<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 JUNE 30, 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)

          Delaware                                        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 August 13, 2002.

Common Stock, Par Value $.001                                  12,605,383
-----------------------------                                  -----------
         (Class)                                               Outstanding

Transitional Small Business Disclosure Format (check one): Yes         No   X
                                                               ----       ----
                                       1

<PAGE>

                              COVALENT GROUP, INC.

                                      INDEX

                                                                           Page

    PART I. Financial Information                                             3

      Item 1. Consolidated Financial Statements (Unaudited)                   3

          Consolidated Balance Sheet--June 30, 2002 and
            December 31, 2001                                                 3

          Consolidated Statements of Operations--Three Months and Six
            Months Ended June 30, 2002 and 2001                               4

          Consolidated Statements of Cash Flows--Six Months Ended
            June 30, 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                                               17
                                       2

<PAGE>

PART I    FINANCIAL INFORMATION
    ITEM 1.

                               Covalent Group Inc.
                           Consolidated Balance Sheets
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                       June 30, 2002     December 31, 2001
                                                    -----------------   -------------------
<S>                                                  <C>                  <C>
Assets
Current Assets
    Cash and cash equivalents                        $     2,736,658      $     3,454,543
    Restricted cash                                          989,219              652,047
    Accounts receivable                                    4,051,051            2,092,854
    Prepaid expenses and other                               492,680              297,202
    Costs and estimated earnings in excess of
      related billings on uncompleted contracts            9,669,776            7,317,942
                                                    ------------------   -------------------
                 Total Current Assets                     17,939,384           13,814,588
                                                    ------------------   -------------------

Property and Equipment, Net                                1,187,073            1,260,197

Other Assets                                                  35,107               38,070
                                                    ------------------   -------------------
Total Assets                                         $    19,161,564      $    15,112,855
                                                    ==================   ===================

Liabilities and Stockholders' Equity
Current Liabilities
    Accounts payable                                 $     1,965,804            1,582,248
    Accrued expenses                                         531,704              561,600
    Income tax payable                                             -              628,898
    Obligations under capital leases                          69,217               66,668
    Billings in excess of related costs and
      estimated earnings on uncompleted contracts          2,444,790              195,122
    Customer advances                                      3,302,960            2,882,360
                                                    ------------------   -------------------
                Total Current Liabilities                  8,314,475            5,916,896
                                                    ------------------   -------------------
Long Term Liabilities
    Obligations under capital leases                          27,277               62,325
    Deferred income tax                                      244,225              244,225
                                                    ------------------   -------------------
                 Total Long Term Liabilities                 271,502              306,550
                                                    ------------------   -------------------
Total Liabilities                                          8,585,977            6,223,446
                                                    ------------------   -------------------
Stockholders' Equity
    Common stock,  $.001 par value 25,000,000 shares
       authorized, 12,617,883 and 12,502,713
       shares issued respectively                             12,618               12,503
    Additional paid-in capital                            10,804,200           10,521,132
    Accumulated deficit                                     (197,752)          (1,602,293)
    Accumulated other comprehensive income                     6,837                8,383
                                                    ------------------   -------------------
      Less:                                               10,625,903            8,939,725
        Treasury stock, at cost, 12,500 shares               (50,316)             (50,316)
                                                    ------------------   -------------------
          Total Stockholders' Equity                      10,575,587            8,889,409
                                                    ------------------   -------------------
Total Liabilities and Stockholders' Equity           $    19,161,564       $   15,112,855
                                                    ==================   ===================
</TABLE>
          See accompanying notes to the consolidated financial statements.
                                        3

<PAGE>

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

<TABLE>
<CAPTION>


                                                 Three Months Ended June 30,            Six Months Ended June 30,
                                                   2002              2001               2002                2001
                                            ------------------------------------   ------------------------------------
<S>                                              <C>              <C>               <C>                  <C>

