<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, 1999.
-------------
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 June 30, 1999.
Common Stock, Par Value $.001 12,058,693
- ----------------------------- ----------
(Class) Outstanding
Transitional Small Business Disclosure Format (check one): Yes ___ No X
---
1
<PAGE>
FORM 10-QSB
COVALENT GROUP, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. Financial Information
Item 1. Financial Statements
Balance Sheet - June 30, 1999 (Unaudited) 3
Statements of Operations - Six and Three Months Ended
June 30, 1999 and 1998 (Unaudited) 5
Statements of Cash Flows - Six Months
Ended June 30, 1999 and 1998 (Unaudited) 6
Notes to Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. Other Information 14
Signature Page 15
</TABLE>
2
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
Covalent Group, Inc.
Balance Sheet
June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C>
Current Assets
Cash and cash equivalents $ 3,045,704
Restricted cash 668,787
Accounts receivable 1,870,784
Prepaid expenses and other 218,653
Costs and estimated earnings in excess of
related billings on uncompleted contracts 767,957
-----------
Total Current Assets 6,571,885
-----------
Property and Equipment
Equipment 1,599,724
Furniture and fixtures 265,580
Leasehold improvements 117,673
-----------
1,982,977
Less - Accumulated depreciation ( 740,281)
-----------
Net Property and Equipment 1,242,696
-----------
Deferred Income Taxes 139,239
-----------
Other Assets 60,290
-----------
Total Assets $ 8,014,110
===========
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
Covalent Group, Inc.
Balance Sheet
June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
<S> <C>
Current Liabilities
Accounts payable $ 2,078,867
Accrued expenses 131,037
Billings in excess of related costs and
estimated earnings on uncompleted contracts 509,819
Customer advances 1,259,079
-----------
Total Current Liabilities 3,978,802
-----------
Stockholders' Equity
Common stock, $.001 par value,
25,000,000 shares authorized,
12,071,193 shares issued 12,071
Additional paid-in-capital 9,384,135
Accumulated deficit (5,301,207)
Unrealized loss on investment (9,375)
-----------
4,085,624
Less:
Treasury stock at cost, 12,500 shares (50,316)
-----------
Total Stockholders' Equity 4,035,308
-----------
Total Liabilities and Stockholders' Equity $ 8,014,110
===========
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
Covalent Group, Inc.
Statements Of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 4,197,470 $ 2,543,213 $ 7,462,446 $ 4,782,820
Operating Expenses
Direct 2,596,232 1,637,901 4,488,735 3,492,127
Selling, general and administrative 953,839 931,928 1,793,329 1,749,650
----------- ----------- ----------- -----------
Total Operating Expenses 3,550,071 2,569,829 6,282,064 5,241,777
----------- ----------- ----------- -----------
Income (Loss) from Operations 647,399 (26,616) 1,180,382 (458,957)
Interest Income 33,642 27,504 47,959 57,465
----------- ----------- ----------- -----------
Income (Loss) before Income Taxes 681,041 888 1,228,341 (401,492)
Income Tax (Benefit) Provision 251,982 (1,471) 454,487 (135,223)
----------- ----------- ----------- -----------
Net Income (Loss) $ 429,059 $ 2,359 $ 773,854 $ (266,269)
=========== =========== =========== ===========
Net Income (Loss) per Common Share
Net Income (Loss) - Basic $ .04 $ - $ .06 $ (.02)
Net Income (Loss) - Diluted $ .03 $ - $ .06 $ (.02)
Weighted Average Common and Common
Equivalent Shares Outstanding
Basic 12,058,693 11,743,209 12,058,693 11,743,209
Diluted 12,435,498 12,069,036 12,474,737 11,743,209
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
Covalent Group, Inc.
