<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 ENDING SEPTEMBER 30,
1996.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO
_______________.
Commission File No.: 33-43537
COVALENT GROUP, INC.
(Name of Small Business Issuer as Specified 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, Suite 201,
Wayne, Pennsylvania 19087
(Address of principal executive offices)
Issuer's telephone number: 610-975-9533
FUTURE MEDICAL TECHNOLOGIES INTERNATIONAL, INC.
(Former Name of Company)
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. X Yes No
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practical date November 1, 1996:
Common Stock, Par Value $.001 11,602,909
- ----------------------------- ----------
(Class) Outstanding
Transitional Small Business Disclosure Format: Yes No XX
<PAGE>
FORM 10-QSB
COVALENT GROUP, INC.
<TABLE>
<CAPTION>
INDEX
Page(s)
<S> <C> <C>
PART I. Financial Information
Item 1. Consolidated Financial Statements
Balance Sheet - September 30, 1996 (Unaudited) 2 & 3
Statements of Operations (Unaudited) - Nine
Months Ended September 30, 1996 and 1995 4
Statements of Cash Flows (Unaudited) - Nine
Months Ended September 30, 1996 and 1995 5
Notes to Consolidated Financial Statements
(Unaudited) 6 - 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8 - 11
PART II. Other Information 12
Signature Page 13
/TABLE
<PAGE>
FORM 10-QSB PART I - FINANCIAL INFORMATION
COVALENT GROUP, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
<S> <S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,007,502
Accounts receivable 515,369
Prepaid expenses 35,837
Due from related party 30,000
Note receivable (Notes 1 & 2) 250,000
Costs and estimated earnings in excess
of related billings on uncompleted
contracts (Note 1) 1,325,635
---------
TOTAL CURRENT ASSETS 4,164,343
---------
PROPERTY AND EQUIPMENT
Equipment (Note 1) 552,533
Furniture and fixtures 98,827
Demonstration model 43,267
---------
694,627
Less accumulated depreciation ( 186,349)
---------
NET PROPERTY AND EQUIPMENT 508,278
---------
Security deposits 6,538
Other asset 2,135
---------
TOTAL ASSETS $ 4,681,294
=========
</TABLE>
See accompanying notes to financial statements.<PAGE>
FORM 10-QSB
COVALENT GROUP, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
<S> <S> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 601,779
Billings in excess of related costs and
estimated earnings on uncompleted
contracts (Note 1) 679,500
---------
TOTAL LIABILITIES 1,281,279
---------
SHAREHOLDERS' EQUITY
Common stock, $.001 par value,
authorized 25,000,000 shares,
issued and outstanding 11,542,715
shares 11,543
Additional paid in capital 9,059,126
Deficit (5,670,654)
---------
TOTAL SHAREHOLDERS' EQUITY 3,400,015
---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 4,681,294
---------
</TABLE>
See accompanying notes to financial statements.<PAGE>
FORM 10-QSB
COVALENT GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
REVENUES (Note 1) $ 2,686,690 $ 365,540 $ 6,622,841 $ 1,511,571
---------- ---------- ---------- ----------
COST AND EXPENSES
Cost of revenue 1,624,324 125,269 3,796,824 610,334
Selling, general and
administrative 556,665 487,614 1,505,445 1,373,127
Research and development 291,123 590,080
---------- ---------- ---------- ----------
TOTAL COST AND EXPENSES 2,472,112 612,883 5,892,349 1,983,461
---------- ---------- ---------- ----------
INCOME (LOSS) FROM
OPERATIONS 214,578 ( 247,343) 730,492 (
471,890)
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE)
Interest and
miscellaneous income 30,632 105,898 64,732 298,224
Interest and
miscellaneous expense ( 1,201) ( 2,197)
---------- ---------- ----------- ---------
TOTAL OTHER INCOME
(EXPENSE) 29,431 105,898 62,535 298,224
---------- ---------- ---------- ---------
INCOME (LOSS) FROM
CONTINUING OPERATIONS 244,009 ( 141,445) 793,027 ( 173,666)
DISCONTINUED
OPERATIONS (Note 2)
Loss from operations of
discontinued
subsidiary (Note 2) ( 36,201) ( 157,176)
Loss on disposal of
subsidiary (Note 2) ( 301,660) ( 301,660)
---------- --------- ---------- ---------
NET INCOME (LOSS) $( 93,852)$( 141,445) $ 334,191 $( 173,666)
========== ========= ========== =========
NET INCOME (LOSS)
PER SHARE $( .01)$( .01) $ .03 $( .02)
========== ========== ========== =========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 11,542,362 10,234,490 11,143,909 8,187,801
========== ========== ========== =========
</TABLE>
See accompanying notes to financial statements.<PAGE>
FORM 10-QSB
COVALENT GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) for the period $ 334,191 $( 173,666)
ADJUSTMENTS TO RECONCILE NET INCOME
(LOSS) TO NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES
Depreciation and amortization 123,203 94,739
Loss on disposition of subsidiary 301,660