     Net revenue                                $6,195,726        $4,761,702        $  11,640,287        $  8,516,831
     Reimbursement revenue                       1,099,514           369,244            1,883,748             521,246

                                            ------------------------------------   ------------------------------------
Total Revenue                                   $7,295,240        $5,130,946        $  13,524,035        $  9,038,077
                                            ------------------------------------   ------------------------------------

Operating Expenses
Direct                                           3,602,317         2,319,972            6,468,244           4,244,628
  Reimbursement out-of-pocket expenses           1,099,514           369,244            1,883,748             521,246
  Selling, general and administrative            1,211,351         1,143,945            2,560,328           2,183,545
  Depreciation and amortization                    142,729           122,417              289,977             234,683
                                            ------------------------------------   ------------------------------------

Total Operating Expenses                         6,055,911         3,955,578           11,202,297           7,184,102
                                            ------------------------------------   ------------------------------------

Income from Operations                           1,239,329         1,175,368            2,321,738           1,853,975

Net Interest (Expense) Income                        2,738           (44,971)               4,279             (40,937)
                                            ------------------------------------   ------------------------------------

Income before Income Taxes                       1,242,067         1,130,397            2,326,017           1,813,038

Income Tax Provision                               469,000           477,766              921,476             757,917
                                            ------------------------------------   ------------------------------------

Net Income                                   $     773,067        $  652,631        $   1,404,541        $  1,055,121
                                            ====================================   ====================================

Net Income per Common Share
Basic:                                               $0.06             $0.05                $0.11               $0.09
Diluted:                                             $0.06             $0.05                $0.11               $0.08

Weighted Average Common and Common Equivalent Shares Outstanding
Basic                                           12,584,900        12,388,345           12,543,291          12,354,787
Diluted                                         13,475,925        12,905,632           13,338,944          12,845,622
</TABLE>


        See accompanying notes to the consolidated financial statements.

                                       4

<PAGE>




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

<TABLE>
<CAPTION>

                                                                  Six Months Ended June 30,
                                                                   2002                2001
                                                             ---------------  --------------
<S>                                                            <C>             <C>
Operating Activities:

Net income                                                     $  1,404,541    $  1,055,120
    Adjustments to reconcile net income to
    net cash provided by operating activities
    Depreciation and amortization                                   289,977         234,683
    Changes in assets and liabilities
    (Increase) decrease in-
    Restricted cash                                                (337,172)        (32,626)
    Accounts receivable                                          (1,958,197)     (3,088,475)
    Prepaid expenses and other                                     (195,478)        (91,401)
    Costs and estimated earnings in excess
      of related billings on uncompleted contracts               (2,351,834)     (2,188,771)
    Other assets                                                      2,963           3,066
    Deferred income taxes                                                               107
    Increase (decrease) in-
    Accounts payable                                                383,556          37,762
    Accrued expenses                                                (29,896)         58,727
    Income taxes payable                                           (628,898)       (312,705)
    Billings in excess of related costs and
      estimated earnings on uncompleted contracts                 2,249,668       1,085,565
    Customer advances                                               420,600       2,376,799
                                                              --------------  --------------

Net (Cash Used)/Provided by In Operating Activities                (750,170)       (862,149)
                                                              --------------  --------------

Investing Activities:

Purchases of property and equipment                                (216,853)       (212,224)
                                                              --------------  ---------------

Net (Cash Used)/Provided by In Operating Activities                (216,853)       (212,224)
                                                              --------------  ---------------
Financing Activities:
Principal repayments of obligations under capital leases            (32,499)        (18,791)
Borrowings under short term debt                                         --         800,000
Proceeds from exercise of stock options                             283,183         591,253
                                                              --------------  --------------

Net Cash Provided By Financing Activities                           250,684       1,372,462
                                                              --------------  --------------

Effect of Exchange Rate Changes on Cash and Cash Equivalents         (1,546)          3,024

Net Increase (Decrease) In Cash and Cash Equivalents               (717,885)        301,113

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

Cash and Cash Equivalents, End of Period                       $  2,736,658    $    388,090
                                                              ==============  ==============
</TABLE>


        See accompanying notes to the consolidated financial statements.





