SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                 -------------

                                   FORM 10-K

(Mark One)
[X]        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) 
           OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended December 31, 1996

                                       OR

[ ]        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 0-26015

                              CRW FINANCIAL, INC.
             -----------------------------------------------------
             (Exact name of registrant as specified in its charter)

          Delaware                                           23-2691986
  -----------------------------                           -----------------
 (State or other jurisdiction of                          (I.R.S. Employer
 incorporation or organization)                           Identification No.)



          443 South Gulph Road
          King of Prussia, PA                                   19406
----------------------------------------                     ------------
(Address of principal executive offices)                      (Zip Code)
   


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

Securities registered pursuant to Section 12(b) of the Act:

                                                 Name of each exchange
      Title of each class                         on which registered
      --------------------                       --------------------
            NONE                                         NONE

          Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.01 per share
                     ---------------------------------------
                                (Title of Class)

     Indicate by check mark whether the Registrant (1) has filed all reports to
be filed by Section 13 or 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___.


     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X}

     The aggregate market value of the voting stock held by non-affiliates of
the Registrant is approximately $27,134,754. Such aggregate market value was
computed by reference to the closing price of the Common Stock as reported on
the NASDAQ Small Cap Market on March 28, 1997. For purposes of making this
calculation only, the Registrant has excluded shares held by all directors,
executive officers and beneficial owners of more than ten percent of the Common
Stock of the Company.

     The number of shares of the Registrant's Common Stock outstanding as of
March 28, 1997 was 5,884,984 shares.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant's definitive proxy statement for its 1997 Annual
Meeting of Stockholders are incorporated by reference into Part III.





                                TABLE OF CONTENTS

                                     PART I

Item 1.   Business......................................................     2
Item 2.   Properties....................................................     5
Item 3.   Legal Proceedings.............................................     6
Item 4.   Submission of Matters to a Vote of Security Holders...........     6

                                     PART II

Item 5.   Market for Registrant's Common Equity and Related
          Stockholder Matters...........................................     7
Item 6.   Selected Financial Data.......................................     8
Item 7.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations...........................     9
Item 8.   Financial Statements and Supplementary Data...................    14
Item 9.   Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure...........................    14

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant............    14
Item 11.  Executive Compensation........................................    14
Item 12.  Security Ownership of Certain Beneficial
          Owners and Management.........................................    14
Item 13.  Certain Relationships and Related Transactions................    14

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on
          Form 8-K......................................................    15



     In addition to historical information, this Annual Report contains
forward-looking statements relating to such matters as anticipated financial
performance, business prospects and similar matters. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. In order to comply with the terms of the safe harbor, the Company
notes that a variety of factors could cause the Company's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking statements. The risks
and uncertainties that may affect the operation, performance and development and
results of the Company's business include, but are not limited to, those matters
discussed herein in the sections entitled "Item 1 - Business" and "Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations." The words "believe," "expect," "anticipate," "project" and similar
expressions identify forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which reflect
management's analysis only as of the date hereof. The Company undertakes no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that arise after the date hereof.

     Unless the context indicates otherwise, the terms "CRW" and "Company" refer
to CRW Financial, Inc.
                                       1
<PAGE>


                                     PART I

ITEM 1.  BUSINESS

Background

     CRW Financial, Inc. ("CRW" or the "Company") founded TeleSpectrum Worldwide
Inc. ("TLSP") in April 1996. TLSP is a premier provider of integrated
teleservices and is listed on the NASDAQ National Market System under the symbol
"TLSP." CRW owns approximately 6.2 million shares of TLSP, representing
approximately 25% of the outstanding common stock of TLSP. CRW also owns 345,178
shares of NCO Group, Inc. ("NCOG") common stock. NCOG is a leading provider of
accounts receivable services listed on the NASDAQ National Market System under
the symbol NCOG. CRW's investment in NCOG was made on February 2, 1997 when it
sold the assets of its accounts receivable management and debt collection
division (the "Collection Business" or "Collection Division") to NCOG. In
addition, CRW's wholly-owned subsidiary Casino Money Centers, Inc. ("CMC")
provides check cashing and other financial services to the casino industry.


     CRW was spun-off from its predecessor company, Casino & Credit Services,
Inc. ("CCS"), in May 1995. CCS was formed in May 1992 and in July 1992, CCS
purchased Receivable Management Services, Inc. and Central Credit, Inc. ("CCI")
from TRW Inc. for approximately $11.5 million. CCS was capitalized with
approximately $12.1 million of bank and convertible debt and $1 million of
equity. In August 1993, CCS completed an initial public offering of its common
stock, generating net proceeds of approximately $12.7 million and valuing CCS at
approximately $26 million. Proceeds from the offering were used to repay all of
CCS' debt and fund the acquisition of Central Credit of New Jersey, Inc., CCI's
only competitor. During the remainder of 1993 and 1994, CCS completed the
acquisition of five complimentary receivables management ("Collection")
businesses for an aggregate of approximately $5.5 million in cash and formed
Casino Money Centers, Inc. to complement CCI's business.

