by generally accepted accounting
     principles for complete financial statements. For further information,
     refer to the financial statements and footnotes thereto included in our
     annual report on Form 10-KSB, for the year ended December 31, 2001.

     Operating results for the three months ended March 31, 2002 may not
     necessarily be indicative of the results for the year ending December 31,
     2002.

     Revenue Recognition
     -------------------

     Revenues are earned by performing services primarily under fixed-price
     contracts. Revenues from contracts are recognized on the percentage of
     completion method, measured principally by the total direct costs incurred
     as a percentage of estimated total direct costs for each contract. The
     estimated total direct costs of contracts are reviewed and revised
     periodically throughout the lives of the contracts with adjustments to
     revenues resulting from such revisions being recorded on a cumulative basis
     in the period in which the revisions are made. Hence, the effect of the
     changes on future periods of contract performance is recognized as if the
     revised estimates had been the original estimates. Because of the inherent
     uncertainties in estimating costs, it is possible that the estimates used
     will change in the near term and could result in a material change.

     Costs and estimated earnings in excess of related billings on uncompleted
     contracts represents revenue recognized to date that is currently
     unbillable to the customer pursuant to contractual terms. In general,
     amounts become billable upon the achievement of milestones or in accordance
     with predetermined payment schedules. Billings in excess of related costs
     and estimated earnings on uncompleted contracts represent amounts billed in
     excess of revenue recognized at the balance sheet date.

     Effective January 1, 2002, in connection with the required implementation
     of Financial Accounting Standards Board Emerging Issues Task Force Rule No.
     01-14 ("EITF 01-14"), "Income Statement Characterization of Reimbursements
     Received for "Out-of-Pocket" Expenses Incurred," out-of-pocket costs are
     now included in cost of revenue, while the reimbursements received are
     reported as reimbursable out-of-pocket revenues in the Consolidated
     Statement of Operations. We will continue to exclude from revenue and
     expenses in the Consolidated Statement of Operations fees paid to
     investigators and the associated reimbursement since we act as an agent on
     behalf of pharmaceutical company sponsors with regard to investigator
     payments. See Note 2 to the Notes to the Consolidated

                                        7

<PAGE>

     Financial Statements "New Accounting Pronouncements" for additional
     information regarding EITF 01-14.

     If we determine that a loss will result from the performance of a
     fixed-price contract, the entire amount of the estimated loss is charged
     against income in the period in which such determination is made.

     Reimbursable Out-of-Pocket Expenses
     -----------------------------------

     On behalf of our clients, we pay fees to investigators and other
     out-of-pocket costs for which we are reimbursed at cost, without markup or
     profit. Effective January 1, 2002, in connection with the required
     implementation of Financial Accounting Standards Board Emerging Issues Task
     Force Rule No. 01-14 ("EITF 01-14"), Income Statement Characterization of
     Reimbursements Received for "Out-of-Pocket" Expenses Incurred,
     out-of-pocket costs are now included in Operating Expenses, while the
     reimbursements received are reported separately as revenues in the
     Consolidated Statements of Operations. We will continue to exclude from
     revenue and expense in the notes to the Consolidated Statements of Income
     fees paid to investigators and the associated reimbursement since we will
     continue to act as an agent on behalf of our clients with regard to
     investigator payments. See Note 2 "New Accounting Pronouncements" for
     additional information regarding EITF 01-14.

     Restricted Cash
     ---------------

     We received advance payments from one of our clients as part of a long-term
     contract, which includes a separate restricted cash account to be utilized
     for payment of investigator fees. As of March 31, 2002 this restricted cash
     amount was $369,427. This amount is also included in customer advances in
     the accompanying balance sheet.

     Net Income Per Common and Common Equivalent Share
     -------------------------------------------------

     Basic net income per common share was computed by dividing net income by
     the weighted average number of shares of common stock outstanding during
     the period. Diluted net income per common share for the period ended March
     31, 2002 reflects the potential dilution from the exercise of outstanding
     stock options into common stock.