                                       5

<PAGE>

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

1.       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 in conformity with
         accounting principles generally accepted in the United States of
         America ("generally accepted accounting principles") require 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 and six months ended June 30,
         2002 and June 30, 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 June 30, 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 and six months ended June 30, 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
                                       6

<PAGE>

         the near term and could result in a material change. 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.

         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. The balance at June
         30, 2002 primarily consisted of 3 clinical trials, which individually
         constitute 37%, 23% and 14% of the balance. These clinical trials are
         expected to be completed in 2003. 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.

         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
         Reimbursement Revenue in the Consolidated Statements of Operations. We
         will continue to exclude from revenue and expense in the Consolidated
         Statement of Operations fees paid to investigators and the associated
         reimbursement since we will continue to act as agent on behalf of our
         clients with regard to investigator payments.

         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 June 30, 2002
         this restricted cash amount was $989 thousand. 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 June 30, 2002 reflects the potential dilution from the exercise
         of outstanding stock options into common stock.
                                       7

<PAGE>

 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                          Six Months Ended
                                                                 June 30,                                   June 30,
                                                         2002                 2001                 2002                 2001
                                               --------------------- -------------------- -------------------- --------------------
<S>                                                    <C>                   <C>                  <C>                  <C>

Net income used for basic and diluted
net income per common share                               773,067               652,631            1,404,541            1,055,121
                                               ===================== ==================== ==================== ====================

Weighted average common shares outstanding
used for basic net income per common share             12,584,900            12,388,345           12,543,291           12,354,787

Dilutive effect of common stock options and
warrants outstanding                                      891,025               517,287              795,653              490,835
                                               --------------------- -------------------- -------------------- --------------------

Weighted average common and common
equivalent shares outstanding used for
diluted net income per common share                    13,475,925            12,905,632           13,338,944           12,845,622
                                               ===================== ==================== ==================== ====================
</TABLE>


         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                          Six Months Ended
                                                    June 30,                                   June 30,
                                            2002                  2001                 2002                 2001
                                 --------------------  -------------------- -------------------- --------------------
<S>                                         <C>                   <C>                <C>                  <C>

Net income                                  773,067               652,631            1,404,541            1,055,121

Foreign currency translation
 adjustment

                                             (1,243)                  697               (1,546)               3,024
                                 --------------------  -------------------- -------------------- --------------------



                                 --------------------  -------------------- -------------------- --------------------
Comprehensive Income                        771,824               653,328            1,402,995            1,058,145
                                 ====================  ==================== ==================== ====================

</TABLE>



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

          In June 2001, the FASB issued SFAS No. 141, "Business Combinations"
          and SFAS No. 142, "Goodwill and Other Intangible Assets." Covalent
          adopted these Statements on January 1, 2002. SFAS No. 141 requires
          that all business combinations initiated after June
                                       8

<PAGE>

          30, 2001 be 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 not be
          amortized, but will rather be tested at least annually for impairment.
          Adoption of these statements 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 issued for fiscal years
          beginning after June 15, 2002. Adoption of SFAS No. 143 is not
          expected to 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 SFAS 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
          SFAS No. 144 did not have a material impact on our financial
          statements.

          On January 1, 2002 we adopted Emerging Issues Task Force (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. As required by this rule, we also
          reclassified comparative financial information for the quarter ended
          June 30, 2001. The implementation of this rule resulted in an increase
          by equal amounts in Total Revenue and Total Operating Expenses
          totaling $1.1 million and $369 thousand for the three months, and $1.9
          million and $521 thousand for the six months, ended June 30, 2002 and
          2001, respectively. The implementation of this rule has no impact upon
          Net Income.

