TELESPECTRUM WORLDWIDE INC, 10-Q, 2000-11-14

TELESPECTRUM WORLDWIDE INC
10-Q, 2000-11-14
BUSINESS SERVICES, NEC

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<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000

[ ] 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. 0-21107

TELESPECTRUM WORLDWIDE INC.
---------------------------
(Exact name of registrant as specified in its charter)

DELAWARE 23-2845501
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)

443 SOUTH GULPH ROAD
KING OF PRUSSIA, PENNSYLVANIA 19406
----------------------------- -----
(Address of principal executive offices) (ZIP Code)

610-878-7400
------------
(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports to be
filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the
preceding 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
---- -----

The number of outstanding shares of the Registrant's Common Stock, par value
$.01 per share, on November 3, 2000 was 33,076,073.

<PAGE> 2

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

Table of Contents

Item No. Page
PART I -- FINANCIAL INFORMATION

1. Financial Statements (unaudited):
Condensed Consolidated Results of Operations
For the Three Months Ended September 30, 2000 and
For the Three Months Ended September 30, 1999.......... 3
Condensed Consolidated Results of Operations
For the Nine Months Ended September 30, 2000 and
For the Nine Months Ended September 30, 1999............ 4
Condensed Consolidated Balance Sheets as of
September 30, 2000 and December 31, 1999............... 5
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2000 and
For the Nine Months Ended September 30, 1999............ 6
Notes to Condensed Consolidated Financial Statements..... 7

2. Management's Discussion and Analysis of Results of
Operations and Financial Condition......................... 17

PART II - OTHER INFORMATION................................ 33

See Notes to Condensed Consolidated Financial Statements

2
<PAGE> 3

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
(Unaudited)
(Dollars in Thousands - Except Per Share Amounts)

<TABLE>
<CAPTION>
Three Months Ended
September 30, September 30,
2000 1999
---- ----

<S> <C> <C>
REVENUES $ 73,119 $ 86,471
OPERATING EXPENSES:
Cost of services 57,541 64,011
Selling, general and administrative 18,605 16,135
Goodwill amortization 2,488 1,787
-------- --------
Total operating expenses 78,634 81,933
-------- --------
Operating (loss) income (5,515) 4,538
INTEREST EXPENSE, net (4,137) (2,792)
-------- --------
(LOSS) INCOME BEFORE INCOME TAXES (9,652) 1,746
INCOME TAXES -- --
-------- --------
(LOSS) INCOME BEFORE MINORITY INTEREST (9,652) 1,746
MINORITY INTEREST 960 --
-------- --------
NET (LOSS) INCOME $ (8,692) $ 1,746
======== ========
BASIC (LOSS) EARNINGS PER SHARE (Note 4): $ (.27) $ .06
DILUTED (LOSS) EARNINGS PER SHARE (Note 4): $ (.27) $ .05
</TABLE>

See Notes to Condensed Consolidated Financial Statements

3
<PAGE> 4

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
(Unaudited)

(Dollars in Thousands - Except Per Share Amounts)

<TABLE>
<CAPTION>
Nine Months Ended
September 30, September 30,
2000 1999
--------- ---------

<S> <C> <C>
REVENUES $ 231,057 $ 181,011

OPERATING EXPENSES:

Cost of services 179,128 130,101

Selling, general and administrative 52,489 39,278

Goodwill amortization 6,429 2,376
--------- ---------
Total operating expenses 238,046 171,755

Operating (loss) income (6,989) 9,256

INTEREST EXPENSE, net (11,513) (3,708)
--------- ---------
(LOSS) INCOME BEFORE INCOME TAXES (18,502) 5,548

INCOME TAXES -- --
--------- ---------
(LOSS) INCOME BEFORE MINORITY INTEREST (18,502) 5,548

MINORITY INTEREST 1,966 --
--------- ---------
NET (LOSS) INCOME $ (16,536) $ 5,548
========= =========
BASIC (LOSS) EARNINGS PER SHARE (Note 4): $ (.52) $ .20

DILUTED (LOSS) EARNINGS PER SHARE (Note 4): $ (.52) $ .18
</TABLE>

See Notes to Condensed Consolidated Financial Statements

4
<PAGE> 5

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)

(Dollars in Thousands - Except Share Amounts)

<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 2000 1999
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 43 $ --
Accounts receivable, net 62,668 72,879
Prepaid expenses and other 7,898 5,809
--------- ---------
Total current assets 70,609 78,688

PROPERTY AND EQUIPMENT, net 65,229 59,455

GOODWILL AND OTHER INTANGIBLES, net 181,151 174,703

OTHER ASSETS 4,460 5,561
--------- ---------
Total assets $ 321,449 $ 318,407
========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Current maturities of long-term debt $ 136,106 $ 16,411

Accounts payable 13,229 9,305

Accrued expenses 40,153 32,597

Other current liabilities 599 6,463
--------- ---------
Total current liabilities 190,087 64,776

LONG-TERM DEBT 2,231 113,846

MINORITY INTEREST AND OTHER 6,270 352

STOCKHOLDERS' EQUITY:

Preferred stock, $.01 par value, 5,000,000 shares authorized,
no shares issued or outstanding -- --

Common stock, $.01 par value, 200,000,000 shares authorized,
40,022,656 shares issued and 33,076,073 shares outstanding,
at September 30, 2000, and 39,558,746 shares issued and 32,612,163
shares outstanding at December 31, 1999 400 396

Additional paid-in capital 339,100 338,848

Common stock purchase warrants 7,840 7,840

Accumulated deficit (173,940) (157,404)

Treasury stock, 6,946,583 shares at cost (48,810) (48,810)

Due from stockholders (952) (952)
Deferred compensation -- (163)
Cumulative currency translation adjustment (777) (322)
--------- ---------
Total stockholders' equity 122,861 139,433
--------- ---------
Total liabilities and stockholders' equity $ 321,449 $ 318,407
========= =========
</TABLE>

See Notes to Condensed Consolidated Financial Statements

5
<PAGE> 6

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(Dollars in Thousands)

<TABLE>
<CAPTION>
Nine Months Ended
September 30, September 30,
2000 1999
--------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net (loss) income $ (16,536) $ 5,548
Adjustments to reconcile net (loss) income to net cash
flows from operating activities:
Depreciation and amortization 13,712 9,016
Amortization of goodwill 6,429 2,376
Provision for bad debts 2,346 5,392
Minority interest (1,966) --
Non-cash compensation 163 269
Other items, net -- 500

Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable 7,938 (11,031)
Prepaid expenses and other (1,593) (1,315)
Accounts payable 3,833 (5,547)
Accrued expenses 1,042 (2,355)
Accrued compensation -- 2,630
Other liabilities (6,381) (3,252)
--------- ----------
Net cash provided by operating activities 8,987 2,231
--------- ----------
Cash Flows From Investing Activities:

Purchases of property and equipment, net (18,217) (17,059)
Net cash acquired in acquisitions 71 762
Payments of deferred transaction costs -- (174)
Payments of notes to sellers and acquisition liabilities -- (590)
--------- ----------
Net cash used in investing activities (18,146) (17,061)
--------- ----------
Cash Flows From Financing Activities:
Proceeds from exercise of stock options and sale of common stock 1,725 1,356
Cash overdraft -- (1,658)
Payments of capital lease obligations (588) (594)
Borrowing on long-term debt 13,733 120,596
Payments on long-term debt (5,668) (105,473)
Payment for treasury stock -- (191)
--------- ----------
Net cash provided by financing activities 9,202 14,036
--------- ----------

Net decrease in cash and cash equivalents 43 (794)

Cash and cash equivalents, beginning of period -- 794
--------- ----------
Cash and cash equivalents, end of period $ 43 $ --
========= ==========
</TABLE>

See Notes to Condensed Consolidated Financial Statements

6
<PAGE> 7

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION

The accompanying financial statements are unaudited and have been prepared by
TeleSpectrum Worldwide Inc. and subsidiaries ("TeleSpectrum" or the "Company")
pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC"). The December 31, 1999 balance sheet was derived from audited financial
statements, however, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to SEC rules and
regulations. The Company believes that the financial statements include all
adjustments of a normal and recurring nature necessary to present fairly the
results of operations, financial position and cash flows for the periods
presented. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Form 10-K for
the year ended December 31, 1999.

The condensed consolidated financial statements include the accounts of the
Company and its subsidiaries. All material intercompany balances and
transactions have been eliminated. During the third quarter of 1999 the Company
changed its presentation of operating expenses in the Condensed Consolidated
Statements of Operations. Cost of services now represents all costs incurred at
the call centers. All remaining costs including account management, management
information systems and human resources are included in SG&A. This
reclassification has been made for all periods presented.

There have been no material changes in accounting policies from those stated in
the Company's Form 10-K for the year ended December 31, 1999. Certain other
prior period amounts have been reclassified to conform to the current year
presentation.

2. COMPANY BACKGROUND

The Company was incorporated in Delaware on April 26, 1996 and on August 12,
1996, completed its initial public offering. Concurrent with the offering, the
Company began material operations with the acquisition of the assets of a number
of businesses. The Company provides services to its customers through its
business segments: Acquisition Services (formerly referred to as Telemarketing),
ChannelCare (formerly referred to as Customer Care) and e-Satisfy.com. As
discussed further in Note 3, the Company completed mergers with International
Data Response Corporation ("IDRC") and CRW Financial, Inc. ("CRW") on June 30,
1999.

