<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, 2001.

     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, 2001.

Common Stock, Par Value $.001                            12,371,609
-----------------------------                            ----------
     (Class)                                             Outstanding

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

                                       1
<PAGE>

FORM 10-QSB


                             COVALENT GROUP, INC.


                                     INDEX



                                                                            Page
                                                                            ----
PART I.  Financial Information

  Item 1.  Consolidated Financial Statements
           Consolidated Balance Sheet - March 31, 2001 (Unaudited) and
             December 31, 2000 (Unaudited)                                     3

           Consolidated Statements of Operations - Three Months Ended
             March 31, 2001 (Unaudited) and 2000 (Unaudited)                   4

           Consolidated Statements of Cash Flows - Three Months
             Ended March 31, 2001 (Unaudited) and 2000 (Unaudited)             5

           Notes to Consolidated Financial Statements (Unaudited)              6

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

PART II. Other Information                                                    12

Signature Page                                                                13

                                       2
<PAGE>

PART I.    FINANCIAL INFORMATION
           ITEM 1.

                          Consolidated Balance Sheets
                                  (unaudited)
<TABLE>
<CAPTION>

                                                                               March 31, 2001                  December 31, 2000
                                                                           -------------------               --------------------
<S>                                                                           <C>                               <C>
ASSETS
CURRENT ASSETS
   Cash and cash equivalents                                                       $    80,032                         $   86,977
   Restricted cash                                                                   1,087,539                            612,522
   Accounts receivable                                                               3,397,621                          1,652,487
   Prepaid expenses and other                                                          449,885                            297,013
   Costs and estimated earnings in excess of
    Related billings on uncompleted contracts                                        6,520,859                          5,549,457
                                                                           -------------------               --------------------
TOTAL CURRENT ASSETS                                                                11,535,936                          8,198,456
                                                                           -------------------               --------------------
Property and Equipment, Net                                                            951,143                            999,070

DEFERRED INCOME TAXES                                                                   78,854                             78,961

OTHER ASSETS                                                                            34,018                             34,073
                                                                            ------------------               --------------------
TOTAL ASSETS                                                                       $12,599,951                         $9,310,560
                                                                            ==================               ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
   Accounts payable                                                                 $  552,756                           $452,653
   Accrued expenses                                                                    678,636                            442,001
   Short term debt                                                                   1,260,694                                 --
   Income tax payable                                                                  653,129                            720,260
   Obligations under capital leases                                                     43,203                             34,723
   Billings in excess of related costs and
    Estimated earnings on uncompleted contracts                                        715,667                            531,641
   Customer advances                                                                 1,681,064                            813,974
                                                                            ------------------               --------------------
          TOTAL CURRENT LIABILITIES                                                  5,585,149                          2,995,242
                                                                            ------------------               --------------------

LONG TERM LIABILITIES
   Obligations under capital leases                                                     75,712                             75,286
                                                                            ------------------               --------------------
      TOTAL LONG TERM LIABILITIES                                                       75,712                             75,286
                                                                            ------------------               --------------------
TOTAL LIABILITIES                                                                    5,660,861                          3,070,528
                                                                            ------------------               --------------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
   Common stock,  $.001 par value 25,000,000 shares
      authorized, 12,371,609 and 12,213,309
      shares issued respectively                                                        13,921                             12,213
   Additional paid-in capital                                                       10,208,171                          9,915,656
   Accumulated deficit                                                              (3,234,417)                        (3,636,926)
   Accumulated other comprehensive income (loss)                                         1,731                               (595)
                                                                            ------------------               --------------------
      LESS:                                                                          6,989,406                          6,290,348
         Treasury stock, at cost, 12,500 shares                                        (50,316)                           (50,316)
                                                                            ------------------               --------------------
          TOTAL STOCKHOLDERS' EQUITY                                                 6,939,090                          6,240,032
                                                                            ------------------               --------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                         $12,599,951                        $ 9,310,560
                                                                            ==================               ====================

See accompanying notes to the consolidated financial statements.
</TABLE>

                                       3
<PAGE>

<TABLE>
<CAPTION>
                                         COVALENT GROUP, INC.
                                 CONSOLIDATED STATEMENTS OF OPERATIONS
                                              (unaudited)

                                                                          Three Months Ended
                                                                               March 31
                                                                       ----------------------
                                                                     2001                     2000 (Restated)
                                                            -------------------      ------------------
<S>                                                             <C>                  <C>
REVENUES                                                            $ 3,755,129             $ 3,643,672

OPERATING EXPENSES
    Direct                                                            1,924,656               1,964,421
    Selling, general and administrative                               1,039,600                 683,974
    Depreciation and amortization                                       112,266                 104,674
                                                            -------------------      ------------------

TOTAL OPERATING EXPENSES                                              3,076,522               2,753,069
                                                            -------------------      ------------------