          In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
          Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
          Technical Corrections." SFAS No. 145 rescinds SFAS No. 4, "Reporting
          Gains and Losses from Extinguishment of Debt," and an amendment of
          that Statement, and SFAS No. 64, "Accounting for Leases," to eliminate
          an inconsistency between the required accounting for sale-leaseback
          transactions and the required accounting for certain lease
          modifications that have economic effects that are similar to
          sale-leaseback transactions. SFAS also amends other existing
          authoritative pronouncements to make various technical corrections,
          clarify meanings, or describe their applicability under changed
          conditions. Adoption of SFAS No. 145 is not expected to have a
          material impact on our financial statements.
                                       9

<PAGE>

         In July, 2002, the FASB issued SFAS No. 146, "Accounting for Costs
         Associated with Exit or Disposal Activities." SFAS No. 146 requires
         companies to recognize costs associated with exit or disposal
         activities when they are incurred rather than at the date of a
         commitment to an exit or disposal plan. Previous accounting guidance
         was provided by EITF No. 94-3, "Liability Recognition for Certain
         Employee Termination Benefits and Other Costs to Exit an Activity
         (including Certain Costs Incurred in a Restructuring)." SFAS No. 146
         replaces EITF No. 94-3 and is to be applied prospectively to exit or
         disposal activities initiated after December 31, 2002. Adoption of SFAS
         No. 146 is not expected to have a material impact on our financial
         statements.

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

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

2.       LINE OF CREDIT

         At June 30, 2002 we maintained a demand line of credit with a bank,
         which was to expire September 30, 2002. Maximum borrowings under this
         facility were the lesser of $2.5 million or 75% of eligible accounts
         receivable, as defined, and bore interest at the bank's prime rate plus
         1.0%. There were no outstanding borrowings under this facility at June
         30, 2002. Subsequent to June 30, 2002, the line of credit was renewed
         and will now expire on June 30, 2003 and will bear interest at the
         bank's prime rate.

         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-QSB. 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 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 and retaining existing clients and projects;
         (ii) the size, duration and timing of clinical trials; (iii) the
         termination, delay or cancellation of clinical trials; (iv) the timing
         difference between our receipt of contract milestone payments and our
         incurring costs to manage these trials; (v) outsourcing trends in the
         pharmaceutical, biotechnology and medical device industries; (vi) the
         ability to maintain profit margins in a competitive marketplace; (vii)
         our ability to attract and retain qualified personnel; (viii) the
         sensitivity of our business to general economic conditions; and (ix)
         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
                                       10

<PAGE>

          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."

          Company Overview
          ----------------

          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 best known, largest and
          most demanding companies in the pharmaceutical, biotechnology and
          medical device industries. From clinical program development, to
          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. We have clinical trial
          experience across a wide variety of therapeutic areas. We currently
          have operational capabilities in the United States, Canada, Western
          and Eastern Europe, Scandinavia and the Middle East.

          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. In June 2002,
          the Company changed its place of incorporation to the state of
          Delaware.

          General
          -------

          The information set forth and discussed below for the three and six
          months ended June 30, 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 design, placement, monitoring and management of clinical
          development studies.
                                       11

<PAGE>

          Our 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
          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 $30 million at June 30, 2002. For the reasons described
          above, we believe that our backlog as of any date is not necessarily a
          meaningful indicator of future results.