3. MERGERS

IDRC Merger

On January 14, 1999, TeleSpectrum and IDRC entered into a merger agreement which
was amended on February 26, 1999 and May 13, 1999 and consummated on June 30,
1999. Under this agreement, holders of outstanding shares of IDRC common stock,
options and warrants to purchase IDRC common stock were entitled to receive
their pro rata portion of an aggregate of 9,200,000 shares of TeleSpectrum
common stock and warrants exercisable for 2,500,000 shares of TeleSpectrum
common stock. In addition, the IDRC preferred stock was exchanged for $6,000,000
of cash, plus all accrued and unpaid dividends of $1,400,000. The majority
stockholders of IDRC invested the proceeds from the exchange of their IDRC
preferred stock of $4,873,000 for a term note with the Company. This note bears
interest at 10% and was payable one year from the closing depending upon certain
covenants as defined in the agreement which do not currently allow for payment.
The merger was accounted for as a purchase and, accordingly, the net tangible
liabilities and results of operations of IDRC have been included in the
consolidated financial statements as of June 30, 1999.

See Notes to Condensed Consolidated Financial Statements

7
<PAGE> 8

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)

The total purchase price of IDRC was $58,700,000 which consisted of (in
thousands):

<TABLE>
<CAPTION>
<S> <C>
Issuance of 8,269,101 shares of TeleSpectrum common stock,
valued at $7.119 per share, with 6,449,349 shares
discounted 10% due to lock up and escrow restrictions of
twelve and fifteen months $ 54,275
Issuance of options to purchase 930,899 shares of
TeleSpectrum common stock, valued at between $2.300 and
$5.320 per option with an average value of $5.141 (all
options are discounted 10% due to lock up and escrow
restrictions of twelve and fifteen months) 4,307
Issuance of warrants to purchase 2,247,038 shares of
TeleSpectrum common stock, valued at $3.136 per warrant 7,047
Issuance of warrants to purchase 252,962 shares of
TeleSpectrum common stock, valued at $3.136 per warrant,
to IDRC option holders 793
Value of shares and options held in escrow (9,164)
Transaction costs 1,442
--------

Total purchase price $ 58,700
========
</TABLE>

Based on management's analysis of the transaction, the application of the
purchase method resulted in approximately $156,211,000 in excess purchase price
over the estimated fair value of the net tangible liabilities acquired of
$90,011,000, which includes accruals by IDRC in the second quarter of 1999
related to closed centers and bad debt reserves. An analysis completed by
TeleSpectrum, resulted in the excess purchase price being assigned to intangible
assets consisting of $1,002,000 for assembled workforce, $14,079,000 for
customer relationships, and $141,130,000 for goodwill. Intangible assets are
amortized on a straight-line basis over their estimated useful lives of 7 years
for assembled workforce, 15 years for customer relationships and 25 years for
goodwill.

The Company has completed its plans to consolidate certain facilities and
departments and has estimated the costs of non-cancelable lease commitments and
severance of $1,539,000. This liability is reflected in the net tangible
liabilities acquired. During the nine months ended September 30, 2000,
approximately $1,523,000 was charged against this reserve. Based upon
management's analysis of the fair value of the assets acquired, the goodwill was
allocated to our Acquisition Services and ChannelCare segments as $105,848,000
and $35,282,000, respectively.

Of the shares of TeleSpectrum common stock issuable to the holders of IDRC
common stock and options, an aggregate 1,730,977 shares/options were placed in
escrow, as required by the merger agreement, to secure the indemnification
obligations of the IDRC security holders to TeleSpectrum. The term of the escrow
was for the 15 months ended September 30, 2000 and is governed by an indemnity
escrow agreement. These shares represent "contingent consideration" and in
accordance with APB No. 16 will not be reflected as part of the purchase price
until the contingency is determinable. At closing, IDRC had a contingent
liability related to a claim by certain of its shareholders. On July 19, 1999,
this claim was settled for $1,907,000, the majority of which was satisfied with
275,153 shares being released from the escrow. The ultimate resolution of the
remaining escrow is currently in dispute and the Company is currently engaged in
ongoing discussions with the Shareholder Representative.

8
<PAGE> 9
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)

CRW Merger

On June 30, 1999, TeleSpectrum and CRW completed a merger agreement whereby
7,296,454 outstanding shares of CRW common stock were exchanged for 5,173,186
shares of TeleSpectrum common stock valued at $38,799,000. In addition, the
outstanding CRW options and warrants to purchase shares of CRW common stock were
exchanged for options to purchase 1,499,079 shares of TeleSpectrum common stock
valued at $9,820,000. Transaction costs related to this transaction amounted to
$191,000. For financial reporting purposes, the Company treated the exchange of
shares of TeleSpectrum common stock for shares of CRW common stock as a treasury
stock transaction. The transaction did not have an effect on TeleSpectrum net
income but did effect its net income per share.

TARP Acquisition

During October 1996, the Company acquired its consulting business Technical
Assistance Research Programs, Inc. ("TARP"). The agreement allowed for potential
earnouts to be paid to prior owners based upon future performance. During
October 1999 the Company signed an agreement to pay $3,200,000 in installments
ending July 2001 to settle these earnout provisions. This note was discounted to
$2,852,000 and is reflected as goodwill which is being amortized on a
straight-line basis over the remaining life of the original TARP goodwill.

Customer Insites Acquisition

During January 2000, the Company placed all assets and liabilities specifically
related to TARP into a new wholly owned corporation called e-Satisfy.com. On
February 2, 2000, e-Satisfy.com acquired Customer Insites, Inc. ("CI") by
issuing 2,410,741 shares or 27.6% of e-Satisfy.com in exchange for all of the
issued and outstanding capital stock of CI. This acquisition was accounted for
as a purchase and accordingly, the net assets and results of operations of CI
have been included in the condensed consolidated financial statements commencing
February 2, 2000. The minority interest's portion of e-Satisfy.com's net losses
are reflected in the Condensed Consolidated Results of Operations as minority
interest. The total purchase price paid for CI was valued at approximately
$6,200,000. Based upon a preliminary analysis, the excess of the purchase price
over the fair value of the net tangible liabilities acquired totaling
approximately $6,478,000, has been recorded as goodwill and is being amortized
on a straight-line basis over twenty-five years. If the acquisition had been in
effect from January 1, 1999, unaudited pro forma net sales and net earnings of
the Company would have been substantially the same as those reported.

Goodwill and Other Intangibles

The Company continually evaluates whether events and circumstances have occurred
which indicate the remaining balance of goodwill and other intangibles may not
be recoverable. Due to the poor operating performance in the first three
quarters of 2000, the Company has undertaken a comprehensive review of the
carrying value of its goodwill and other intangibles in order to determine if a
permanent impairment has occurred. This review will be completed in the fourth
quarter of 2000.

4. EARNINGS PER SHARE

The Company reports earnings per share in accordance with SFAS No. 128 "Earnings
Per Share" which requires a dual presentation of "basic" and "diluted" EPS on
the face of the income statement. Basic EPS is computed by dividing net income
(loss) by the weighted average number of shares of common stock outstanding for
the period. Diluted EPS includes the effect, if any, from the potential exercise
or conversion of securities, such as stock options and warrants, which would
result in the issuance of shares of common

9
<PAGE> 10
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)

stock.

The table below sets forth the reconciliation of the weighted average number of
shares outstanding used to compute basic and diluted earnings (loss) per share
(in thousands):

<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999

<S> <C> <C> <C> <C>
Shares used in computing basic earnings (loss) per share 31,764 31,056 31,582 27,652
Dilutive effect of options and warrants - 4,147 - 2,909
------ ------ ------ ------
Shares used in computing diluted earnings (loss) per share 31,764 35,203 31,582 30,561
====== ====== ====== ======
</TABLE>

5. CAPITALIZED SOFTWARE DEVELOPMENT COSTS

The Company capitalizes both acquired and internally developed or modified
software used as an integral part of the operations of the Company, in
accordance with Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The Company
capitalizes certain internal and external costs directly associated with
developing or modifying the internal use software, which begins with the
application development stage and ends when the project is substantially
complete and ready for its intended use. Amounts capitalized as of September 30,
2000 and 1999 were $19,496,000 and $1,600,000, respectively, and are included in
the Condensed Consolidated Balance Sheets in property, plant and equipment. Such
costs are amortized on a straight-line basis over the estimated useful life,
usually 3-5 years.

During the third quarter of 2000, e-Satisfy.com determined that it would no
longer use certain software associated with its traditional TARP business.
Accordingly, e-Satisfy.com wrote-off $1,600,000 of net capitalized software at
September 30, 2000.