CHANGES IN OPERATING ASSETS
AND LIABILITIES
Increase in receivables ( 423,205) ( 155,774)
Increase in inventories ( 60,966) ( 209,150)
Decrease (increase) in prepaid expenses 5,086 ( 5,977)
Increase in costs and estimated earnings
in excess of related billings on
uncompleted contracts (1,325,635)
Decrease (increase) in other assets 506 ( 18,941)
Increase (decrease) in accounts payable
and accrued expenses 506,102 ( 252,360)
Increase in billings in excess of related
costs and estimated earnings on
uncompleted contracts 679,500 161,082
--------- ---------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 140,442 ( 560,047)
--------- ---------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of property and equipment ( 265,844) ( 430,341)
Net change in assets of discontinued
operations ( 40,555)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES ( 306,399) ( 430,341)
--------- ---------
Cash Flows From Financing Activities
Decrease in loans from officer ( 26,349)
Reduction of debt ( 5,000) (341,185)
Proceeds from issuances of common stock 1,872,624 1,944,136
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,867,624 1,576,602
--------- ---------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 1,701,667 586,214
BEGINNING CASH AND CASH EQUIVALENTS 305,835 18,373
--------- ---------
ENDING CASH AND CASH EQUIVALENTS $ 2,007,502 $ 604,587
========= =========
</TABLE>
Supplemental Disclosure (Note 2)
See accompanying notes to financial statements.
<PAGE>
FORM 10-QSB
COVALENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Organization
Future Medical Technologies, Inc. ("FMT") was incorporated under
the laws of the State of New Jersey on September 28, 1989.
On January 26, 1990, West End Ventures, Inc. (West End),
acquired 100% of the stock of FMT. West End was organized under the
laws of the State of Nevada on August 1, 1989. West End completed
a blind pool public offering of common stock on January 15, 1990.
The intent upon completion of the offering was to seek potential
businesses with which to merge or acquire. Pursuant to the
acquisition agreement, West End amended its Certificate of
Incorporation to change its name to Future Medical Technologies
International, Inc. (FMTI) and the subsidiary (FMT) retained its
name. West End's officers and directors resigned in favor of the
officers and directors of FMT.
In 1994, FMTI effected a one for five reverse stock split.
On February 22, 1995, FMTI effected a five for seven reverse
stock split and completed the acquisition of 100% of the stock of
Covalent Research Alliance Corporation, (CRA) a Pennsylvania
corporation, in exchange for 7,200,000 shares of post split common
stock of FMTI. CRA is a total research management organization
whose strength is in the design and management of clinical trials
in the drug and device development process and with associated
cost containment and quality of care components.
On September 20, 1996 FMTI ratified the disposition of all stock of
FMT. As provided in the ratification, the effective date of the
transaction was July 31, 1996. At the same time, shareholders
approved the change of the Company's name to Covalent Group, Inc.
(the "Company").
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and all of its wholly owned subsidiaries.
Intercompany transactions and balances have been eliminated in
consolidation.
Cash Equivalents
Cash equivalents include investments with maturities of three months
or less.
Inventories
Inventories are recorded at the lower of cost (first-in/first-out)
or market.
<PAGE>
Property and Equipment
Property and equipment are recorded at cost. Depreciation is
provided using a combination of straight-line and accelerated
methods over the useful lives of the assets, which range from two
to seven years.
Revenue Recognition
The Company recognizes revenue using the accrual method of
accounting whereby it records revenue at the time a sale has been
made and the product shipped or services performed. In addition,
long term contract revenues are recognized under the
percentage-of-completion method based on the ratio of costs
incurred to date on the contract to total estimated contract costs
after providing for all known or anticipated losses. Costs
include direct and subcontract labor and applicable overhead
expenses. Cost estimates are reviewed periodically as the work
progresses and adjustments to revenue are reflected in the period
in which revisions to such estimates are deemed appropriate. All
anticipated losses are recognized immediately. Costs and
estimated earnings in excess of billings on uncompleted contracts,
as reflected in the balance sheet, comprise amounts of revenue
recognized on contracts for which billings have not been rendered.