     The net income and weighted average common and common equivalent shares
     outstanding for purposes of calculating net income per common share are
     computed as follows:

                                        8

<PAGE>

     Comprehensive Income
     --------------------

<TABLE>
<CAPTION>
                                                                  Three Months Ended
                                                                       March 31,
                                                                 2002               2001
                                                             --------------    ---------------
       <S>                                                   <C>               <C>
       Net income used for basic and diluted
       net income per common share                               631,474             402,489
                                                             ==============     ==============

       Weighted average common shares outstanding
       used for basic net income per common share             12,501,499          12,320,857

       Dilutive effect of common stock
       options outstanding                                       686,835             463,699
                                                             --------------     --------------

       Weighted average common and common
       equivalent shares outstanding used for
       diluted net income per common share                    13,188,334          12,784,556
                                                             ==============     ==============
</TABLE>

     A reconciliation of comprehensive income in accordance with Statement of
     Financial Accounting Standards No. 130 "Reporting Comprehensive Income" is
     as follows:

<TABLE>
<CAPTION>
                                                                  Three Months Ended
                                                                       March 31,
                                                                 2002               2001
                                                             --------------    ---------------
       <S>                                                   <C>               <C>
       Net Income                                                631,474             402,489
       Foreign currency transaction
        adjustment                                                  (303)              2,327
                                                             --------------    ---------------

       Comprehensive Income                                      631,171             404,816
                                                             ==============    ===============
</TABLE>

     New Accounting Pronouncements
     -----------------------------

     In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and
     SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires
     that all business combinations initiated after June 30, 2001 is accounted
     for under the purchase method and addresses the initial recognition and
     measurement of goodwill and other intangible assets acquired in a business
     combination. SFAS No. 142 addresses the initial recognition and measurement
     of intangible assets acquired outside of a business combination and the
     accounting for goodwill and other intangible assets subsequent to their
     acquisition. SFAS No. 142 provides that intangible assets with finite
     useful lives be amortized and that goodwill and intangible assets with
     indefinite lives will not be amortized, but will rather be tested at least
     annually for impairment. Adoption of this statement did not have a material
     impact on our financial statements.

     In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
     Retirement Obligations." This Statement addresses financial accounting and
     reporting for obligations associated with the retirement of tangible
     long-lived assets and the associated asset retirement costs. This Statement
     requires that the fair value of a liability for an asset retirement
     obligation be recognized in the period in which it is incurred if a
     reasonable estimate of fair value can be made. SFAS No. 143 is effective
     for financial statements

                                        9

<PAGE>

     issued for fiscal years beginning after June 15, 2002. Adoption of this
     statement did not have a material impact on our financial statements.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
     Impairment or Disposal of Long-Lived Assets." This Statement addresses the
     financial accounting and reporting for the impairment or disposal of
     long-lived assets. This Statement superceded FASB Statement No. 121,
     "Accounting for the Impairment of Long-Lived Assets." This Statement
     established a single accounting model, based on the framework established
     in SFAS No. 121, and resolves some of the implementation issues related to
     Statement 121. SFAS No. 144 is effective for financial statements issued
     for fiscal years beginning after December 15, 2001, and interim periods
     within those fiscal years. Adoption of this statement did not have a
     material impact on our financial statements.

     In November 2001, the Emerging Issues Task Force (EITF) issued EITF No.
     01-14, "Income Statement Characterization of Reimbursements Received for
     "Out of Pocket" Expenses Incurred." EITF No. 01-14 requires that in cases
     where the contractor acts as principal, reimbursements received for
     out-of-pocket expenses incurred be characterized as revenue and the
     associated costs be included as operating expenses in the statement of
     operations. EITF No. 01-14 is effective for periods beginning after
     December 15, 2001. We implemented this rule for the quarter ended March 31,
     2002 and as required, we also reclassified comparative financial
     information for the quarter ended March 31, 2001. The implementation of
     this rule resulted only in the gross up of revenues and expenses totaling
     $784,234 and $152,002 for the three months ended March 31, 2002 and 2001,
     respectively and has no impact upon earnings.

     Reclassifications
     -----------------

     Certain prior year balances have been reclassified to conform to the
     current year presentation.

3.   LINE OF CREDIT

     We maintain a demand line of credit with a bank, which will expire June 30,
     2002. Maximum borrowings under this facility are currently the lesser of
     $2,500,000 or 75% of eligible accounts receivable, as defined, and bear
     interest at the bank's prime rate plus 1.0%. There were no outstanding
     borrowings under this facility at March 31, 2002.

     ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS

     Forward Looking Statements
     --------------------------

     The following discussion and analysis should be read in conjunction with
     the Company's Annual Report on Form 10-KSB, as well as the Company's
     financial statements and notes thereto included elsewhere in this Quarterly
     Report on Form 10-KSB. When used in this Report on Form 10-QSB and in other
     public statements, both oral and written, by the Company and Company
     officers, the words "estimate," "project," "intend," "believe,"
     "anticipate" and similar expressions are intended to identify
     forward-looking statements

                                       10

<PAGE>

     regarding events and financial trends that may effect our future operating
     results and financial position. Such statements are subject to risks and
     uncertainties that could cause our actual results and financial position to
     differ materially. Such factors include, among others: (i) our success in
     attracting new business; (ii) the size, duration and timing of clinical
     trials; (iii) the termination, delay or cancellation of clinical trials;
     (iv) outsourcing trends in the pharmaceutical, biologics and medical device
     industries; (v) the ability to maintain profit margins in a competitive
     marketplace; (vi) our ability to attract and retain qualified personnel;
     (vii) the sensitivity of our business to general economic conditions; and
     (viii) other economic, competitive, governmental and technological factors
     affecting our operations, markets, products, services and prices. We
     undertake no obligation to publicly release the result of any revision of
     these forward-looking statements to reflect events or circumstances after
     the date they are made or to reflect the occurrence of unanticipated
     events. These and other factors that could cause the forward-looking
     statements to be materially different are described in greater detail in
     our Annual Report on Form 10-KSB in the section entitled "Factors that
     Might Affect our Business or Stock Price".

     General
     -------

     The information set forth and discussed below for the three months ended
     March 31, 2002 and 2001 is derived from the Financial Statements included
     elsewhere herein. The financial information set forth and discussed below
     is unaudited but, in the opinion of management, reflects all adjustments
     (consisting of normal recurring adjustments) necessary for a fair
     presentation of such information. The results of our operations for a
     particular quarter may not be indicative of results expected during the
     other quarters or for the entire year.

     Our quarterly results can fluctuate as a result of a number of factors,
     including our success in attracting new business, the size and duration of
     clinical trials, the timing of client decisions to conduct new clinical
     trials or possible cancellation or delays of ongoing trials, and other
     factors, many of which are beyond our control.

     We are a research management organization that designs, coordinates and
     monitors clinical trials in drug development for some of the world's
     leading pharmaceutical firms. Revenue is derived principally from the
     placement, monitoring and management of clinical development studies.

     Clinical research service contracts generally have terms ranging from
     several months to several years. A portion of the contract fee is generally
     payable upon execution of the contract, with the balance payable in
     installments over the life of the contract. Revenues from contracts are
     generally recognized on the percentage of completion method, measured
     principally by the total direct costs incurred as a percentage of estimated
     total direct costs for each contract.

     Contracts generally may be terminated by clients with or without cause.
     Clinical trials may be terminated or delayed for several reasons, including
     unexpected results or adverse patient reactions to the drug, inadequate
     patient enrollment or investigator recruitment, manufacturing problems
     resulting in shortages of the drug or decisions by the client to
     de-emphasize or terminate a particular trial or development efforts on a
     particular drug. Depending on the size of the trial in question, a client's
     decision to terminate or delay a trial

                                       11

<PAGE>

         in which we participate could have a materially adverse effect on our
         backlog, future revenue and profitability.

         Our backlog, which consists of anticipated revenues from signed
         contracts, was $28 million at March 31, 2002. We believe that our
         backlog as of any date is not necessarily a meaningful indicator of
         future results.

         Results of Operations
         ---------------------

<TABLE>
<CAPTION>
                                                                FINANCIAL DATA:
                                                                          Three Months Ended March 31
                                                                             2002             2001
                                                                       --------------    ---------------
                                                                                 (Unaudited)
                                                                       ---------------------------------
           <S>                                                         <C>                        <C>
           Net Revenue                                                       100.00%           100.00%
           Operating Expenses
              Direct                                                          52.64%            51.25%
              Selling, general and administrative                             24.78%            27.68%
              Depreciation and amortization                                    2.70%             2.99%
           Income from Operations                                             19.88%            18.07%
           Net Income                                                         11.59%            10.72%
</TABLE>

         Three Months Ended March 31, 2002 Compared To Three Months Ended March
         ----------------------------------------------------------------------
         31, 2001
         --------

         Net revenue for the three months ended March 31, 2002 increased 45% to
         $5,445,000 as compared to $3,755,000 for the three-month period ended
         March 31, 2001. The increase of $1,690,000 resulted from an increased
         number of trials being conducted as well as the relative size of these
         trials.

         Direct expenses include compensation and other expenses directly
         related to conducting clinical studies. These costs increased by
         $941,000 from $1,925,000 to $2,866,000 for the three months ended March
         31, 2001 and 2002, respectively. The increase in expenses resulted
         principally from the increase in the number of trials being conducted
         in 2002. Direct expenses as a percentage of revenues were 53% for the
         three months ended March 31, 2002 as compared to 51% for the same
         period last year. The increase in relative percent resulted from the
         different cost structures of the clinical trials being conducted and
         different types of services requested by our clients.