6. SECURED CREDIT FACILITY

In connection with the mergers on June 30, 1999, the Company entered into $135.0
million in new credit facilities consisting of Term A, Term B, Term C and
working capital revolver facilities (the "Credit Facilities") incurring costs of
$5.0 million which are being amortized on a straight-line basis over the life of
the Credit Facility. The Company borrowed $20.0 million under the Term A
facility, $20.0 million under the Term B facility and $50.0 million under the
Term C facility. The Company can borrow the lesser of $45.0 million or 85% of
eligible receivables, as defined, under its working capital revolver facility.
The working capital revolver facility also provides for the issuance of letters
of credit subject to certain borrowing limits, of which none were outstanding at
September 30, 2000. The unused portion of the working capital revolver facility
is subject to an annual fee of 0.50%. The Term A facility matures December 31,
2001 and requires quarterly principal payments totaling $4.0 million for the
remainder of 2000 and $10.0 million in 2001. The Term B facility matures
December 31, 2002 and requires quarterly principal payments totaling $0.1
million for the remainder of 2000, $0.3 million in 2001, and a final payment of
$19.3 million in 2002. The Term C facility matures December 31, 2003 and
requires quarterly principal payments totaling $0.2 million for the remainder of
2000, $0.4 million in 2001, $0.9 million in 2002 and $48.0 million in 2003. All
outstanding principal is due under the working capital revolver facility on the
maturity date, December 31, 2001.

10
<PAGE> 11
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)

Currently, the Company has fully utilized the credit available under the Term A,
Term B, Term C and working capital revolver facilities.

The Company can elect at the time it makes borrowings to pay interest quarterly
at prime plus 1.75% or LIBOR plus 3.25% for the Term A and working capital
revolver facilities; prime plus 2.25% or LIBOR plus 3.75% for the Term B
facility and prime plus 2.75% or LIBOR plus 4.25% for the Term C facility. At
September 30, 2000, the weighted average interest rate payable under the Credit
Facilities was 10.7%. Borrowings under the Credit Facilities are collateralized
by substantially all of the assets of the Company. The Credit Facilities require
interest rate caps (see Item 3) and contain covenants, the most restrictive of
which require the maintenance of certain financial ratios, restrict future
indebtedness, limit capital expenditures and prohibit cash dividends.

The proceeds from the Credit Facilities were used to refinance $98.0 million in
principal and interest outstanding under the IDRC credit facilities and $10.9
million in principal, interest and early termination fees outstanding under the
Company's April 14, 1998 Secured Credit Facility. The remaining Credit
Facilities proceeds were used in the mergers to repay certain notes including
accrued interest, redeem preferred stock and pay transaction fees aggregating
$9.7 million. At December 31, 1998, the Company had no outstanding balance and
$18.1 million available under the Secured Credit Facility. During the nine
months ended September 30, 2000 and 1999, the weighted average interest rate on
borrowings under the Secured Credit Facility was 10.3% and 9.2%, respectively.

During April 2000, the Company signed an amendment to the Credit Facility that
modified the Company's debt covenants effective February 2000 including the
leverage ratio and the fixed charge coverage ratio and obtained additional
borrowing capacity totaling $6.0 million in the form of a Revolving Credit
Commitment raising the total capacity on revolvers to $51.0 million. In
addition, the annual limitation allowed for capital expenditures decreased for
the year 2000 from $32,500,000 to $25,000,000. The Company and its banking group
entered into various amendments of the Company's Credit Facility commencing
September 30, 2000. These amendments included the deferral of principal and
interest of $2.2 million and $3.0 million, respectively, the waiver of financial
covenants and a restriction on certain payments through various periods. On
October 27, 2000, the Company and its bank group agreed to terminate the
Revolving Credit Commitment of $6.0 million obtained during April 2000, which
had never been utilized. On November 10, 2000, the Company drew the remaining
capacity on the working capital revolver facility of $1.4 million and together
with existing cash paid the $3.0 million deferred interest. Principal payments
due at September 30, 2000 totaling $2.2 million have been deferred through
November 17, 2000. Additional interest, computed at 2% per annum of the total
Credit Facility is now being charged. Currently, the Company has an
understanding with its senior lending group to waive principal payments and
compliance with financial covenants through November 17, 2000. Since the
Company's agreement with its senior lending group does not waive financial
covenants for a period through October 1, 2001, the Company is required to
classify amounts related to its Credit Facilities as current liabilities.
Management is seeking to negotiate the extension of waivers relating to
compliance with financial covenants.

During the second quarter of 2000, the Company renegotiated the terms of a note
payable to the former principals of TARP. The original scheduled payment of $1.2
million due June 30, 2000 was changed to payments of $300,000 on the first day
of July, October, November and December plus interest at 10%. Payments of
$300,000 and $100,000 were made the first of July and October, respectively. The
Company was prohibited from paying the November installment by its senior lender
making the Company in default on this agreement . The balance of these notes
have been shown as current liabilities as of September 30, 2000.

11
<PAGE> 12

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)

e-Satisfy.com Debt

During May 2000 a shareholder of TeleSpectrum advanced $500,000 to e-Satisfy.com
in return for convertible promissory notes and 200,000 warrants to purchase
e-Satisfy.com Common Stock. The notes bear interest at 8% and were due August
31, 2000 if additional equity totaling $3,000,000 (a "Subsequent Financing") was
not obtained by June 15, 2000. Upon the consummation of a Subsequent Financing,
the notes automatically convert to 285,715 shares of Series A Common Stock of
e-Satisfy.com after August 31, 2000. A Subsequent Financing was not obtained and
on September 13, 2000 a forbearance agreement was entered into which deferred
principal and interest payments to December 12, 2000. On November 8, 2000, the
lender subordinated their position to the factoring arrangement discussed below.
The warrants expire in seven years and were exercisable at $2.50 per warrant
unless a Subsequent Financing was not obtained by August 31, 2000, in which case
they are $.01 per warrant.

During June 2000 the same TeleSpectrum shareholder advanced an additional
$500,000 to e-Satisfy.com in return for convertible promissory notes and 250,000
warrants to purchase e-Satisfy.com Common Stock. The notes bear interest at 8%
and were due October 15, 2000 if additional equity totaling $5,000,000 (a
"Subsequent Financing") was not obtained by July 31, 2000. Upon consummation of
a Subsequent Financing, the notes automatically convert to 357,143 shares of
Series A Common Stock of e-Satisfy.com after August 31, 2000. A Subsequent
Financing was not obtained putting e-Satisfy.com into technical default on these
notes. e-Satisfy.com is currently negotiating with the lender to obtain a
forbearance agreement. On November 8, 2000, the lender subordinated their
position to the factoring arrangement discussed below. The warrants expire in
seven years and were exerciseable at $2.00 per warrant unless a Subsequent
Financing was not obtained by August 31, 2000, in which case they are $.01 per
warrant.

During the third quarter TeleSpectrum advanced $300,000 to e-Satisfy.com in
addition to the initial advance of $1.0 million, bringing the total advance to
$1,300,000. This advance is eliminated in consolidation. During November 2000,
the Company subordinated its position to the factoring arrangement discussed
below.

In August 2000 e-Satisfy.com entered into a factoring arrangement with a bank
(the "Factoring") which is secured by substantially all the assets of
e-Satisfy.com. Qualifying receivables up to $800,000 may be sold to the lender
in exchange for an 80% advance on the receivables purchased, creating a 20%
reserve to cover potential losses and fees. The receivables are sold with total
recourse and accordingly, the transaction was recorded as a financing. The
outstanding debt balance at September 30, 2000 was $222,000. Finance charges are
approximately 1% per month of the outstanding balance. The Factoring contains
various covenants, one of which requires e-Satisfy.com to raise additional
capital of $500,000 on both September 30 and November 30, 2000, respectively. No
additional capital was raised by September 30, putting e-Satisfy.com into
technical default of the Factoring. e-Satisfy.com is currently negotiating with
the lender to amend this agreement.

7. SUPPLEMENTAL CASH FLOWS INFORMATION

The Company paid $3,314,000 and $538,000 in interest expense for the three
months ended September 30, 2000 and 1999, and $10,001,000 and $1,421,000 for the
nine months ended September 30, 2000 and 1999, respectively. During the nine
months ended September 30, 2000, net non-cash charges totaling $6.5 million
related to the IDRC acquisition for certain lease termination costs and
severance accruals were booked as additional goodwill. The Company did not
pay any income taxes during the three months ended September 30, 2000 and 1999.

12
<PAGE> 13

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)

8. COMMITMENTS AND CONTINGENCIES

On April 27, 2000, the Company entered into an employment contract with its CEO
and President which expires in April, 2003. The contract provides for annual
compensation of not less than $325,000 per year, plus potential bonuses.
Additionally stock options were granted under TeleSpectrum's Amended and
Restated 1996 Equity Compensation Plan exercisable for an aggregate of 1,500,000
shares of common stock. One of these stock options, which is exercisable for an
aggregate 500,000 shares, vests incrementally on the earlier of any ten day
periods that the TeleSpectrum common stock reaches certain closing prices, or in
May 2004. The vesting schedule is as follows: 166,667 shares vest if the closing
price of the common stock reaches $11.00 per share during a ten day period that
begins prior to November 1, 2001: 166,667 shares vest if the closing price of
the common stock reaches $17.00 per share during a ten day period that begins
prior to August 1, 2003; and 166,667 shares vest if the closing price of the
common share reaches $23.50 per share during a ten day period that begins prior
to April 30, 2003. The remaining two of these options, exercisable for an
aggregate of 1,000,000 shares, vest as to 100,000 shares on April 30, 2000 and
the remaining 900,000 shares vest in three equal amounts on each of April 26,
2001, 2002 and 2003.