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------
1999 1998
---------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ 773,854 $ (266,269)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities
Amortization and depreciation 140,278 110,610
(Increase) decrease deferred income taxes 336,000 (136,522)
Changes in assets and liabilities
(Increase) decrease in -
Accounts receivable 663,499 709,795
Restricted cash 331,213 -
Prepaid expenses and other 77,036 (65,510)
Costs and estimated earnings in excess
of related billings on uncompleted contracts (164,731) (438,168)
Other assets (10,500) (16,239)
Increase (decrease) in -
Accounts payable 1,016,303 (131,839)
Accrued expenses (164,415) (7,165)
Customer advances 259,079 -
Billings in excess of related costs and
estimated earnings on uncompleted contracts (780,151) (326,098)
---------- ----------
Net Cash Provided By (Used In) Operating Activities 2,477,465 (567,405)
---------- ----------
Investing Activities:
Purchases of property and equipment (640,717) (26,564)
---------- ----------
Net Cash Used In Investing Activities (640,717) (26,564)
---------- ----------
Net Increase (Decrease) In Cash and Cash Equivalents 1,836,748 (593,969)
Cash and Cash Equivalents, Beginning of Period 1,208,956 1,794,530
---------- ----------
Cash and Cash Equivalents, End of Period $3,045,704 $1,200,561
========== ==========
</TABLE>
See accompanying notes to financial statements
6
<PAGE>
FORM 10-QSB
Covalent Group, Inc.
Notes To Financial Statements
(Unaudited)
1. DESCRIPTION OF BUSINESS
-----------------------
Covalent Group, Inc. (the "Company"), is a contractual research
organization, providing clinical research and development services to
pharmaceutical, biotechnology, medical services and managed care
organizations. The Company initiates, designs and monitors clinical trials,
manages and analyzes clinical data and offers other related services and
products.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles 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.
Merger
------
Effective April 30, 1999, the Company's only subsidiary, Covalent Research
Alliance Corporation, was merged into its parent company, Covalent Group,
Inc. The purpose of the merger was to simplify administrative activities
between the two entities.
Basis of Presentation
---------------------
The financial statements for the six and three months ended June 30, 1999
and 1998 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 June 30, 1999 and the results of its operations and its 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 the
Company's annual report on Form 10-KSB, for the year ended December 31,
1998.
Operating results for the six months ended June 30, 1999 may not
necessarily be indicative of the results for the year ending December 31,
1999.
7
<PAGE>
Revenue Recognition
-------------------
Fixed price contract revenue is recognized based on the status of the work
completed under the contract as of a given time using the percentage of
completion method. Revenue from other contracts is recognized as services
are provided. Revenue related to contract modifications is recognized when
realization is assured and the amounts are reasonably determinable.
Adjustments to contract cost estimates are made in the periods in which the
facts which require the revisions become known. When the revised estimate
indicates a loss, such loss is provided for currently in its entirety.
Costs and estimated earnings in excess of related billings on uncompleted
contracts represent revenue recognized in excess of amounts billed.
Billings in excess of related costs and estimated earnings on uncompleted
contracts represent amounts billed in excess of revenue recognized.
Restricted Cash
---------------
The Company received an advance payment from one of its 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 June 30, 1999, this
restricted cash amount was $668,787 and this amount is also included in
customer advances.
Reclassifications
-----------------
Certain prior year balances have been reclassified to conform to the
current year presentation.
Net Income (Loss) Per Common and Common Equivalent Share
--------------------------------------------------------
Basic net income (loss) per common share was computed by dividing net
income (loss) by the weighted average number of shares of common stock
outstanding during the period. Diluted net income per common share for the
six and three months ended June 30, 1999 reflects the potential dilution
from the exercise of outstanding stock options and warrants into common
stock. Inclusion of shares of common stock potentially issuable upon the
exercise of stock options and warrants in calculating diluted net loss per
common share for the six months ended June 30, 1998, would have been anti-
dilutive, and therefore such shares were not included in the calculation.