     In July 1994, CCS commenced discussions with Hospitality Franchise Systems,
Inc. ("HFS") regarding a sale of CCI. In November 1994, CCS and HFS announced a
merger and plan of reorganization whereby CCS would merge with HFS after a
spin-off of the collection business and CMC to CCS' shareholders. In May 1995,
the merger and spin-off were completed resulting in CCS shareholders receiving
approximately $37.2 million in HFS common stock and approximately $3.5 million
in CRW common stock. CRW's common stock began trading on the NASDAQ Small Cap
Market under the symbol "CRWF" on May 11, 1995.

     In December 1995, CRW's management team began to explore the creation of a
telemarketing subsidiary to capitalize on the rapid growth in demand by large
corporations for large-scale professional telemarketing services. CRW's
management team concluded that its experience in acquiring and operating call
centers for its collection business would provide the foundation to build a CRW
subsidiary into a leading teleservices company. In April 1996, CRW formed TLSP
and TLSP agreed to acquire four telemarketing businessess, a market research
business and a fulfillment business, contingent upon an initial public offering
of its common stock. In August 1996, TLSP completed its initial public offering,
generating net proceeds of approximately $162 million and valuing TLSP at
approximately $375 million. The total purchase price for the six businesses
acquired was approximately $200 million consisting of approximately $90.9
million in cash, $49 million in TLSP stock and warrants, $25.6 million in notes,
and $34.5 million in assumed liabilities and transaction expenses.

     In October 1996, CRW's Board of Directors approved a plan to sell the
Company's Collection Division. On February 2, 1997, the Company completed the
sale of its Collection Division to NCOG for approximately $12.8 million,
consisting of $3.75 million in cash, 345,178 shares of NCOG common stock and a
warrant to purchase 250,000 shares of NCOG common stock for $27.625 per share.
The results of the Collection Division and CCI's results have been presented as
discontinued operations in the accompanying financial statements.

                                       2
<PAGE>

     The Company is continuing to explore ways to further increase shareholder
value, including through a spin-off of CMC and further development of its
relationship with and investment in TLSP, although there can be no assurance
that such increase in value will be achieved.

     Currently, CRW's only operating business is conducted through its
wholly-owned subsidiary, CMC.

CMC Background


     Casino Money Centers, Inc. ("CMC") was formed in September 1993 to provide
funds transfer services at gaming sites. CMC opened its first casino operation
in October 1993 at the Table Mountain Casino, a casino located on Indian land
near Fresno, California. CMC purchased Strip Check Cashing Service, Inc. in Las
Vegas, Nevada in February 1994 and established operations in the Oneida casino
on Indian lands in Green Bay, Wisconsin in July 1994 and in the Mohican
Northstar Casino on Indian Lands in Bowler, Wisconsin in December 1995. In
August 1995, CMC acquired the operations of All Check Cashing, Inc. in Laughlin,
Nevada. In January 1997, CMC began operations in the Grand Coushatta Casino in
Louisiana and purchased the assets of Twain Check Cashing in Las Vegas, Nevada.


General

     CMC provides funds transfer services to casino customers through operations
located in casinos. These services include wire transfers, cash advances on
debit and credit cards and check cashing. Currently, CMC operates in five
casinos, one in Las Vegas, two in Wisconsin, one in Louisiana and one in
California and is actively pursuing arrangements to establish additional casino
operations. In addition, CMC operates two locations not located within casinos.
The funds transfer business, however, is highly competitive, and there can be no
assurance that CMC will be successful in achieving its planned expansion.

     CMC offers wire transfers, debit and credit card cash advance services and
check cashing services based upon the requirements of the host casino. Debit and
credit card cash advance services are provided through a system which enables
casino customers to use their MasterCard(R), VISA(R) or Discover(R) credit cards
to obtain cash in the casino. The casino customer may initiate a request for a
cash advance at CMC's service desk or at one of CMC's remote terminals located
on the casino floor. The use of a remote terminal affords the casino customer
privacy and the ability to determine whether the desired cash advance will be
authorized by the customer's credit card company. The remote terminal also
speeds the cash advance process by allowing multiple pre-authorizations to occur
simultaneously and by enabling service desk personnel to handle more
transactions.