The Company is party to various claims and other matters arising in the ordinary
course of business. In the opinion of management, the outcome of these matters
will not have a material adverse effect on the Company's financial position or
results of operations.

9. CONCENTRATIONS OF RISK

The financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of accounts receivable.
Concentrations of credit risk with respect to accounts receivable are limited
due to the large number of customers comprising the Company's customer base, and
their dispersion across many different industries and geographies. The Company
does not require collateral or other securities to support customer accounts
receivable. The Company performs periodic reviews of its clients' condition to
reduce the collection risk.

The Company does not believe a significant credit risk exists at September 30,
2000. The following table summarizes those customers with revenue or accounts
receivable in excess of 10% of total revenue for the three and nine months ended
September 30, 2000 and 1999 or total receivables as of September 30, 2000 and
1999, respectively:

<TABLE>
<CAPTION>
Revenues Accounts
Three Months Ended Nine Months Ended Receivable
September 30, September 30, September 30,
2000 1999 2000 1999 2000 1999
<S> <C> <C> <C> <C> <C> <C>
Customer 1 10.7% 10.7% 10.6% - - -
Customer 2 - - - 11.6% - -
Customer 3 12.0% - - - 16.5% -
</TABLE>

10. COMPREHENSIVE INCOME

The Company has adopted SFAS No. 130, "Reporting Comprehensive Income", which is
effective for financial statements issued for fiscal years beginning after
December 15, 1997. The Company's comprehensive income includes net income (loss)
and unrealized losses from foreign currency translation. Total comprehensive
income (loss) for the three months ended September 30, 2000 and 1999 was
$(8,937,000)

13
<PAGE> 14

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)

and $1,819,000, respectively. Total comprehensive income (loss) for the nine
months ended September 30, 2000 and 1999 was $(16,991,000) and $5,443,000,
respectively.

11. RELATED-PARTY TRANSACTIONS

CRW Financial, Inc.

The Company subleases a 21,000 square foot office building in King of Prussia,
Pennsylvania, from CRW Financial, Inc., a former partial owner of the Company
who in turn was subleasing the facility from another landlord. As discussed in
Note 3, CRW was merged with the Company on June 30, 1999. The sublease commenced
on May 9, 1996, and requires monthly base rent payments through September 30,
2004, of approximately $44,000. Total rent expense for the nine months ended
September 30, 2000 and 1999 was approximately $415,000 and $378,000,
respectively.

e-Satisfy.com

As more fully discussed in Note 6, e-Satisfy.com borrowed approximately
$1,000,000 from a shareholder of TeleSpectrum.

12. GOING CONCERN MATTERS

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. The Company has incurred substantial recurring losses from
operations, and has a deficit tangible net worth in the amount of $(58,290,000)
at September 30, 2000. As discussed in Note 6, the Company has an understanding
with its senior lending group to waive principal payments and compliance with
financial covenants through November 17, 2000. Since the Company's agreement
with its senior lending group does not waive financial covenants for a period
through October 1, 2001, the Company is required to classify amounts related to
its Credit Facilities as current liablities. Due primarily to this
classification the Company has a working capital deficiency of $(118,000,000) as
of September 30, 2000.

The Company has generated positive earnings before interest, taxes, depreciation
and amortization ("EBITDA") each quarter of 2000 and $13,562,000 for the nine
months ended September 30, 2000. Excluding e-Satisfy.com , the Company has
generated $17,880,000 in EBITDA during the same period.

During the fourth quarter Management initiated a cost reduction program targeted
to reduce costs by $10.0 to $15.0 million annually. The financial savings will
result from staff reductions, reduced telecommunications costs and other
infrastructure costs. The reduction in staff support functions will be through a
combination of attrition and the involuntary separation of employees. A
comprehensive review of our primary business processes will result in the
identification of the specific positions to be eliminated or outsourced. These
initiatives may result in a restructuring charge during the fourth quarter. The
benefits of the cost reduction program are expected to be realized beginning in
the first quarter of 2001.

e-Satisfy.com also initiated a cost reduction program during the third quarter
including the elimination of 46 positions representing 66% of their domestic
operation. If e-Satisfy.com successfully implements its cost reduction program,
management believes that it will be cash flow neutral by the end of 2000.

These circumstances call into question the Company's ability to continue as a
going concern. The Company has been advised by its independent public
accountants that in the event the Company is unsuccessful in amending the Credit
Facilities, or in obtaining additional long-term financing prior to the
completion of their audit of the Company's financial statements for the year
ending December 31, 2000, their auditors' report on those financial statements
may include an explanatory paragraph regarding the Company's ability to continue
as a going concern. The accompanying consolidated financial statements do not
include any adjustments relating to the recoverability of assets or the
classification of liabilities should the Company be unable to continue as a
going concern.

14
<PAGE> 15
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)

Currently, Management is seeking to amend its current Credit Facilities.
Management believes that the working capital needs of the Company will be
provided by the cash generated from ongoing operations and the willingness of
lenders to extend credit. There can be no assurance that the Company will be
able to amend its Credit Facilities with its current lenders; to obtain
alternative financing or additional capital on terms acceptable to Management,
if at all; or to reduce its costs without significantly impacting its business.

13. OTHER

Prior to October 30, 2000, the Company's common stock was traded on the Nasdaq
National Market ("NASDAQ") which requires certain maintenance standards
in order to remain on that market. The Company's common stock failed to
maintain a minimum bid price and accordingly, was delisted at the close of
business on October 30, 2000. The Company's common stock is now traded under its
stock symbol "TLSP" on the OTC Bulletin Board. The Company intends to re-apply
to the NASDAQ when it is able to meet applicable relisting requirements.

14. SEGMENTS

The Company classifies its continuing operations into three segments:
Acquisition Services, ChannelCare and e-Satisfy.com. The operating segments are
managed separately because each operating segment represents a strategic
business unit that offers different services. The business segments are
described in further detail below. Segment assets include amounts specifically
identified with Acquisition Services, ChannelCare and e-Satisfy.com segments.
Corporate assets consist primarily of property and equipment.

The Acquisition Services Segment provides both business-to-consumer and
business-to-business acquisition services, primarily direct sales initiated by
the Company on behalf of its clients.

The ChannelCare Segment provides customer service expertise to its clients. The
Company's customer service expertise includes the more traditional inbound
services of customer care support, typically through toll-free telephone
numbers, for activities such as responses to clients' customer service
inquiries, catalogue sales and electronic order processing and consulting
services to a wide range of clients. In addition, ChannelCare also includes our
more recent strategic initiatives into multi-channel Customer Relationship
Management including Web-based sales and service, e-mail response, Web
telephony, Web chat, Web collaboration and fax.

The e-Satisfy.com segment, a business-to-business internet company, measures,
monitors and improves the customer service experience.

Corporate operations include the selling, general and administrative functions
of the Company.

During 1999, the Company began reporting operating expenses differently from the
historical presentation in order to be more consistent with industry practices.
The principal change relates to the components of two line items - Cost of
Services and SG&A. Cost of Services now reflects only those costs that are
directly associated with the operation of a call center. All other costs
including account management, management information systems and human resources
are included in SG&A. This reclassification has been made for all periods
presented.

15
<PAGE> 16
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)

Business segment information is as follows (in thousands):

<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------

2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Acquisition Services.............. $ 45,163 $ 56,676 $147,100 $122,149
ChannelCare....................... 26,489 27,599 79,248 51,166
e-Satisfy.com..................... 1,467 2,196 4,709 7,696
-------- -------- -------- --------

Total......................... $ 73,119 $ 86,471 $231,057 $181,011
======== ======== ======== ========

Operating income (loss):
Acquisition Services.............. $ 8,458 $ 13,153 $ 29,700 $ 30,718
ChannelCare....................... 5,040 6,328 15,293 13,638
e-Satisfy.com..................... (408) 1,192 507 4,178
Corporate......................... (18,605) (16,135) (52,489) (39,278)
--------- --------- --------- ---------

Total......................... $ (5,515) $ 4,538 $ (6,989) $ 9,256
========= ======== ========= ========
</TABLE>

<TABLE>
<CAPTION>
As of September 30,
--------------------
2000 1999
--------- ---------
<S> <C> <C>
Total assets:
Acquisition Services.............. $185,002 $ 59,799
ChannelCare....................... 94,354 68,508
e-Satisfy.com..................... 28,943 20,161
Corporate......................... 13,150 169,390
-------- --------

Total......................... $321,449 $317,858
======== ========
</TABLE>

16
<PAGE> 17

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

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

This Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this Quarterly Report contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These statements address, among other things, the Company's business
strategy, including its use of cash and cash equivalents; reliance on certain
customers; projected capital expenditures; liquidity; Year 2000 disclosure,
including statements regarding readiness, remediation, consequences and
contingency plans; increased sales in future periods; the continuation of
fluctuations in results of operations, as well as information contained
elsewhere in this Report where statements are preceded by, followed by or
include the words "believes", "expects", "anticipates", "plans" or similar
expressions. These statements are based on a number of assumptions concerning
future events, and are subject to a number of uncertainties and other factors,
many of which are outside the Company's control, that could cause actual results
to differ materially from such statements. The Company undertakes no obligation
to update or revise forward-looking statements, whether as a result of new
information, future events or otherwise.