The net income (loss) and weighted average common and common equivalent
shares outstanding for purposes of calculating net income (loss) per common
share are computed as follows:
8
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- ---------
1999 1998 1999 1998
--------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
Net income (loss) used for basic
and diluted net income (loss)
per common share $ 429,059 $ 2,359 $ 773,854 $ (266,269)
Weighted average common shares
outstanding used for basic net income
(loss) per common share 12,058,693 11,743,209 12,058,693 11,743,209
Dilutive effect of common stock
options and warrants outstanding 376,805 325,827 416,044 -
--------------- ---------------- --------------- -----------------
Weighted average common and
common equivalent shares outstanding
used for diluted net income (loss)
per common share 12,435,498 12,069,036 12,474,737 11,743,209
=============== ================ =============== =================
</TABLE>
Comprehensive Income (Loss)
---------------------------
A reconciliation of comprehensive income (loss) 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,
-------- ---------
1999 1998 1999 1998
--------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
Net Income (Loss) $ 429,059 $ 2,359 $ 773,854 $ (266,269)
Unrealized Loss on Investment (9,375) (242,547) (9,375) (351,218)
--------------- ---------------- --------------- -----------------
Comprehensive Income (Loss) $ 419,684 $ (240,188) $ 764,479 $ (617,487)
=============== ================ =============== =================
</TABLE>
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 the Company's future operating results and
financial position. Such statements are subject to risks and uncertainties that
could cause the Company's actual results and financial position to differ
materially. Such factors include, among others: (i) the Company's 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 the Company competes; (v) the
Company's ability to obtain financing on satisfactory terms; (vi) the
sensitivity of the Company's business to general economic conditions; and (vii)
other economic, competitive, governmental and technological factors affecting
the Company's operations, markets, products, services and prices. The Company
undertakes 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.
9
<PAGE>
The information set forth and discussed below for the six and three months ended
June 30, 1999 and 1998 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 operations of the Company for a particular
quarter may not be indicative of results expected during the other quarters or
for the entire year.
General
- -------
The Company, 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, which consists of anticipated revenues from signed
contracts, is $26 million at June 30, 1999. The Company believes that its
backlog as of any date is not necessarily a meaningful predictor of future
results.
Three Months Ended June 30, 1999 Compared To Three Months Ended June 30, 1998
- -----------------------------------------------------------------------------
Revenues for the three months ended June 30, 1999 increased 65% to $4,197,000 as
compared to $2,543,000 for the three month period ended June 30, 1998. The
increase of $1,654,000 results from the larger scale and dollar value of the
individual clinical studies being conducted 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 increased by $958,000 from
$1,638,000 to $2,596,000 for the three months
10
<PAGE>
ended June 30, 1998 and 1999, respectively. The increase in expenses results
principally from the cost of additional personnel and related expenses
associated with conducting larger scale clinical studies. Direct expenses as a
percentage of revenues were 62% for the three months ended June 30, 1999 as
compared to 64% for the same period last year. The decrease in relative percent
is due to the different cost structures of the studies and are based on
different types of services requested by the Company's clients.
Selling, general and administrative expenses include 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, 1999 amounted to $954,000 or 23% of revenues, as
compared to $932,000 or 37% of revenues for the same period last year. The
change in absolute amounts is de minimis while the decrease in percentage of
revenues of 14 percentage points is attributable to a larger revenue base.
Interest income increased $6,000 from $28,000 for the three months ended June
30, 1998 to $34,000 for the three months ended June 30, 1999.
The income tax provision for the three months ended June 30, 1999 amounted to
$252,000 or an effective tax rate of 37%.
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
- -------------------------------------------------------------------------
Revenues for the six months ended June 30, 1999 increased 56% to $7,462,000 as
compared to $4,783,000 for the six months ended June 30, 1998. The increase of
$2,679,000 results from the larger scale and dollar value of the individual
clinical studies being conducted in the most recent period as compared to the
same period last year.