     Check cashing services are provided at all of CMC's casino operations. When
a casino customer requests check cashing at CMC's service desk, CMC conducts a
check verification process using identification procedures and software licensed
by CMC. Each transaction also provides additional data for CMC's customer
database, which database is used in assessing the credit worthiness for the
particular customer.

     CMC provides its services pursuant to one to two year agreements with the
operators of the host casinos. Such agreements enable the casino operators to
provide funds transfer services to their customers without assuming any credit
risk. CMC believes that the efficient and confidential manner in which it
provides its services makes CMC's services attractive to casino operators and
their customers.


The Casino Gaming Market

     Casino gaming in the United States has expanded significantly in recent
years. Once found only in Nevada and New Jersey, casino gaming has recently been
legalized in numerous states, including land-based casinos on Indian lands and
elsewhere, and on riverboats and dockside casinos. Several additional
jurisdictions are currently considering the authorization of casino gaming.

                                       3
<PAGE>

     The expansion of casino gaming has generated a corresponding demand for
ancillary services, including funds transfer services in casinos. While some
casino operators provide such services directly, most casinos rely on third
parties to provide funds transfer services pursuant to contracts with the casino
operator. CMC management believes that the principal objective of casino
operators in providing or arranging for such services is to promote gaming
activity by making funds available to casino customers on a convenient basis. In
some cases, however, the casino operator may view such services as a potential
profit center separate from the gaming operations.

     CMC's business currently is concentrated in the casino gaming industry and
its plan of operation contemplates that CMC's operations will continue to be
focused on operations in casinos and other gaming locations. Accordingly, a
decline in the popularity of gaming, a reduction in the rate of expansion of
casino gaming, changes in laws or regulations affecting casinos and related
operations, or other adverse changes in the gaming industry would have an
adverse effect on CMC's operations.


Debit and Credit Card Advances

     CMC provides a system by which casino customers may use their
MasterCard(R), VISA(R) or Discover(R) credit cards to obtain cash. In a typical
credit card transaction, the amount of the cash advance together with a service
fee is charged to the individual's MasterCard(R), VISA(R) or Discover(R) credit
card account. Upon authorization of the transaction by either the bank who
issued the card, the credit card company or a designated agent, CMC issues a
draft to the customer who then cashes the draft at CMC's service desk in the
casino. The casino customer may initiate a request for a cash advance at CMC's
service desk or at one of CMC's remote terminals located on the casino floor.
The use of a remote terminal serves several purposes. First, it affords the
casino customer privacy. The remote terminal informs the casino customer whether
the desired cash advance will be authorized, eliminating embarrassment if the
request is not approved. Second, it speeds the process by allowing multiple
pre-authorizations to occur simultaneously, thereby reducing any bottleneck of
customers at the service desk.

     For debit and credit card advances, customers are currently charged a
transaction fee equal to a percentage of the amount advanced, or a flat fee,
whichever is greater. The fee is charged to the customer's card at the time of
the advance. CMC pays a vendor a fee based on a percentage of the amount of the
cash advance. The vendor then pays MasterCard, VISA and Discover. In some cases,
such as when CMC must seek a manual or voice authorization or does not transmit
its transactions electronically, the fee can be a higher percentage than
otherwise would be charged. Any fee owed by CMC to MasterCard, VISA or Discover
is deducted from the monthly settlement made by the card companies to CMC.


Check Cashing Services

     CMC currently provides check cashing services at each of its casino
locations. A casino customer initiates a request for check cashing at CMC's
service desk at the casino. CMC uses systems and software licensed by CMC to
store and maintain data regarding all customer check cashing activity to aid in
the check verification process. The system and software enable CMC's employees
to perform the following functions: accept and store customer data, including
names, addresses and other personal data; review recent transactions of existing
customers; determine the collection risk in cashing a particular customer's
check; add check cashing transactions for any customer in the database; add
return item data for any customer in the database; add payment transactions for
any customer in the database; and summarize the daily check cashing activity for
transmittal to headquarters. The system and software permit information to be
gathered and reported in an efficient and timely manner. CMC has designed and
implemented a credit rating system which utilizes this customer database to
determine whether a casino customer's check should be cashed.

     Fees for check cashing services are paid by the customer. Check cashing
involves the risk that some cashed checks will be uncollectible because of
insufficient funds, stop payment orders, closed accounts or fraud. This risk of
collection is greater in new locations where the amount of data in CMC's
database is smaller.

                                       4
<PAGE>

Wire Transfer Services

     CMC provides wire transfer services to casino customers through CMC
operations located at casinos.