Recent Developments

IDRC Merger Agreement

On January 14, 1999, we entered into a merger agreement with International Data
Response Corporation ("IDRC") and its majority stockholders. This agreement was
amended on February 26, 1999 and May 13, 1999 and consummated on June 30, 1999.
Under this agreement, the holders of outstanding shares of IDRC common stock,
options and warrants were entitled to receive their pro rata portion of an
aggregate of 9.2 million shares of TeleSpectrum common stock and warrants
exercisable for 2.5 million shares of TeleSpectrum common stock. In addition,
the IDRC preferred stock was exchanged for $6.0 million in cash, plus all
accrued and unpaid dividends of $1.4 million. The majority stockholders of IDRC
invested the proceeds from the exchange of their IDRC preferred stock of $4.9
million for a term note from us. We accounted for the IDRC merger as a purchase
pursuant to Accounting Principles Board Opinion No. 16 "Business Combinations."
Of the shares of TeleSpectrum common stock issuable to the holders of IDRC
common stock and options, an aggregate 1,730,977 shares/options were placed in
escrow, as required by the merger agreement, to secure the indemnification
obligations of the IDRC security holders to TeleSpectrum. The term of the escrow
is for 15 months and is governed by an indemnity escrow agreement. These shares
represent "contingent consideration" and in accordance with APB No. 16 will not
be reflected as part of the purchase price until the contingency is
determinable. At closing, IDRC had a contingent liability related to a claim by
certain of its shareholders. On July 19, 1999, this claim was settled for $1.9
million. 275,153 shares were initially released from the escrow to satisfy the
majority of this claim. The ultimate resolution of the remaining escrow is
currently in dispute and the Company is currently engaged in ongoing discussions
with the Shareholder Representative.

In connection with the mergers on June 30, 1999, the Company entered into a new
$135.0 million senior debt facility (the "Credit Facilities") which was used to
replace our current facility and to refinance IDRC's long-term debt including
accrued interest and repay certain seller notes including accrued interest,
redeem preferred stock, including accrued dividends and pay transaction fees.
The Credit Facilities consist of three term notes in the aggregate of $90.0
million

17
<PAGE> 18
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

with maturities between 30 and 54 months and a revolving credit facility of
$45.0 million due in 30 months. The Credit Facilities allow for alternative
interest rates. The Credit Facilities require interest rate caps (see Item 3)
and contain covenants, the most restrictive of which require the maintenance of
certain financial ratios, restrict future indebtedness, limit capital
expenditures and prohibit cash dividends.

CRW Merger Agreement

On September 3, 1998, we entered into a merger agreement with CRW Financial,
Inc. ("CRW"). This agreement was amended on December 30, 1998 and was
consummated on June 30, 1999. Under this agreement each outstanding share of CRW
common stock was exchanged for .709 of a share of TeleSpectrum common stock. In
addition, each outstanding option to purchase shares of CRW common stock was
exchanged for an option to purchase .709 of a share of TeleSpectrum common
stock. The warrants issued by CRW to purchase 0.7 million shares of our common
stock owned by CRW were unaffected by this merger. Immediately prior to the
merger, CRW did not have any continuing business operations and its only
significant asset was 6.9 million shares of our common stock. For financial
reporting purposes, we treated the exchange of our shares of common stock for
shares of CRW common stock as a treasury stock transaction. The transaction did
not have an effect on our net income or loss, but did effect our net income or
loss per share.

Strategic Initiatives

During the first quarter of 2000 the Company retained an investment banking firm
to raise capital for e-Satisfy.com - a company formed by merging TARP, a wholly
owned subsidiary of the Company and Customer Insites, Inc., a company acquired
in February 2000. The scope of the investment banker's engagement was then
expanded to raise additional capital to assist in the strategic initiatives of
ChannelCare, the Company's multi-channel CRM platform. During the second quarter
of 2000, the Company reviewed the suggestions of the investment banking firm and
continued to evaluate various capital raising alternatives. During the third
quarter of 2000 e-Satisfy.com implemented a significant cost reduction program
eliminating 46 positions representing 66% of their domestic operation.
e-Satisfy.com shifted its business strategy back to the traditional TARP
business and maintained the site monitor capability, which services the
internet. e-Satisfy.com has retained an investment banking firm to seek various
financing alternatives, including debt, equity, joint ventures and a sale.

Customer Insites Acquisition

During January 2000, the Company placed all assets and liabilities specifically
related to TARP into a new corporation called e-Satisfy.com. On February 2,
2000, e-Satisfy.com acquired Customer Insites, Inc. ("CI") by issuing 2,410,741
shares or 27.6% of e-Satisfy.com in exchange for all of the issued and
outstanding capital stock of CI. This acquisition was accounted for as a
purchase and accordingly, the net assets and results of operations of CI have
been included in the condensed consolidated financial statements commencing
February 2, 2000. The total purchase price paid for CI was valued at
approximately $6,200,000. The excess of the purchase price over the fair value
of the net tangible liabilities acquired totaling approximately $6,478,000, has
been recorded as goodwill and is being amortized on a straight-line basis over
twenty-five years. If the

18
<PAGE> 19

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

acquisition had been in effect from January 1, 1999, unaudited pro forma net
sales and net earnings of the Company would have been substantially the same as
those reported.

New Chairman

During the third quarter TeleSpectrum elected a new Chairman of the Board, Mr.
Fenton R. Talbott. The Company entered into an employment agreement with Mr.
Talbot which provides for minimum levels of annual compensation, potential
bonuses and stock options.

Goodwill and Other Intangibles

Credit Facility Amendments

During April 2000, the Company signed amendments to the Credit Facility that
modified the Company's debt covenants effective February 2000, including the
leverage ratio and the fixed charge coverage ratio and obtained additional
borrowing capacity totaling $6.0 million in the form of a Revolving Credit
Commitment raising the total capacity on revolvers to $51.0 million. In
addition, the annual limitation regarding capital expenditures was lowered for
the year 2000 from $32,500,000 to $25,000,000. As discussed more fully in the
liquidity section below, the Company and its banking group entered into various
amendments of the Company's Credit Facility commencing September 30, 2000. These
amendments included the deferral of principal and interest of $2.2 million and
$3.0 million, respectively, the waiver of financial covenants and a restriction
on certain payments through various periods.

Results of Operations

The following discussions should be read in connection with the Condensed
Consolidated Financial Statements contained within this report on Form 10Q.
During the third quarter of 1999 the Company changed its presentation of
operating expenses in the Condensed Consolidated Statements of Operations. Cost
of services now represents all costs incurred at the call centers. All remaining
costs including account management, management information systems and human
resources are included in SG&A. This reclassification has been made for all
periods presented.

19
<PAGE> 20

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

Comparison of the results of operations for the three months ended September 30,
2000 to the three months ended September 30, 1999.

<TABLE>
<CAPTION>
Results of Operations
(Dollars in Millions)
----------------------------------------------------------
Three Months As a Three Months As a
Ended Percentage Ended Percentage
September 30, of September 30, of
2000 Revenues 1999 Revenues
<S> <C> <C> <C> <C>
Revenues:
Acquisition Services............. $ 45.1 62% $ 56.7 66%
ChannelCare...................... 26.5 36 27.6 32
e-Satisfy.com.................... 1.5 2 2.2 2
------- ---- ------ ----
Total revenue...................... 73.1 100 86.5 100

Cost of services:
Acquisition Services............ 35.1 78 42.4 75
ChannelCare..................... 20.8 78 20.8 75
e-Satisfy.com................... 1.6 107 .8 36
------- ---- ------ ----
Total cost of services............. 57.5 79 64.0 74

Total selling, general and......... 18.6 26 16.2 19
administrative
Amortization of goodwill........... 2.5 3 1.8 2
------- ---- ------ ----
Total operating expenses........... 78.6 108 82.0 95

Operating (loss) income............ (5.5) (7) 4.5 5

Interest expense................... (4.1) (6) (2.8) (3)
------- ---- ------ ----
(Loss) income before taxes......... (9.6) (13) 1.7 2

Income taxes....................... -- -- -- --
------- ---- ------ ----

(Loss) income before minority...... (9.6) (13) 1.7 2
interest

Minority interest.................. 0.9 1 -- --
------- ---- ------ ----

Net (loss)......................... $ (8.7) (12)% $ 1.7 2%
======= ==== ======= ====
</TABLE>

20
<PAGE> 21

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

Revenues

Our total revenues for the three months ended September 30, 2000 were $73.1
million, representing a decrease of 15% from $86.5 million for the three months
ended September 30, 1999. The primary cause of the decrease is a decline in the
fulfillment business and a general overall decline in business activity.

Acquisition Services Segment

Our Acquisition Services segment revenues were $45.1 million for the three
months ended September 30, 2000. These revenues accounted for 62% of our total
revenues and represent a decrease of $11.6 million or 20% from Acquisition
Services revenues of $56.7 million for the three months ended September 30,
1999. The decrease in Acquisition Services revenues is primarily attributable to
a decrease in fulfillment business revenue of $4.6 million and a net decrease
from new/lost clients totaling $3.7 million. The remaining $3.3 million came
from existing clients that decreased their business.