Direct expenses include compensation and other expenses directly related to
conducting clinical studies. These expenses increased by $997,000 from
$3,492,000 to $4,489,000 for the six months ended June 30, 1998 and 1999
respectively. The increase in expenses results principally from the cost of
additional personnel and related expenses associated with conducting larger
scale clinical studies. Direct expenses as a percentage of revenues were 60% for
the six months ended June 30, 1999 as compared to 73% for the same period last
year. The decrease in relative percent is due to the different cost structures
of the studies and are based on different types of services requested by the
Company's clients.
Selling, general and administrative expenses include all administrative and
business development personnel, and all other support expenses not related to
specific contracts. Also included are expenses associated with the development
of an interactive voice recognition ("IVR") system, the platform development of
which was essentially completed in 1998. Selling, general and administrative
expenses for the six months ended June 30, 1999 amounted to $1,793,000 as
compared to $1,749,000 for the same period last year. Included in this category
for the six months ended June 30, 1998 and 1999 are IVR development and systems
maintenance expenses of $218,000 and $7,000, respectively. The increase in the
level of expenses, excluding IVR related expenses for both periods, is due to
costs associated with building the necessary support infrastructure for the
overall business, including human resources, marketing and business development
personnel. As a percentage of revenues, selling, general and administrative
expenses
11
<PAGE>
decreased from 37% to 24% for the six months ended June 30, 1998 and 1999,
respectively. The decrease in expenses as a percentage of revenues results from
the increase in clinical study revenues.
Interest income decreased $9,000 from $57,000 for the six months ended June 30,
1998 to $48,000 for the three months ended June 30, 1999.
The effective income tax rate for the six months ended June 30, 1999 was 37% as
compared to 34% for the six months ended June 30, 1998. The change in the
effective income tax rate is primarily due to the impact of certain non-tax
deductible expenses.
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. Compared
to December 31, 1998, accounts receivable decreased $663,000 to $1,871,000 at
June 30, 1999 primarily due to the timing of progress payments for clinical
trials. Costs and estimated earnings in excess of related billings on
uncompleted contracts increased $165,000 to $768,000 at June 30, 1999. This
increase was attributable to five clinical trials, for which revenues have been
recognized in excess of progress billings made to date on those contracts.
The Company's cash and cash equivalents balance at June 30, 1999 was $3,046,000
as compared to $1,209,000 at December 31, 1998. The increase in cash was
primarily due to operating results for the six months ended June 30, 1999
including the above mentioned decrease in accounts receivable and increase in
costs and estimated earnings in excess of related billings on uncompleted
contracts.
The Company purchased $641,000 of equipment in 1999. The Company anticipates the
need for capital expenditures during the remainder of 1999 for computer
equipment of $110,000.
The Company has a line of credit with a commercial bank providing a maximum
credit facility of $1 million 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 the assets of the Company. No borrowings
were outstanding under the credit line at June 30, 1999.
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 its existing services, and the development of new service products for
clinical research and the healthcare industry. The Company expects such
activities to be funded from existing cash and cash equivalents and cash flow
from operations.
Management believes that the Company's operations and financial results are not
materially affected by inflation.
FORM 10-QSB
12
<PAGE>
Year 2000 Compliance
- --------------------
The Company is taking the required steps to make its existing systems Year 2000
ready at a total estimated cost of $50,000, $40,000 of which has already been
incurred through June 30, 1999 and $10,000 of which is expected to be incurred
by September 1999. The Company believes it is on schedule to complete its
remediation efforts by September 1999. If such efforts are not completed timely,
the Year 2000 issue could have a material impact on the operations of the
Company.
The Company's efforts are focused on Year 2000 compliance in the following four
principal areas:
1. Application software, including operating systems and applications for
network servers, midranges and PCs;
2. Network and communication software, including business offices, home
offices and field locations;
3. Computer equipment, including network servers, midranges and PCs; and
4. Telecommunications equipment, including telephone and voice mail.
These activities are intended to encompass all major categories of systems in
use by the Company, including sales, research and trial conduct and operations
and human resources.