INCOME FROM OPERATIONS                                                  678,607                 890,603

INTEREST INCOME                                                           4,033                  15,197
                                                            -------------------      ------------------

INCOME BEFORE INCOME TAXES                                              682,640                 905,800

INCOME TAX PROVISION                                                    280,151                 333,646
                                                            -------------------      ------------------

NET INCOME                                                          $   402,489             $   572,154
                                                            ===================      ==================

NET INCOME PER COMMON SHARE

BASIC:                                                                    $0.03                   $0.05
DILUTED:                                                                  $0.03                   $0.04

WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES
 OUTSTANDING
BASIC                                                                12,320,857              12,124,516
DILUTED                                                              12,784,556              13,010,582

See accompanying notes to the consolidated financial statements.
</TABLE>

                                       4
<PAGE>

<TABLE>
<CAPTION>
                             COVALENT GROUP, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (unaudited)
                                                                                                   THREE MONTHS ENDED MARCH 31,
                                                                                                   ---------------------------
                                                                                                       2001          2000 (Restated)
                                                                                                       -----------     -----------
<S>                                                                                     <C>                        <C>
OPERATING ACTIVITIES:

Net income                                                                                         $   402,489     $   572,154
Adjustments to reconcile net income to
     net cash provided by operating activities
    Depreciation and amortization                                                                      112,266         104,674
     Changes in assets and liabilities
     (Increase) decrease in -
      Restricted cash                                                                                 (475,017)        155,546
      Accounts receivable                                                                           (1,745,134)      1,887,159
      Prepaid expenses and other                                                                      (152,872)       (197,683)
      Costs and estimated earnings in excess
       Of related billings on uncompleted contracts                                                   (971,400)     (1,894,199)
      Other assets                                                                                         162               -
     Increase (decrease) in -
      Accounts payable                                                                                 100,113        (703,181)
      Accrued expenses                                                                                 236,635          65,188
      Income taxes payable                                                                             (67,133)        264,558
      Billings in excess of related costs and
       Estimated earnings on uncompleted contracts                                                     184,026         128,834
      Customer advances                                                                                867,090        (189,654)
                                                                                                   -----------     -----------

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                                                 (1,508,775)        193,396
                                                                                                   -----------     -----------

INVESTING ACTIVITIES:

Purchases of property and equipment                                                                    (47,004)        (12,841)
                                                                                                   -----------      ----------

NET CASH USED IN INVESTING ACTIVITIES                                                                  (47,004)        (12,841)
                                                                                                   -----------     -----------

FINANCING ACTIVITIES:
Principal repayments of obligations under capital leases                                                (8,410)              -
Borrowings under short term debt                                                                     1,260,694               -
Proceeds from exercise of stock options                                                                294,223         316,991
                                                                                                   -----------     -----------

NET CASH PROVIDED BY FINANCING ACTIVITIES                                                            1,546,507         316,991
                                                                                                   -----------     -----------

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                                             2,327               -

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                                    (6,945)        497,546

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                                            86,977         558,528
                                                                                                   -----------     -----------

CASH AND CASH EQUIVALENTS, END OF YEAR                                                             $    80,032     $ 1,056,074
                                                                                                   ===========     ===========

</TABLE>
See accompanying notes to the consolidated financial statements.

                                       5
<PAGE>

FORM 10-QSB

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


1.   DESCRIPTION OF BUSINESS
     -----------------------

     General
     -------

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

     We are a contractual research organization, providing clinical research and
     development services to pharmaceutical, biotechnology, medical service and
     managed care organizations. We initiate, design and monitor clinical
     trials, manage and analyze clinical data and offer other related services
     and products.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     ------------------------------------------

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

     The consolidated financial statements for 2001 and 2000 include our
     accounts and the accounts of our wholly owned subsidiary. Intercompany
     transactions and balances have been eliminated in consolidation.

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

     The preparation of consolidated financial statements in conformity with
     accounting principles generally accepted in the United States of America
     requires management to make estimates and assumptions that 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, 2001 and 2000
     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, 2001 and 2000 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, 2000.

     Operating results for the three months ended March 31, 2001 may not
     necessarily be indicative of the results for the year ended December 31,
     2001.

                                       6
<PAGE>

     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 costs incurred as a
     percentage of estimated total costs for each contract. The estimated total
     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 at least reasonably 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 in excess of amounts billed. Billings in
     excess of related costs and estimated earnings on uncompleted contracts
     represents amounts billed in excess of revenue recognized.

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

     We received an advance payment from one of our customers 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, 2001, this
     restricted cash amount was $1,087,539. This amount was also included in
     customer advances.