          The following chart provides a common-sized presentation of our
          Consolidated Statement of Operations, excluding the impact of
          reimbursement revenue and reimbursement of out-of-pocket expenses, for
          the three and six months ended June 30, 2002 and 2001:

<TABLE>
<CAPTION>
                                                       Three Months Ended June 30       Six Months Ended June 30
                                                        2002                2001          2002                2001
                                                --------------------------------- ---------------------------------
                                                            (Unaudited)                        (Unaudited)
                                                --------------------------------- ---------------------------------
<S>                                                   <C>                 <C>           <C>                  <C>
     Net revenue                                      100.0%              100.0%        100.0%              100.0%
Operating Expenses
     Direct                                            58.1%               48.7%         55.6%               49.8%
     Selling, general and administrative               19.6%               24.0%         22.0%               25.6%
     Depreciation                                       2.3%                2.6%          2.5%                2.8%
Income from Operations                                 20.0%               24.7%         19.9%               21.8%
Net Income                                             12.5%               13.7%         12.1%               12.4%
</TABLE>

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

          Three Months Ended June 30, 2002 Compared To Three Months Ended June
          30, 2001
          ---------------------------------------------------------------------

          Net revenue for the three months ended June 30, 2002 increased 30% to
          $6.2 million as compared to $4.8 million for the three month period
          ended June 30, 2001. The increase of $1.4 million resulted from an
          increased number of trials being conducted as well as an increase in
          average size of these trials.

                                       12

<PAGE>

          Direct expenses include compensation and other expenses directly
          related to conducting clinical studies. These costs increased by $1.3
          million from $2.3 million to $3.6 million for the three months ended
          June 30, 2001 and 2002, respectively. The increase in direct expenses
          resulted principally from the increase in the number and average size
          of trials being conducted in 2002. Direct expenses as a percentage of
          revenues were 58% for the three months ended June 30, 2002, as
          compared to 49% 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 June 30, 2002 were $1.2 million, or 20% of net
          revenues, as compared to $1.1 million, or 24% of net revenues, for the
          same period last year. The increase of $67 thousand reflects increased
          staff, rent and insurance expenses.

          Depreciation and amortization expense increased to $143 thousand for
          the three months ended June 30, 2002 from $122 thousand for the three
          months ended June 30, 2001, as a result of additional purchases of
          office and computer equipment.

          Net interest income for the three months ended June 30, 2002 was $2.7
          thousand compared to net interest expense of $45.0 thousand for the
          three months ended June 30, 2001, a positive change of $47.7 thousand,
          largely the result of having more cash to invest and less short term
          debt.

          The effective income tax rate for the three months ended June 30, 2002
          and 2001 was 38% and 42%, respectively. The decrease of 4% is the
          result of the impact of income (losses) generated outside the United
          States.

          Six Months Ended June 30, 2002 Compared To Six Months Ended June 30,
          2001
          ----------------------------------------------------------------------

          Net revenue for the six months ended June 30, 2002 increased 37% to
          $11.6 million as compared to $8.5 million for the six month period
          ended June 30, 2001. The increase of $3.1 million resulted from an
          increased number of trials being conducted as well as an increase in
          average size of these trials.

          Direct expenses include compensation and other expenses directly
          related to conducting clinical studies. These costs increased by $2.2
          million from $4.2 million to $6.5 million for the six months ended
          June 30, 2001 and 2002, respectively. The increase in direct expenses
          resulted principally from the increase in the number and average size
          of trials being conducted in 2002. Direct expenses as a percentage of
          revenues were 56% for the six months ended June 30, 2002 as compared
          to 50% 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
                                           13

<PAGE>

          directly related to specific contracts. Selling, general and
          administrative expenses for the six months ended June 30, 2002 were
          $2.6 million, or 22% of net revenues, as compared to $2.2 million, or
          26% of net revenues, for the same period last year. The increase of
          $377 thousand reflects increased staff expenses, rent and insurance
          expenses.

          Depreciation and amortization expense increased to $290 thousand for
          the six months ended June 30, 2002 from $235 thousand for the six
          months ended June 30, 2001 as a result of additional purchases of
          office and computer equipment.

          Net interest income for the six months ended June 30, 2002 was $4.0
          thousand compared to net interest expense of $41.0 thousand for the
          six months ended June 30, 2001, a positive change of $45.0 thousand,
          largely the result of having more cash to invest and less short term
          debt.