ChannelCare Segment

Our ChannelCare segment revenues were $26.5 million for the three months ended
September 30, 2000. These revenues accounted for 36% of our total revenues and
decreased by $1.1 million or 4% from the three months ended September 30, 1999.
New client revenue increases of $2.5 million were offset by a reduction in
existing net client activity of $3.6 million.

e-Satisfy.com Segment

Our e-Satisfy.com segment revenues were $1.5 million for the three months ended
September 30, 2000. These revenues accounted for 2% of total revenues and
decreased by $0.7 million or 32% from the three months ended September 30, 1999.
The decrease in revenue is primarily attributable to e-Satisfy.com's change in
business focus to a services provider for business-to-business internet
companies after the acquisition of CI in February 2000, versus the traditional
TARP business activity engaged in during the third quarter of 1999.

Cost of Services

Our cost of services were $57.5 million for the three months ended September 30,
2000, a decrease of $6.5 million or 10% from cost of services of $64.0 million
for the three months ended September 30, 1999. As a percentage of total
revenues, cost of services were 79% and 74% for each of the three months ended
September 30, 2000 and 1999 respectively.

Acquisition Services Segment

Our Acquisition Services segment cost of services for the three months ended
September 30, 2000 were 78% of Acquisition Services revenues and decreased by
$7.3 million or 17% from the three months ended September 30, 1999. Costs of
services for the three months ended September 30, 1999 were 75% of Acquisition
Services revenues. The increase in cost of services as a percentage

21
<PAGE> 22

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

of revenue is attributable to a reduction in center utilization offset by an
increase in revenue per hour of $1.00 to $24.81.

ChannelCare Segment

Our ChannelCare segment cost of services were 78% of our ChannelCare revenues
for the three months ended September 30, 2000 and in terms of total dollars were
unchanged from the three months ended September 30, 1999. Cost of services for
the three months ended September 30, 1999 were 75% of ChannelCare revenues. The
increase in cost of services as a percentage of revenues is due to a change in
the client mix and an increase in infrastructure to support anticipated higher
volumes.

e-Satisfy.com Segment

Our e-Satisfy.com segment cost of services were 107% of our e-Satisfy.com
revenues for the three months ended September 30, 2000 and increased by $0.8
million or 100% from the three months ended September 30, 1999. Cost of services
for the three months ended September 30, 1999 were 36% of e-Satisfy.com
revenues. The increase in cost of services as a percentage of revenues is the
result of a $0.8 million charge in cost of services to writeoff software
associated with the traditional TARP business platform which will not be used in
the future, and a change in the cost structure associated with their new
business strategy. In addition, e-Satisfy.com initiated a cost reduction program
during the third quarter of 2000 by eliminating 46 positions, representing 66%
of their domestic operation. The charge taken during the quarter for severance
costs was $0.1 million.

Selling, General and Administrative

SG&A expenses were $18.6 million for the three months ended September 30, 2000,
an increase of $2.4 million or 15% from the three months ended September 30,
1999. As a percentage of total revenue, SG&A expenses were 26% and 19% for the
three months ended September 30, 2000 and 1999, respectively. During the quarter
we took a $1.1 million charge related to a change in accounting estimate in our
allowance for doubtful accounts of which $0.8 million went to SG&A. Including
this adjustment bad debt expense was $0.9 million lower in the quarter than the
preceding year. In addition e-Satisfy.com's SG&A amounts increased $1.9 million
to $3.1 million in the quarter, due to a charge in SG&A to write-off software
associated with the traditional TARP business of $0.8 million and salaries and
infrastructure associated with the change in business strategy of $1.1 million.
Depreciation and maintenance fees increased approximately $0.6 million for the
quarter ended September 30, 2000 versus the same period in the prior year due to
increases in technology spending. These increases were offset by overall SG&A
reductions in the core support areas of client services, sales, accounting,
human resources and payroll. The Company had duplicate functions in these areas
during the third quarter of 1999 due to the IDRC merger on June 30, 1999. These
duplicate functions were largely eliminated in the fourth quarter of 1999.

Goodwill Amortization

Our goodwill amortization was $2.5 million, representing 3% of total revenues
for the three

22
<PAGE> 23

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

months ended September 30, 2000, and increased by $0.7 million from the three
months ended September 30, 1999. This increase is due to increased goodwill
recognized in the IDRC merger as well as the CI acquisition.

Interest Expense, net

We incurred net interest expense of $4.1 million for the three months ended
September 30, 2000 which represented an increase of $1.3 million from the three
months ended September 30, 1999. This increase in interest expense is primarily
attributable to increased debt levels , amortization of debt issuance costs and
an increase in average interest rates of approximately 150 basis points.

Minority Interest

Minority interest represents the portion of e-Satisfy.com owned by other
individuals (27.6%). For the three months ended September 30, 2000 minority
interest was $0.9 million. There was no minority interest for the three months
ended September 30, 1999.

Results of Operations

23
<PAGE> 24

Comparison of the results of operations for the nine months ended September 30,
2000 to the nine months ended September 30, 1999.

<TABLE>
<CAPTION>
Results of Operations
(Dollars in Millions)
-----------------------------------------------------------
Nine Months As a Nine Months As a
Ended Percentage Ended Percentage
September 30, of September 30, of
2000 Revenues 1999 Revenues
<S> <C> <C> <C> <C>
Revenues:
Acquisition Services............... $147.1 64% $122.1 68%
ChannelCare........................ 79.3 34 51.2 28
e-Satisfy.com...................... 4.7 2 7.7 4
------ ---- ------ ----
Total revenue........................ 231.1 100 181.0 100

Cost of services:
Acquisition Services.............. 113.4 77 90.3 74
ChannelCare....................... 62.3 79 36.8 72
e-Satisfy.com..................... 3.4 72 3.0 39
------ ---- ------ ----
Total cost of services............... 179.1 77 130.1 72

Total selling, general and........... 52.5 23 39.3 22
administrative
Amortization of goodwill............. 6.4 3 2.4 1
------ ---- ------ ----
Total operating expenses............. 238.0 103 171.8 95

Operating (loss) income.............. (6.9) (3) 9.2 5

Interest expense..................... (11.6) (5) (3.7) (2)
------ ---- ------ ----
(Loss) income before taxes........... (18.5) (8) 5.5 3

Income taxes......................... -- -- -- --
------ ---- ------ ----

(Loss) income before minority........ (18.5) (8) 5.5 3
interest

Minority interest.................... 2.0 1 -- --
------ ---- ------ ----

Net (loss) income.................... $(16.5) (7)% $ 5.5 3%
====== ==== ====== ====
</TABLE>

Revenues

Our total revenues for the nine months ended September 30, 2000 were $231.1
million, representing an increase of 28% from $181.0 million for the nine months
ended September 30, 1999. This increase is primarily attributable to the
addition of IDRC centers for the first two quarters of 2000 resulting in
increased revenue of $65.6 million offset primarily by a decrease in fulfillment
of $6.8 million and e-Satisfy.com of $3.0 million.

Acquisition Services Segment

Our Acquisition Services segment revenues were $147.1 million for the nine
months ended September 30, 2000. These revenues accounted for 64% of our total
revenues and represent an

24
<PAGE> 25
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

increase of $25.0 million or 20% from Acquisition Services revenues of $122.1
million for the nine months ended September 30, 1999. The increase in
Acquisition Services revenues is primarily attributable to the addition of IDRC
centers for the first two quarters of 2000 resulting in increased revenue of
$42.9 million offset by the decline in fulfillment revenue of $6.8 million and
overall reductions in business volumes.

ChannelCare Segment

Our ChannelCare segment revenues were $79.3 million for the nine months ended
September 30, 2000. These revenues accounted for 34% of our total revenues and
increased by $28.1 million or 55% from the nine months ended September 30, 1999.
The increase is primarily due to the addition of IDRC centers for the first two
quarters of 2000 resulting in increased revenue of $22.7 million with the
remaining increase of $5.4 million coming from our voice response business ($2.0
million) and general increases in ChannelCare business volumes.

e-Satisfy.com Segment

Our e-Satisfy.com segment revenues were $4.7 million for the nine months ended
September 30, 2000. These revenues accounted for 2% of total revenues and
decreased by $3.0 million or 39% from the nine months ended September 30, 1999.
During the nine months of 2000, e-Satisfy.com focused on developing their
business-to-business internet strategy after the acquisition of CI in February
2000. During that same period of 1999, the focus was on the traditional TARP
business before the CI acquisition.

Cost of Services

Our cost of services were $179.1 million for the nine months ended September 30,
2000, an increase of $49.0 million or 38% from cost of services of $130.1
million for the nine months ended September 30, 1999. As a percentage of total
revenues, cost of services were 77% and 72% for each of the nine months ended
September 30, 2000 and 1999, respectively.

Acquisition Services Segment

Our Acquisition Services segment cost of services for the nine months ended
September 30, 2000 were 77% of Acquisition Services revenues and increased by
$23.1 million or 26% from the nine months ended September 30, 1999. Costs of
services for the nine months ended September 30, 1999 were 74% of Acquisition
Services revenues. The increase in cost of services as a percentage of revenue
is attributable to lower revenue per hour due to competitive pricing pressures
and lower utilization of call center capacity.