     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 reflects the potential
     dilution from the exercise of outstanding stock options and warrants 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:
<TABLE>
<CAPTION>
                                                                                     Three Months Ended
                                                                                           March 31,
                                                                                           ---------
                                                                                  2001                     2000
                                                                              -----------              -----------
<S>                                                                   <C>                      <C>
Net income used for basic and diluted
 net income per common share                                                  $   402,489              $   572,154
                                                                      ===================      ===================

Weighted average common shares outstanding
 used for basic net income per common share                                    12,320,857               12,124,516

Dilutive effect of common stock
 options and warrants outstanding                                                 463,699                  886,066
                                                                      -------------------      -------------------

 Weighted average common and common
 equivalent shares outstanding used for
 diluted net income per common share                                           12,784,556               13,010,582
                                                                      ===================      ===================
</TABLE>

                                       7
<PAGE>
      Comprehensive Income
     ---------------------

     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,
                                                              ----------------------------------
                                                                     2001                 2000
                                                                   --------             --------
<S>                                                           <C>                   <C>
Net Income                                                         $402,489             $572,154

Foreign currency transaction
 adjustment                                                           2,327                    -
                                                            ---------------       --------------
Comprehensive Income                                               $404,816             $572,154
                                                            ===============       ==============
</TABLE>
     New Accounting Pronouncements
     -----------------------------

     In June 1998, the Financial Accounting Standards Board (the "FASB") issued
     SFAS No. 133, "Accounting for Derivative Investments and Hedging
     Activities."  This statement establishes the accounting and reporting
     standards for derivatives and hedging activity.  Upon the adoption of SFAS
     No. 133, all derivatives are required to be recognized in the statement of
     financial position as either assets or liabilities and measured at fair
     value.  In July 1999 and June 2000, the FASB issued SFAS No. 137 and SFAS
     No. 138 which deferred the effective date for implementation of SFAS No.
     133 to fiscal years beginning after June 15, 2000 and which addressed a
     limited number of issues causing implementation difficulties for entities
     that apply SFAS No. 133, respectively.  Adoption of this statement on
     January 1, 2001 did not have a material effect on our financial statements.

     Change in Accounting Principle
     ------------------------------

     In the quarter ended December 31, 2000, we performed an extensive review of
     our contracts for purposes of evaluating the impact of SAB 101 on our
     consolidated financial statements. Due to the magnitude of the adjustments,
     we determined that disclosure of pro forma net income as a result of the
     above discussion was necessary. Proforma net income as a result of our
     change in accounting for revenue recognition under SAB 101 is disclosed
     below:
<TABLE>
<CAPTION>
                                                                 Three Months Ended
                                                                   March 31, 2000
                                                              ------------------------
<S>                                                           <C>
Net income as reported                                                    $   572,154

Adjustments for current year net income:
Total pretax adjustment -
  Change in accounting principal                                              316,189
  Tax effect                                                                 (132,799)
                                                                          -----------
  Net adjustment                                                          $   183,390

Net income as adjusted                                                    $   755,544

Basic weighted average common and common equivalent                        12,124,516
 shares outstanding
Basic earnings per share as reported                                      $      0.05
Per share amount of the adjustment                                        $      0.01
Pro forma earnings per common share                                       $      0.06
</TABLE>
Restatement
-----------

In the quarter ended December 31, 2000, we reviewed our relationship with
Speedtrials.com. Speedtrials.com is an internet venture with which we were
collaborating to develop a web-based clinical research application. As disclosed
in our December 31, 2000 Form 10-KSB, we reversed $680,000 of previously
recorded revenues. Of this amount, $30,000 was recorded in the quarter ended
March 31, 2000. The restated March 31, 2000 amounts are reconciled to previously
recorded revenues below:
<TABLE>
<CAPTION>
                                   Three Months Ended
                                     March 31, 2000
                                     --------------
<S>                                  <C>
Revenues as previously reported          $3,673,672

Adjustment to reverse revenues              (30,000)
                                     --------------
Revenues as restated                     $3,643,672
                                     --------------
</TABLE>
As a result of the above restatement, net income decreased by $17,400 from
$589,554 to $572,154.
                                       8
<PAGE>

3.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
     ----------------------------------------------

     Speedtrials.com
     ----------------

     On May 4, 2001 we entered into an agreement with Speedtrials.com, Inc. and
     an outside technology company (software development vendor) by which we
     acquired ownership of certain TeleTrial enhancements and related work
     product which had been previously developed under a contract between
     Speedtrials and the vendor. In connection with this acquisition we paid
     $45,833 to the vendor (in addition to other amounts previously paid to the
     vendor), owed by Speedtrials for development services.