          The effective income tax rate for the six months ended June 30, 2002
          and 2001 was 40% and 42%, respectively. The decrease of 2% is the
          result of the impact of income (losses) generated outside the United
          States.

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

          Our cash and cash equivalents balance at June 30, 2002 was $2.7
          million as compared to $3.5 million at December 31, 2001. The net
          decrease in cash was primarily due to an increase in accounts
          receivable and costs and estimated earnings in excess of related
          billings on uncompleted contracts.

          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 milestones
          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 net revenue outstanding in accounts
          receivable, costs and estimated earnings in excess of related
          billings, customer advances, and billings in excess of related costs
          will fluctuate due to the timing and size of billings and cash
          receipts. At June 30, 2002, the net days revenue outstanding was 117
          days compared to 110 days at December 31, 2001. Compared to December
          31, 2001, accounts receivable increased $2.0 million to $4.1 million
          at June 30, 2002 primarily due to the timing of billings and progress
          payments for clinical trials.

          Compared to December 31, 2001, costs and estimated earnings in excess
          of related billings on uncompleted contracts increased $2.4 million to
          $9.7 million at June 30, 2002. The increase primarily represents
          timing differences between the costs incurred to run the trials and
          the billing milestones contained in the contracts with our sponsors.
          The balance at June 30, 2002 primarily consisted of 3 clinical trials,
          which individually constitute 37%, 23% and 14% 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 $2.3 million to $2.4 million as of June 30,
          2002 from $195 thousand as of December 31, 2001
                                       14

<PAGE>

          resulted from the timing of billings and revenue recognition on
          clinical trial contracts.

          We purchased $217 thousand of equipment during the six months ended
          June 30, 2002. We anticipate capital expenditures of approximately
          $300 - $500 thousand during the remainder of 2002, primarily for
          computer equipment and leasehold improvements.

          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 the pharmaceutical, biotechnology and medical device
          industries. We expect such activities to be funded from existing cash
          and cash equivalents, cash flow from operations and our line of
          credit. We maintain a demand line of credit with a bank in the amount
          of $2.5 million.

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

          Critical Accounting Policies and Estimates
          ------------------------------------------

          Management's Discussion and Analysis of Financial Condition and
          Operations discusses our consolidated financial statements which have
          been prepared in conformity with accounting principles generally
          accepted in the United States of America. The preparation of these
          financial statements requires management to make certain estimates,
          judgments and assumptions that affect the reported amounts of assets
          and liabilities at the date of the financial statements and the
          reported amounts of revenues and expenses during the periods
          presented. On an ongoing basis, management evaluates its judgments and
          estimates. Management bases its judgments and estimates on historical
          experience and on various other factors that are believed to be
          reasonable under the circumstances. Actual results may differ from
          these estimates under different assumptions or conditions. Management
          considers the following policies to be most critical in understanding
          the more complex judgments that are involved in preparing our
          consolidated financial statements and the uncertainties that could
          affect our results of operations and financial condition.

          The majority of the Company's revenues are based upon fixed-price
          contracts calculated on a percentage of completion basis based upon
          assumptions regarding the estimated total costs for each contract.
          Costs are incurred for each contract and compared to estimated total
          direct costs for each contract to determine a percentage of completion
          on the contract. The percentage of completion is multiplied by the
          total contract value to determine the amount of revenue recognized.
          Management reviews the estimated total direct costs on each contract
          to determine if estimated amounts are correct, and estimates are
          adjusted as needed. Historically, the majority of the Company's
          estimates have been materially accurate, but there can be no assurance
          that these estimates will continue to be accurate. As work progresses,
          original estimates might be changed due to changes in the scope of
          work. The Company attempts to negotiate contract amendments with the
          sponsor to cover these services provided outside the terms of the
          original contract. Historically, the Company has been successful in
          negotiating amendments in the majority of these instances. However,
                                          15

<PAGE>

          there can be no assurance that the sponsor will agree to the proposed
          amendments, and the Company ultimately bears the risk of cost
          overruns.