In addition to making its own systems Year 2000 ready, the Company's Year 2000
team has and will continue to survey its key suppliers and customers to
determine the extent to which the systems of such suppliers and customers are
Year 2000 compliant and the extent to which the Company could be affected by the
failure of such third parties to be Year 2000 compliant. The Company cannot
presently estimate the impact of the failure of such third parties to be Year
2000 compliant.
The general phases of the Year 2000 Project are: (1) Year 2000 methodology
training for key IT personnel, (2) inventorying Year 2000 items, internally and
externally; (3) assigning priorities to identified items; (4) assessing the Year
2000 compliance of items determined to be material to the Company; (5)
remediating or replacing material items that are determined not to be Year 2000
compliant; (6) testing material items; and (7) designing and implementing
contingency plans to the extent deemed necessary. The Company has completes
phases (1), (2), (3), and (4) and is presently conducting phases (5), (6) and
(7). Assessment and testing is ongoing as hardware or system software is
remediated, upgraded or replaced. In anticipation of its being Year 2000
compliant by September 1999, the Company has not yet designed contingency plans
in the case that it is not Year 2000 compliant by the turn of the century. The
Company will keep a view to its Year 2000 compliance progress and adjust the
implementation of the phases and the necessity of contingency planning as it
deems appropriate.
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations such as the Company's ability to properly conduct a particular trial
or otherwise provide necessary service to its customers. Such failures could
materially and adversely affect the Company's results of operations, liquidity
and financial condition. Due to the general uncertainty inherent in the Year
2000 problem, resulting in part from the uncertainty of the Year 2000 readiness
of third-party supplies and customers, the Company is
13
<PAGE>
unable to determine at this time whether the consequences of Year 2000 failures
will have a material impact on the Company's results of operations, liquidity or
financial condition. The Year 2000 assessment being conducted by the Company is
expected to significantly reduce the Company's level of uncertainty about the
Year 2000 problem and, in particular, about the Year 2000 compliance and
readiness of its material suppliers and customers.
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
On June 17, 1999, the Company held its Annual Meeting of
Stockholders during which the stockholders:
(1) Elected five nominees to serve as directors with terms
continuing until the next Annual Meeting of Stockholders in
2000. The votes cast were as follows:
<TABLE>
<CAPTION>
For Withheld
---------- --------
<S> <C> <C>
Kenneth M. Borow, M.D. 11,555,381 5,537
Bruce LaMont 11,555,381 5,537
William Robinson 11,555,381 5,537
Ivan Rubin 11,555,381 5,537
John Whittle 11,555,381 5,537
</TABLE>
(2) Ratified the appointment of the firm of Arthur Andersen LLP
as independent auditors to examine the accounts of the
Company for the year ending December 31, 1999. The votes
cast were as follows:
For Against Abstain
---------- ------- -------
11,551,265 1,893 7,760
ITEM 5. Other Information
14
<PAGE>
None.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (in electronic format only)
(b) Reports on Form 8-K
None.
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: 08/06/99 By: /s/Bruce LaMont
-------- -------------------------
Bruce LaMont
Chief Executive Officer
Dated: 08/06/99 By: /s/William K. Robinson
-------- -------------------------
William K. Robinson
Chief Financial Officer
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,714,491
<SECURITIES> 0
<RECEIVABLES> 1,870,784
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,571,885
<PP&E> 1,982,977
<DEPRECIATION> 740,281
<TOTAL-ASSETS> 8,014,110
<CURRENT-LIABILITIES> 3,978,802
<BONDS> 0
0
0
<COMMON> 12,071
<OTHER-SE> 4,023,237
<TOTAL-LIABILITY-AND-EQUITY> 8,014,110
<SALES> 7,462,446
<TOTAL-REVENUES> 7,462,446
<CGS> 4,488,735
<TOTAL-COSTS> 4,488,735
<OTHER-EXPENSES> 1,745,370
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,228,341
<INCOME-TAX> 454,487
<INCOME-CONTINUING> 773,854
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 773,854
<EPS-BASIC> .06
<EPS-DILUTED> .06
</TABLE>