4.   LINE OF CREDIT
     --------------

     In 1997, we obtained a demand line of credit facility with a bank. Maximum
     borrowings under the facility are the lessor of $1,000,000 or 75% of
     eligible accounts receivable, as defined, and bear interest at the bank's
     prime rate plus 1.0%. On March 30, 2001, the credit facility was extended
     through May 31, 2001 and increased to a maximum borrowing of $1,500,000 at
     the same terms. On April 10, 2001, the credit facility was modified and
     increased to the lesser of $2,500,000 or 75% of eligible accounts
     receivable, as defined and bears interest at the bank's prime rate plus
     1.0%, expiring on June 30, 2002.



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

When used in this Report on Form 10-QSB and in other public statements, both
oral and written, by Covalent Group, Inc. (the "Company") and Company officers,
the words "estimate," "project," "intend," "believe," "anticipate" and similar
expressions are intended to identify forward-looking statements regarding events
and financial trends that may affect 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) the intense competition in the industry
in which we compete; (v) our ability to obtain financing on satisfactory terms;
(vi) the sensitivity of our business to general economic conditions; (vii) other
economic, competitive, governmental and technological factors affecting our
operations, markets, products, services and prices and (viii) concentration of
our clients.  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 registration
statement on Form S-3 in the section entitled "Risk Factors".

The information set forth and discussed below for the three months ended March
31, 2001 and 2000 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.

General
-------

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 the
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.  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.

                                       9

<PAGE>

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
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, is
$33 million at March 31, 2001.  We believe that our backlog as of any date is
not necessarily a meaningful predictor of future results.

Three Months Ended March 31, 2001 Compared To Three Months Ended March 31, 2000
-------------------------------------------------------------------------------

Revenues for the three months ended March 31, 2001 increased 3% to $3,755,000 as
compared to $3,644,000 for the three month period ended March 31, 2000.  The
increase of $111,000 results from the increase in the number of clinical
development projects being worked on in the most recent quarter as compared to
the same quarter last year.

Direct expenses include compensation and other expenses directly related to
conducting clinical studies.  These expenses decreased by $39,000 from
$1,964,000 to $1,925,000 for the three months ended March 31, 2000 and 2001,
respectively.  Direct expenses as a percentage of revenues were 51% for the
three months ended March 31, 2001 as compared to 54% for the same period last
year.  The decrease in relative percent is due to the different cost structures
of the clinical studies being conducted and is based on different types of
services requested by the Company's clients.

Selling, general and administrative expenses include all administrative
personnel and business development and all other support expenses not directly
related to specific contracts.  Selling, general and administrative expenses for
the three months ended March 31, 2001 amounted to $1,040,000 or 28% of revenues,
as compared to $684,000 or 19% of revenues for the same period last year.  The
increase of $356,000 or 52% reflects increased consulting and professional
service fees as well as expenses associated with the growth of our
infrastructure and training of our clinical operations staff.

Interest income decreased $11,000 from $15,000 for the three months ended March
31, 2000, to $4,000 for the three months ended March 31, 2001.

The effective income tax rate for the three months ended March 31, 2001 and 2000
was 41% and 37% respectively.

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

                                       10
<PAGE>

result, the number of days outstanding in accounts receivable will
fluctuate due to the timing and size of cash receipts.  Compared to December 31,
2000, accounts receivable increased $1,746,000 to $3,398,000 at March 31, 2001
primarily due to the timing of billings and progress payments for clinical
trials.  Costs and estimated earnings in excess of related billings on
uncompleted contracts increased $972,000 to $6,521,000 at March 31, 2001.  This
increase was attributable to ten clinical trials for which revenues have been
recognized in excess of progress billings made to date on those contracts. As a
result of the increase in receivables, we borrowed $1,261,000 which was
outstanding March 31, 2001.

Our cash and cash equivalents balance at March 31, 2001 was $80,000 as compared
to $87,000 at December 31, 2000.  The net decrease in cash was primarily due to
operating results for the three months ended March 31, 2001 offset by the
proceeds from borrowings under our line of credit.

We purchased $47,000 of equipment in the three months ended March 31, 2001.  We
anticipate the need for capital expenditures during the remainder of 2001 for
computer equipment of $200,000.

We have a line of credit with a commercial bank providing a maximum credit
facility of the lessor of $2,500,000 or 75% of eligible accounts receivable
which bears interest at a rate not to exceed 1% point above the bank's prime
rate. Borrowings outstanding under the credit line are secured by substantially
all of our assets. Borrowings outstanding under the credit line at March 31,
2001 and December 31, 2000 were $1,261,000 and $0, respectively.

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 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.

                                       11
<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

              (a) Exhibits

                  None.

              (b) Reports on Form 8-K

                  None.



                                       12
<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: 5/15/01                           By: /s/Kenneth M. Borow, M.D.
     ---------                               ------------------------
                                             Kenneth M. Borow, M.D.
                                             Chief Executive Officer

Dated: 5/15/01                           By: /s/Joseph A. Delikat
     ---------                               --------------------
                                             Joseph A. Delikat
                                             Principal Accounting Officer

                                       13