          There have been no material changes to the Company's critical
          accounting policies and estimates since December 31, 2001. For more
          detailed information on the Company's critical accounting policies and
          estimates, see our Annual Report on Form 10-KSB for the year ended
          December 31, 2001.














                                        16

<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

              The 2002 Annual Meeting of Stockholders of the
              Company was held on June 4, 2002. At the Annual
              Meeting, the following proposals were voted upon:

              a. The election of five directors for the ensuing
                 year. The following directors were elected to
                 office for the ensuing year and were approved by
                 the following votes:

                                                    For           Against
                                                    ---           -------
                 Kenneth M. Borow, M.D.           11,976,604       74,957
                 Earl M. Collier, Jr.             12,035,704       15,857
                 Thomas E. Hodapp                 12,015,604       35,957
                 Scott M. Jenkins                 12,035,704       15,857
                 Brian M. Dickson, M.D.           11,976,604       74,957

              b. A proposal to approve and adopt an Agreement and
                 Plan of Merger providing for the merger of the
                 Company into its wholly-owned subsidiary,
                 Covalent Group (Delaware), Inc., a Delaware
                 corporation, for the purpose of changing the
                 Company's state of incorporation from Nevada to
                 Delaware was approved by the following vote:

                    For        Against        Abstentions        Not Voted
                    ---        -------        -----------        ---------
                 6,489,701      24,673              2,227        6,093,768
                                       17

<PAGE>

          c.   A proposal to approve and adopt an amendment to the Company's
               Certificate of Incorporation to authorize 250,000 shares of
               preferred stock, which required the affirmative vote of the
               majority of the Company's outstanding shares, was defeated by the
               following vote:

                    For         Against        Abstentions          Not Voted
                    ---         -------        -----------          ---------
              4,887,038       1,591,131             38,432          6,093,768

          d.   A proposal to approve and adopt the Company's 2002 Equity
               Incentive Plan was approved by the following vote:

                    For         Against        Abstentions           Not Voted
                    ---         -------        -----------           ---------
              5,390,257       1,085,891             40,454           6,093,768

          e.   A proposal to ratify the selection of Deloitte & Touche LLP as
               the Company's independent public accountants for the year ending
               December 31, 2002 was approved by the following vote:

                    For         Against        Abstentions
                    ---         -------        -----------
             12,021,565          18,092             11,905


         ITEM 5.  Other Information

                  None.

         ITEM 6.  Exhibits and Reports on Form 8-K

           a.     Exhibits

         Exhibit
         -------

          10.1    Form of Indemnification Agreement between Covalent Group,
                  Inc., a Delaware corporation, and its officers and directors.

          99.1    Certification pursuant to 18 U.S.C.(S) 1350, as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

          99.2    Certification pursuant to 18 U.S.C.(S) 1350, as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

           b.     Reports on Form 8-K

                  Covalent filed a Current Report on Form 8-K dated July 2,
                  2002, reporting the Company's reincorporation in the state of
                  Delaware.
                                       18

<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:  August 13, 2002            By: /s/Kenneth M. Borow, M.D.
     -------------------------         ----------------------------------------
                                       Kenneth M. Borow, M.D.
                                       President and
                                       Chief Executive Officer


Dated:  August 13, 2002            By: /s/Jorge A. Leon
     -------------------------         ----------------------------------------
                                       Jorge A. Leon
                                       Executive Vice President and
                                       Chief Financial Officer









                                     19

<PAGE>

                                  EXHIBIT INDEX

Exhibit
-------

10.1     Form of Indemnification Agreement between Covalent Group, Inc., a
         Delaware corporation, and its officers and directors.

99.1     Certification pursuant to 18 U.S.C.(S) 1350, as adopted pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2     Certification pursuant to 18 U.S.C.(S) 1350, as adopted pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002.
                                       20