         Selling, general and administrative expenses includes the salaries,
         wages and benefits of all administrative and business development
         personnel and all other support expenses not directly related to
         specific contracts. Selling, general and administrative expenses for
         the three months ended March 31, 2002 were $1,349,000 or 25% of
         revenues, as compared to $1,040,000 or 28% of revenues for the same
         period last year. The increase of $309,000 reflects increased salaries
         and other compensation expenses of $146,000 (including staff
         expansion), rent of $75,000 due to expansion of space required for
         additional staffing, consulting and professional fees, insurance and
         other miscellaneous expenses.

                                       12

<PAGE>

         Depreciation and amortization expense increased from $112,000 for the
         three months ended March 31, 2001 to $147,000 for the three months
         ended March 31, 2002 resulting from additional purchases of property
         and equipment.

         Net interest income decreased $2,000 from net income of $4,000 for the
         three months ended March 31, 2001, to net income of $2,000 for the
         three months ended March 31, 2002 because of an increase in capital
         lease interest expenses.

         The effective income tax rate for the three months ended March 31, 2001
         and 2002 was 41% and 42% respectively. The decrease of 1% is the result
         of our ongoing review of our tax accruals and the impact of income
         (losses) generated outside the United States.

         Liquidity and Capital Resources
         -------------------------------

         Our contracts usually require a portion of the contract amount to be
         paid at the time the contract is initiated. Additional payments are
         generally made upon completion of negotiated performance requirements
         throughout the life of the contract. Cash receipts do not necessarily
         correspond to costs incurred and revenue recognized (revenue
         recognition is based on the percentage of completion accounting
         method). We typically receive a low volume of large-dollar receipts. As
         a result, the number of days outstanding in accounts receivable will
         fluctuate due to the timing and size of cash receipts. Compared to
         December 31, 2001, accounts receivable increased $1,824,000 to
         $3,917,000 at March 31, 2002 primarily due to the timing of billings
         and progress payments for clinical trials. Accounts payable increased
         $328,000 to $1,910,000 at March 31, 2002 due to an increase in
         investigator payments related to clinical trials.

         Costs and estimated earnings in excess of related billings on
         uncompleted contracts increased $2,780,000 to $10,098,000 at March 31,
         2001. The balance at March 31, 2002 primarily consists of 3 clinical
         trials, which individually constitute 49%, 21% and 12% of the balance.
         These clinical trials are expected to be completed in 2003. The
         increase in billings in excess of related costs and estimated earnings
         on uncompleted contracts of $981,000 to $1,176,000 as of March 31, 2002
         from $195,000 as of December 31, 2001 resulted from the timing of
         billings and revenue recognition on clinical trial contracts. During
         the first quarter of 2002, we received initial payments on two new
         contracts, which substantially accounted for this increase.

         Our cash and cash equivalents balance at March 31, 2002 was $1,811,000
         as compared to $3,455,000 at December 31, 2001. The net decrease in
         cash was primarily due to an increase in costs and estimated earnings
         in excess of related billings on uncompleted contracts.

         We purchased $125,000 of equipment during the three months ended March
         31, 2002. We anticipate capital expenditures of $600,000 during the
         remainder of 2002 for computer equipment.

         Our principal cash needs on both a short and long-term basis are for
         the funding of our operations, and capital expenditure requirements. We
         expect to continue expanding our operations through internal growth,
         expansion of our existing services, and the development

                                       13

<PAGE>

     of new service products for clinical research and the healthcare industry.
     We expect such activities to be funded from existing cash and cash
     equivalents, cash flow from operations and our line of credit.

     Management believes that our operations and financial results are not
     materially affected by inflation.

                                       14

<PAGE>

                              COVALENT GROUP, INC.

PART II. OTHER INFORMATION

         ITEM 1.  Legal Proceedings

                  None.

         ITEM 2.  Changes in Securities

                  None

         ITEM 3.  Defaults Upon Senior Securities

                  None.

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

                  None

         ITEM 5.  Other Information

                  None.

         ITEM 6.  Exhibits and Reports on Form 8-K

                  None.

                                       15

<PAGE>

                                   SIGNATURES

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

                                               COVALENT GROUP, INC.

Dated: May 14, 2002                  By: /s/ Kenneth M. Borow, M.D.
       ------------------------          ---------------------------------------
                                                    Kenneth M. Borow, M.D.
                                                    Chief Executive Officer

Dated: May 14, 2002                  By: /s/ Joseph A. Delikat
       ------------------------          ---------------------------------------
                                                    Joseph A. Delikat
                                                    Principal Accounting Officer

                                       16