Billings in excess of costs and estimated earnings on uncompleted
contracts comprise amounts of billings recognized on contracts
for which costs have not been incurred.
Basis of Presentation
The financial statements for the three months and nine months ended
September 30, 1996 have been prepared without audit and, in
the opinion of management, reflect all adjustments necessary
(consisting only of normal recurring adjustments) to present
fairly the Company's financial position at September 30, 1996
and the results of its operations and its cash flows for the
interim and cumulative 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
the Company's annual report on Form 10-KSB for the year ended
December 31, 1995.
Operating results for the three months and nine months ended
September 30, 1996 are not necessarily indicative of the results
for the year ending December 31, 1996.
2. SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITY
On September 20, 1996, the Company disposed of all the stock of FMT
for $250,000, payable over five years with interest at 7% per annum.
As provided in the ratification, the effective date of the
transaction was July 31, 1996. The assets and liabilities of FMT
have been removed from the Company's September 30, 1996 consolidated
balance sheet and a corresponding receivable has been recorded. The
September 30, 1996 consolidated statement of operations includes the
results of FMT for the seven months ended July 31, 1996.
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
The information set forth and discussed below for the three months and
nine months ended September 30, 1996 is derived from the Consolidated
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 accruals) necessary for a fair presentation of such
information. The Company's results of operations for a particular
quarter may not be indicative of results expected during the other
quarters or for the entire year.
GENERAL
CRA is a research management organization that designs, coordinates and
monitors clinical trials in drug development for some of the world's
leading pharmaceutical firms. In addition, using advanced technologies,
the Company works extensively in managed care, medical outcomes research
and health management programs that focus on compliance and
provider/patient behavior modification. Revenue is derived principally
from the identification, placement, monitoring and management of
clinical development studies in the traditional pharmaceutical, as well
as managed care environment.
The Company's quarterly results can fluctuate as a result of a number of
factors, including the Company's 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 the
Company's 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.
Revenue and related cost of revenue are recognized as specific contract
terms are fulfilled under the percentage of completion method.
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 the Company
participates could have a materially adverse effect on the Company's
backlog, future revenue and profitability.
The Company's backlog consists of anticipated revenue from letters of
intent in excess of $11,000,000 and work remaining on signed contracts.
In certain cases, the Company will begin work on a project after
receiving a letter of intent and prior to executing a contract. The
Company believes that its backlog as of any date is not necessarily a
meaningful predictor of future results.
SALE OF BUSINESS
The Board of Directors concluded that the Company's subsidiary FMT would
require substantial funding of research and development in order to
fully develop its business. The Board decided that additional funding
was not in the best strategic interest of the Company. On July 26,
1996, an agreement was reached, and subsequently ratified by the
Company's shareholders on September 20, 1996, to sell all of the stock
of FMT for $250,000. As additional consideration, the agreement
provides for a licensing fee ranging from 5% to 2.5% payable to the
Company on the revenue of certain FMT products over the next five years.
The financial impact of this transaction resulted in a one time
nonrecurring loss of $301,660 which was charged to earnings in the third
quarter ended September 30, 1996.
In addition, Joseph Hippensteel and Dianne Van Leeuween, officers of FMT
agreed to donate back to the Company 285,000 and 190,000 stock options
(expiring March 22, 2000 at the exercise price of $2.875 per share),
respectively.<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH THREE MONTHS ENDED
September 30, 1995
Revenue for the three months ended September 30, 1996 increased 635% to
$2,686,690 as compared to $365,540 in the three month period ended
September 30, 1995 due to the increase in the number and size of
clinical development studies.
Cost of revenue includes compensation and other expenses directly
related to conducting clinical studies. These costs increased by
$1,499,055 or 1,197% from $125,269 to $1,624,324 for the three months
ended September 30, 1995 and 1996, respectively. As a percentage of
revenue, the cost of revenue increased from 34% during the three months
ended September 30, 1995 to 60% during the three months ended September
30, 1996. The increase in relative percent of costs to revenue is due
to growth in the number, size and complexity of clinical studies.
Selling, general and administrative expenses include all administrative
personnel and business development, and all other expenses not directly
chargeable to a specific contract. Selling, general and administrative
costs for the three month period ended September 30, 1996 increased 14%
to $556,665 as compared to $487,614 during the three months ended
September 30, 1995. As a percentage of revenue, selling, general and
administrative expenses decreased from 133% to 21% for the three months
ended September 30, 1995 and 1996, respectively. The decrease in
selling, general and administrative expenses as a percentage of revenue
reflects decrease fixed costs resulting from the change of the Company's
services and personnel required to deliver these services.