ChannelCare Segment

Our ChannelCare segment cost of services accounted for 79% of our ChannelCare
revenues for the nine months ended September 30, 2000 and increased by $25.5
million or 69% from the nine months ended September 30, 1999. Cost of services
for the nine months ended September 30, 1999 were 72% of ChannelCare revenues.
The increase in cost of services as a percentage of revenues is due to a change
in the client mix and an increase in infrastructure to support

25
<PAGE> 26
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

anticipated higher volumes.

e-Satisfy.com Segment

Our e-Satisfy.com segment cost of services accounted for 72% of our
e-Satisfy.com revenues for the nine months ended September 30, 2000 and
increased by $0.4 million or 13% from the nine months ended September 30, 1999.
Cost of services for the nine months ended September 30, 1999 were 39% of
e-Satisfy.com revenues. The increase in cost of services as a percentage of
revenue is a result of a charge to write-off software associated with the
traditional business platform which will not be used in the future and the
change in the traditional business strategy.

Selling, General and Administrative

SG&A expenses were $52.5 million for the nine months ended September 30, 2000,
an increase of $13.2 million or 34% from the nine months ended September 30,
1999. As a percentage of total revenue, SG&A expenses were 23% and 22% for each
of the nine months ended September 30, 2000 and 1999, respectively. Of the $52.5
million, $8.0 million relates directly to e-Satisfy.com which increased $4.3
million from 1999. The $4.3 million increase is due to a charge to write-off
software associated with the traditional TARP business of $0.8 million in SG&A
and increases in salaries and infrastructure associated with the changes in
e-Satisfies business strategies. Overall maintenance fees and depreciation and
amortization increased $2.4 million in the nine months ended September 30, 2000
over the same period in the preceding year due to the IDRC acquisition and
increases in technology spending. Bad debt expense decreased by $3.1 million
from $5.4 million to $2.3 million for the nine months ended September 30, 2000
and 1999, respectively. The remaining increase in SG&A is attributable to the
IDRC merger.

Goodwill Amortization

Our goodwill amortization was $6.4 million, representing 3% of total revenues
for the nine months ended September 30, 2000, and increased by $4.0 million from
the nine months ended September 30, 1999. This increase is primarily
attributable to the IDRC merger and the CI acquisition.

Interest Expense, net

We incurred net interest expense of $11.6 million for the nine months ended
September 30, 2000 which represented an increase of $7.9 million from the nine
months ended September 30, 1999. This increase in interest expense is primarily
attributable to increased debt levels from the IDRC merger, amortization of debt
issuance costs, and an increase in the average interest rates of approximately
100 basis points.

Minority Interest

Minority interest represents the portion of e-Satisfy.com owned by other
individuals (27.6%). For the nine months ended September 30, 2000 minority
interest was $2.0 million. There was no minority interest for the nine months
ended September 30, 1999.

26
<PAGE> 27
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

Liquidity and Capital Resources

Cash flows provided by (used in) (dollars in thousands):

<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
<S> <C> <C>
Operating activities $ 8,987 $ 2,231
Investing activities (18,146) (17,061)
Financing activities 9,202 14,036
</TABLE>

For the nine months ended September 30, 2000

The $9.0 million of cash provided by operating activities consisted of $16.5
million of net loss offset by non-cash items including depreciation and
amortization of $20.1 million and $2.3 million for bad debts. Working capital
requirements which positively effected cash flow included a decrease in accounts
receivable of $7.9 million, a $1.0 million increase in accrued expenses, a $3.8
million increase in accounts payable, offset by a $1.6 million increase in
prepaids, a $6.3 million decrease in other liabilities and a $2.0 million
decrease in minority interest.

The $18.1 million of cash used in investing activities primarily consisted of
net property and equipment purchases attributable to maintaining and enhancing
our technology platforms. The $9.2 million of net cash provided by financing
activities primarily consisted of net borrowings related to long-term debt.

For the nine months ended September 30, 1999

The $2.2 million of cash used in operating activities consisted of $5.5 million
of net income and noncash items including depreciation and amortization of $11.4
million, and $5.4 million for bad debts, offset by working capital requirements
including an increase in accounts receivable of $11.0 million, and a $5.5
million decrease in accounts payable.

The $17.1 million of cash used in investing activities primarily consisted of
property and equipment purchases attributable to maintaining and enhancing our
technology platforms and the opening/transferring of three call centers.

The $14.0 million of net cash provided by financing activities primarily
consisted of borrowings related to long-term debt.

Financing Matters

27
<PAGE> 28

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

its working capital revolver facility. The working capital revolver facility
also provides for the issuance of letters of credit subject to certain borrowing
limits, of which none were outstanding at September 30, 2000. The unused portion
of the working capital revolver facility is subject to an annual fee of 0.50%.
The Term A facility matures December 31, 2001 and requires quarterly principal
payments totaling $4.0 million for the remainder of 2000 and $10.0 million in
2001. The Term B facility matures December 31, 2002 and requires quarterly
principal payments totaling $0.1 million for the remainder of 2000, $0.3 million
in 2001, and a final payment of $19.3 million in 2002. The Term C facility
matures December 31, 2003 and requires quarterly principal payments totaling
$0.2 million for the remainder of 2000, $0.4 million in 2001, $0.9 million in
2002 and $48.0 million in 2003. All outstanding principal is due under the
working capital revolver facility on the maturity date, December 31, 2001.
Currently, the Company has fully utilized the credit available under the Term A,
Term B, Term C and working capital revolver facilities.

28
<PAGE> 29
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

deferred through November 17, 2000. Additional interest, computed at 2% per
annum of the total Credit Facility is now being charged. Currently, the Company
has an understanding with its senior lending group to waive principal payments
and compliance with financial covenants through November 17, 2000. Since the
Company's agreement with its senior lending group does not waive financial
covenants for a period through October 1, 2001, the Company is required to
classify amounts related to its Credit Facilities as current liabilities.
Management is seeking to negotiate the extension of waivers relating to
compliance with financial covenants.

During the second quarter of 2000, the Company renegotiated the terms of a note
payable to the former principals of TARP. The original scheduled payment of $1.2
million due June 30, 2000 was changed to payments of $300,000 on the first day
of July, October, November and December plus interest at 10%. Payments of
$300,000 and $100,000 were made the first of July and October, respectively. The
Company was prohibited from paying the November installment by its senior lender
making the Company in default on this agreement. The balance of these notes have
been shown as current liabilities as of September 30, 2000.

e-Satisfy.com Debt

During May 2000 a shareholder of TeleSpectrum advanced $500,000 to e-Satisfy.com
in return for convertible promissory notes and 200,000 warrants to purchase
e-Satisfy.com Common Stock. The notes bear interest at 8% and were due August
31, 2000 if additional equity totaling $3,000,000 (a "Subsequent Financing") was
not obtained by June 15, 2000. Upon the consummation of a Subsequent Financing,
the notes automatically convert to 285,715 shares of Series A Common Stock of
e-Satisfy.com after August 31, 2000. A Subsequent Financing was not obtained and
on September 13, 2000 a forebearance agreement was entered into which deferred
principal and interest payments to December 12, 2000. On November 8, 2000, the
lender subordinated their position to the factoring arrangement discussed below.
The warrants expire in seven years and were exerciseable at $2.50 per warrant
unless a Subsequent Financing was not obtained by August 31, 2000, in which case
they are $.01 per warrant.

During June 2000 the same TeleSpectrum shareholder advanced an additional
$500,000 to e-Satisfy.com in return for convertible promissory notes and 250,000
warrants to purchase e-Satisfy.com Common Stock. The notes bear interest at 8%
and were due October 15, 2000 if additional equity totaling $5,000,000 (a
"Subsequent Financing") was not obtained by July 31, 2000. Upon consummation of
a Subsequent Financing, the notes automatically convert to 357,143 shares of
Series A Common Stock of e-Satisfy.com after August 31, 2000. A Subsequent
Financing was not obtained putting e-Satisfy.com into technical default on these
notes. e-Satisfy.com is currently negotiating with the lender to obtain a
forebearance agreement. On November 8, 2000, the lender subordinated their
position to the factoring arrangement discussed below. The warrants expire in
seven years and were exerciseable at $2.00 per warrant unless a Subsequent
Financing was not obtained by August 31, 2000, in which case they are $.01 per
warrant.

29
<PAGE> 30

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

GOING CONCERN MATTERS

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. The Company has incurred substantial recurring losses from
operations, and has a deficit tangible net worth in the amount of $(58,290,000)
at September 30, 2000. As discussed above, the Company has an understanding with
its senior lending group to waive principal payments and compliance with
financial covenants through November 17, 2000. Since the Company's agreement
with its senior lending group does not waive financial covenants for a period
through October 1, 2001, the Company is required to classify amounts related to
its Credit Facilities as current liablities. Due primarily to this
classification, the Company has a working capital deficiency of $(118,000,000)
as of September 30, 2000.

The Company has generated positive earnings before interest, taxes, depreciation
and amortization ("EBITDA") each quarter of 2000 and $13,562,000 for the nine
months ended September 30, 2000. Excluding e-Satisfy.com, the Company has
generated $17,880,000 in EBITDA during the same period.