Research and development expense of $291,123 for the three month period
ended September 30, 1996 relates to the development of voice recognition
software.
Depreciation and amortization expense decreased from $33,537 in the
three month period ended September 30, 1995 to $32,573 during the three
months ended September 30, 1996. The decrease is attributed to the
disposition of FMT on July 31, 1996.
Other income decreased $76,467 from $105,898 in the three month period
ended September 30, 1995 to $29,431 in the three month period ended
September 30, 1996.
As a result of the Company's net operating loss carry forward which is
in excess of $900,000 for federal income tax purposes, the Company does
not anticipate a federal tax liability for 1996. Accordingly, the tax
rate is not reflected in the Company's Consolidated Statement of
Operations for the three months ended September 30, 1996.
<PAGE>
Net loss from discontinued operations for the three months ended
September 30, 1996 amounted to $36,201 and pertains to the sale of FMT.
The sales price for FMT was $250,000. The terms require a $25,000 down
payment and the balance is payable over the next five years with
interest at the rate of 7% per annum. As a result of the sale, the
Company incurred a loss of $301,660.
Net loss incurred by the Company for the three months ended September
30, 1996 was $93,852, consisting of net income of CRA of $244,009, net
loss of discontinued FMT operations of $36,201 and the $301,660 loss on
the sale of FMT. The net loss realized in the three months ended
September 30, 1995 was $141,445. The increase in income was due to the
factors described above.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1995
Revenue for the nine months ended September 30, 1996 increased 338% to
$6,622,841 as compared to $1,511,571 in the nine month period ended
September 30, 1995 due to the increase in the number and size of
clinical development studies.
Cost of revenue increased by $3,186,490 or 522% from $610,334 to
$3,796,824 for the nine months ended September 30, 1995 and 1996,
respectively. As a percentage of revenue, the cost of revenue increased
from 40% during the nine months ended September 30, 1995 to 57% during
the nine months ended September 30, 1996. The increase in relative
percent of cost to revenue is due to growth in the number, size and
complexity of clinical studies.
Selling, general and administrative expenses for the nine month period
ended September 30, 1996 increased 10% to $1,505,445 as compared to
$1,373,127 during the nine months ended September 30, 1995. As a
percentage of revenue, selling, general and administrative expenses
decreased from 91% to 23% for the nine months ended September 30, 1995
and 1996, respectively. The decrease in selling, general and
administrative expenses as a percentage of revenue reflects the growth
of the Company's services.
Research and development expense of $590,080 for the nine month period
ended September 30, 1996 relates to the development of voice recognition
software.
Depreciation and amortization expense increased from $94,739 in the nine
month period ended September 30, 1995 to $103,040 during the nine months
ended September 30, 1996. The increase is attributed to fixed asset
purchases during 1996.
Other income decreased $235,689 from $298,224 in the nine month period
ended September 30, 1995 to $62,535 in the nine month period ended
September 30, 1996.
As a result of the Company's net operating loss carryforward which is in
excess of $900,000 for federal income tax purposes, the Company does not
anticipate a federal tax liability for 1996. Accordingly, the tax rate
is not reflected in the Company's Condensed Consolidated Statement of
Operations for the nine months ended September 30, 1996.
<PAGE>
Net loss from discontinued operations for the nine months ended
September 30, 1996 amounted to $157,176 and pertains to the sale of FMT.
The sales price for FMT was $250,000. The terms require a $25,000 down
payment and the balance is payable over the next five years with
interest at the rate of 7% per annum. As a result of the sale, the
Company incurred a loss of $301,660.
Net income realized by the company for the nine months ended September
30, 1996 was $334,191, consisting of net income of CRA of $793,027, net
loss of discontinued FMT operations of $157,176 and the $301,660 loss on
the sale of FMT. The net loss realized in the nine months ended
September 30, 1995 was $173,666. The increase in income was due to the
factor described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's 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).
The Company typically receives a low volume of large-dollar receipts.
As a result, the number of days outstanding in accounts receivable will
fluctuate due to the timing and size of cash receipts. Accounts
receivable (net of allowance for doubtful accounts) was $515,369 at
September 30, 1996 and $161,232 at December 31, 1995. On a pro forma
basis, after giving effect to the FMT divestiture, accounts receivable
(net of allowance for doubtful accounts) would have been $124,736 at
December 31, 1995. The number of days outstanding in accounts
receivable was 21 days at September 30, 1996 and 33 days at December 31,
1995 (26 days on a pro forma basis).