These circumstances call into question the Company's ability to continue as a
going concern. The Company has been advised by its independent public
accountants that in the event the Company

30
<PAGE> 31
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

is unsuccessful in amending the Credit Facilities, or in obtaining additional
long-term financing prior to the completion of their audit of the Company's
financial statements for the year ending December 31, 2000, their auditors'
report on those financial statements may include an explanatory paragraph
regarding the Company's ability to continue as a going concern. The accompanying
consolidated financial statements do not include any adjustments relating to the
recoverability of assets or the classification of liabilities should the Company
be unable to continue as a going concern.

OTHER

During November 2000 David R. Kriegel resigned from the board of directors and
as chairman of the compensation committee and was replaced as chairman of the
compensation committee by Richard W. Virtue.

Year 2000 Issue

The Year 2000 issue results from the writing of computer programs using two
digits rather than four to define the applicable year. Because of this
programming convention, computer software, hardware or firmware may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
system failures, miscalculations or error causing disruptions of operations or
other business problems, including, among others, a temporary inability to
process transactions or engage in other normal business activities.

Starting in 1998 and continuing in 1999 we undertook a comprehensive program,
including the hiring of an outside consulting firm, to address the Year 2000
issue.

As of September 30, 2000, we had spent approximately $1.6 million on the Year
2000 issue. Many of our systems that required Year 2000 remediation or
replacement also received performance upgrades or enhancements. Our costs do not
include costs related to these upgrades or enhancements. Because we have not
experienced material Year 2000 problems at the beginning of 2000 or any material
leap year issues after February 29, 2000, we do not expect future remediation
costs to be material to our consolidated position or results of operations.

31
<PAGE> 32
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

In connection with the merger of IDRC on June 30, 1999, we refinanced $10.5
million of our $20.0 million Secured Credit Facility debt and acquired $118.6
million in senior debt under the new $135.0 million Credit Facilities. The
increased level of long-term debt increases our exposure to interest rate risk.

We pay interest to the Credit Facilities banks based on a floating interest
rate, either the prime rate or LIBOR. Based on the outstanding balance under the
Credit Facilities at September 30, 2000, we would be required to pay an
additional $1.3 million in interest annually for every 1.0% increase in the
average prime rate or LIBOR. To reduce the risk associated with a large increase
in interest rates, we have in place two derivative financial instruments known
as interest rate caps each with notional amounts of $29.5 million. Under the
terms of the interest rate cap agreements, we would receive quarterly cash
payments when the 3-month LIBOR rate at the end of any quarter exceeded 7.5%.
The payment would be determined by multiplying the difference between the actual
LIBOR rate and 7.5% by the notional amounts of $29.5 million. The interest rate
cap agreements expire on September 30, 2002. These interest rate caps are
required under the terms of the $135.0 million Credit Facilities, which dictates
that we establish and maintain three-year interest rate caps at 200 basis points
above the three-month LIBOR rate with notional amounts not less than 66.0% of
the term loan balance. The three-month LIBOR interest rate was approximately
6.7% at September 30, 2000.

Foreign Currency Risk

We have subsidiaries in Canada and the United Kingdom, which are subject to
foreign currency fluctuations. As currency rates change, translation of income
statements of these subsidiaries from local currencies to U.S. dollars affects
year-over-year comparability of our operating results. Gains and losses on
translation are recorded as a separate component of stockholders' equity.

Approximately $22.0 million of the Credit Facilities proceeds have been loaned
to our Canadian subsidiary (acquired in the June 30, 1999 merger with IDRC). The
loan proceeds have been converted to Canadian dollars. Under the terms of the
Credit Facilities agreement, large principal payments due in the years 2002 and
2003 may require conversion of all or a portion of our Canadian dollar loan to
U.S. dollars. An unfavorable change in the Canadian dollar exchange rate at the
time of the conversion could cause a foreign currency exchange loss. At this
time, we do not believe that such a conversion would be required. The other
foreign subsidiaries are limited in their operations and the level of investment
by the parent company so that risk of foreign currency fluctuations is not
expected to be material.

32
<PAGE> 33

TELESPECTRUM WORLDWIDE 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

None

ITEM 5.

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

The following is a list of exhibits filed as part of this
quarterly report on Form 10-Q. Where so indicated by footnote,
exhibits which were previously filed are incorporated by
reference. For exhibits incorporated by reference, the location
of the exhibit in the previous filing is indicated in
parentheses.

3.01 Restated Certificate of Incorporation of TeleSpectrum
Worldwide Inc. is incorporated by reference to exhibit 3.01
of the Company's Registration Statement on Form S-1 (File
No. 333-04349).

3.02 Bylaws of TeleSpectrum Worldwide Inc. are incorporated by
reference to exhibit 3.02 of the Company's Registration
Statement on Form S-1 (File No. 333-04349).

10.1 Amendment No. 5 & Limited Waiver to the Credit Agreement
(this "Amendment") dated as of September 30, 2000, by and
among TeleSpectrum Worldwide, Inc., a Delaware corporation
(the "Borrower"), the financial institutions listed on the
signature pages (the "Lenders"), BNP

33
<PAGE> 34

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

Paribas, as collateral agent (the "Agent"), and Bank of
America, N.A., as administrative agent for the Lenders (the
"Administrative Agent")

10.2 Amendment No. 6 & Limited Waiver to the Credit Agreement
(this "Amendment") dated as of October 13, 2000, by and
among TeleSpectrum Worldwide, Inc., a Delaware corporation
(the "Borrower"), the financial institutions listed on the
signature pages (the "Lenders"), BNP Paribas, as collateral
agent (the "Agent"), and Bank of America, N.A., as
administrative agent for the Lenders (the "Administrative
Agent")

10.3 Extension of Amendment No. 6 & Limited Waiver to the Credit
Agreement dated as of October 27, 2000, by and among
TeleSpectrum Worldwide, Inc., a Delaware corporation (the
"Borrower"), the financial institutions parties thereto (the
"Lenders"), BNP Paribas, as collateral agent (the "Agent"),
and Bank of America, N.A., as administrative agent for the
Lenders (the "Administrative Agent")

10.4 Second Extension of Amendment No. 6 & Limited Waiver to the
Credit Agreement dated as of November 3, 2000, by and among
TeleSpectrum Worldwide, Inc., a Delaware corporation (the
"Borrower"), the financial institutions parties thereto
(the "Lenders"), BNP Paribas, as collateral agent (the
"Agent"), and Bank of America, N.A., as administrative agent
for the Lenders (the "Administrative Agent")

10.5 Third Extension of Amendment No. 6 & Limited Waiver to the
Credit Agreement dated as of November 10, 2000, by and among
TeleSpectrum Worldwide, Inc., a Delaware corporation (the
"Borrower"), the financial institutions parties thereto (the
"Lenders"), BNP Paribas, as collateral agent (the "Agent"),
and Bank of America, N.A., as administrative agent for the
Lenders (the "Administrative Agent")

10.6 McCown DeLeeuw Subordination Agreement

10.7 Convertible Promissory Note dated May 11, 2000 with
McCown De Leeuw III

10.8 Convertible Promissory Note dated May 11, 2000 with
McCown De Leeuw III (Europe)

10.9 Convertible Promissory Note dated May 11, 2000 with
McCown De Leeuw III (Asia)

10.10 Convertible Promissory Note dated May 11, 2000 with
Gamma Fund LLC

10.11 Warrant to Purchase Common Stock dated May 11, 2000 with
McCown De Leeuw III

10.12 Warrant to Purchase Common Stock dated May 11, 2000 with
McCown De Leeuw III (Europe)

10.13 Warrant to Purchase Common Stock dated May 11, 2000 with
McCown De Leeuw III (Asia)

10.14 Warrant to Purchase Common Stock dated May 11, 2000 with
Gamma Fund LLC

10.15 Convertible Promissory Note dated June 23, 2000 with
McCown De Leeuw III

10.16 Convertible Promissory Note dated June 23, 2000 with
McCown De Leeuw III (Europe)

10.17 Convertible Promissory Note dated June 23, 2000 with
McCown De Leeuw III (Asia)

10.18 Convertible Promissory Note dated June 23, 2000 with
Gamma Fund LLC

10.19 Warrant to Purchase Common Stock dated June 23, 2000 with
McCown De Leeuw III

10.20 Warrant to Purchase Common Stock dated June 23, 2000 with
McCown De Leeuw III (Europe)

10.21 Warrant to Purchase Common Stock dated June 23, 2000 with
McCown De Leeuw III (Asia)

10.22 Warrant to Purchase Common Stock dated June 23, 2000 with
Gamma Fund LLC

10.23 Employment Agreement between TeleSpectrum Worldwide, Inc.
and Fenton R. Talbott

27.01 Financial Data Schedule.

(b) FORM 8-K

NONE

34
<PAGE> 35
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

TeleSpectrum Worldwide Inc.
-------------------------------------
(Registrant)

\s\ Vincent J. Ciavardini
-------------------------------------
Vincent J. Ciavardini
TeleSpectrum Worldwide Inc.
President & Chief Executive Officer

Date: November 14, 2000 \s\ Kurt Dinkelacker
-------------------------------------
Kurt Dinkelacker
TeleSpectrum Worldwide Inc.
Chief Financial Officer

<PAGE> 36
EXHIBIT INDEX

Exhibit
Number Description of Exhibit
------ ----------------------