Cash and cash equivalents increased $1,701,667 provided by operating and
financing activities respectively, offset by $306,399 used in investing
activities. Investing activities included $265,844 used to purchase
property and equipment.
The Company's principal cash needs on both a short and long-term basis
are for the funding of its operations, and capital expenditure
requirements. The Company expects to continue expanding its operations
through internal growth, expansion of existing list of services as well
as developing new service products for clinical research and the
healthcare industry. The Company expects such activities will be funded
from existing cash and cash equivalents and cash flow from operations.
<PAGE>
COVALENT GROUP, INC. AND SUBSIDIARIES
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.
On September 20, 1996, the Annual Meeting of Shareholders
for Fiscal Year 1995 was held to vote on the following matters:
(1) To elect three Directors (Bruce LaMont, William K.
Robinson and John Whittle) for the ensuing year;
Votes in Favor: 8,535,205; Against: 71; Abstain: 0
(2) To approve the selection of Baratz & Associates, P.A., as
the Company's independent public accountants for the
fiscal year ending December 31, 1996;
Votes in Favor: 8,504,812; Against: 99; Abstain: 30,432
(3) Proposal to approve the 1996 Stock Option Plan
(2,000,000 shares).
Votes in Favor: 7,949,230; Against: 348; Abstain: 730
(4) Approve the name change of the Company to Covalent Group,
Inc.
Votes in Favor: 7,949,658; Against: 174; Abstain: 297
(5) Approve the disposition of 100% of the stock of Future
Medical Technologies, Inc. in a sale to Medical
Technologies, Inc.
Votes in Favor: 7,929,221; Against: 99; Abstain: 269
The number of shares which were eligible for voting as of
August 20, 1996 was 11,543,403. The number of shares that actually
voted was 8,534,533. Therefore all propositions passed.
ITEM 5. Other Information
On July 24, 1996, the Registrant entered into a Letter of
Intent/Agreement with Medical Technologies, Inc. ("MTI") for the
disposition of FMT because the Company's Future Medical Technologies,
Inc. ("FMT") subsidiary required substantial funds for research and
development from investment in order to fully develop its business. On
August 20, 1996, the transaction was finalized, subject to shareholder
approval. The Board of Directors of the Company decided that because of
its limited cash resources, that the Company would be better served to
spend its resources on its other divisions. Accordingly, the Company
sold its 100% interest in FMT in order to avoid having to put further
investment funds in FMT and to stop the substantial reduction of
earnings in the consolidated financials that was adversely affecting the
Registrant ($110,000 FMT loss in second quarter, 1996 alone). The
<PAGE>
transaction was approved by the shareholders with a vote in favor of
7,929,221 shares, 99 shares against and 269 shares abstaining.
The above summary of information does not purport to be complete and
is qualified in its entirety by reference to the Letter of
Intent/Agreement attached as Exhibit 1 to Form 8-K for earliest event
reported July 26, 1996.
ITEM 6. Exhibits and Reports on Form 8-K
Exhibits
None.
Reports on Form 8-K
The Registrant filed a Form 8-K for earliest event
reported July 26, 1996 pertaining to the disposition of the Company's
Future Medical Technologies, Inc. subsidiary whereby it disposed of 100%
of that stock of that subsidiary. That Form 8-K and Exhibit is
incorporated with reference hereto.
<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: November 7, 1996 By: /s/Bruce LaMont
Bruce LaMont, President
and Chief Executive Officer
Dated: November 7, 1996 By: /s/William Robinson
William Robinson
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary information
extracted from the Consolidated Statements of
Operations and Consolidated Balance Sheets of
Covalent Group, Inc. and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000856569
<NAME> Covalent Group, Inc.
<MULTIPLIER> 1
<S> <C>
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Sep-30-1996
<PERIOD-TYPE> 9-MOS
<CASH> 2,007,502
<SECURITIES> 0
<RECEIVABLES> 795,369
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,164,343
<PP&E> 694,627
<DEPRECIATION> (186,349)
<TOTAL-ASSETS> 4,681,294
<CURRENT-LIABILITIES> 1,281,279
<BONDS> 0
0
0
<COMMON> 11,543
<OTHER-SE> 3,388,472
<TOTAL-LIABILITY-AND-EQUITY> 4,681,294
<SALES> 6,622,841
<TOTAL-REVENUES> 6,622,841
<CGS> 3,796,824
<TOTAL-COSTS> 5,892,349
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,197
<INCOME-TAX> 0
<INCOME-CONTINUING> 793,027
<DISCONTINUED> (458,836)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 334,191
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