Competition

     CMC competes with a number of providers of funds transfer services in
casinos, many of which have significantly greater financial resources than CMC.
Competitors include Game Financial, Premier CashLink, Valley National Bank and
First Interstate Bank of Nevada, which currently provide cash advance services
in casinos and other gaming locations through automated teller machines ("ATMs")
and other facilities located at casinos and other gaming establishments, and in
hotels associated with casinos.

     CMC also competes with sponsors of ATM networks which place ATMs in
casinos, and with major credit card companies and vendors of traveler's checks,
which make cash available to holders of their credit cards and checks on a
nationwide basis. ATMs offer several advantages in providing cash advances,
including the following: speed, convenience, and minimal expense per
transaction; limited supervision required by casino staff, and, with a personal
identification number ("PIN"), access to most major credit cards, including
VISA, MasterCard, American Express, Diners Club and Discover cards. Customers
who utilize ATMs to obtain cash advances, however, must have and remember a PIN
and are subject to limitations (typically $300) on the amount of cash which may
be withdrawn in a day.

     CMC believes that the principal competitive factors in providing credit
card cash advance and check cashing services are marketing efforts, pricing,
reliability, convenience and speed in effecting transactions.


Government Regulation

     Many states require companies engaged in the business of providing cash
advance services or transmitting funds to obtain a license from the appropriate
state agency. In certain states, such as Wisconsin, such companies are required
to post bonds or other collateral to secure their obligations to their customers
in those states. State agencies have extensive discretion to deny or revoke
licenses. CMC has obtained the necessary licenses and bonds to do business in
the states where it currently operates and will be subject to similar and
possibly more onerous licensing requirements if it expands its operations into
other jurisdictions. While there can be no assurance that it will be able to do
so, CMC anticipates that it will be able to obtain and maintain the licenses
necessary for the conduct of its business.

Employees

     As of March 14, 1997, CRW had 82 full-time employees. The full-time
employees consisted of 11 engaged in corporate management and administration and
71 in CMC operations.


ITEM 2.  PROPERTIES

     CRW leases an aggregate of 13,000 square feet in King of Prussia,
Pennsylvania from 210 Mall Boulevard Associates, a partnership which is
controlled by J. Brian O'Neill, CRW's Chief Executive Officer. The lease
commenced on December 15, 1996 and requires monthly base rent payments through
December 15, 2001 of $23,478. CRW believes the lease to be at the prevailing
commercial market rate. In 1996, CRW paid $11,739 in rent to 210 Mall Boulevard
Associates. CRW also subleases a 22,000 square foot facility in King of Prussia,
PA from HFS, Inc. and has subleased the facility to TLSP. HFS leases the
facility from CRW Building Limited Partnership, a partnership controlled by Mr.
O'Neill. Prior to subleasing the facility to TLSP, CRW paid approximately
$365,000 in rent in 1996 under the sublease from HFS. In addition, CRW also
leased office space in 1996 in Conshohocken, PA, from Lee Park Investors, L.P.,
a partnership controlled by Mr. O'Neill. The lease was assumed by NCOG on
February 2, 1997. CRW paid approximately $46,000 in rent to Lee Park 
Investors, L.P.

                                       5
<PAGE>

in 1996. The aggregate minimum rent due on all of the above leases through
the end of their terms, net of commitments for payments under subleases is
approximately $1.3 million.

ITEM 3. LEGAL PROCEEDINGS

     CRW is a party to a number of lawsuits incidental to the ordinary course
of business of its Collection Division. NCOG did not assume any potential
liability under such lawsuits in connection with NCOG's acquisition of the
Collection Division's net assets in February 1997. The Company intends to
vigorously defend all such actions and, in the current opinion of management,
the ultimate resolution of such actions will not have a material adverse
effect on the Company's business, financial condition or results of operations,
although there can be no assurance that this will be the case.

     One of such lawsuits was filed in August 1996 by Eugene Piscitelli, an
employee of the Company, in the United States District Court for the Eastern
District of Pennsylvania. Mr. Piscitelli has made a claim against the Company
for an unspecified amount of money damages in excess of jurisdictional limits
based on claims of alleged fraud in the inducement by the Company and alleged
breach by the Company of his employment agreement with respect to compensation
matters. The Company believes that Mr. Piscitelli's claims have no merit and
intends to vigorously defend this action.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The following matters were submitted to and approved by a vote of the
Company's stockholders, following the solicitation of stockholder proxies by the
Board of Directors, at the 1996 Annual Meeting of Stockholders of the Company
held on October 3, 1996. The Board of Directors fixed the close of business on
August 5, 1996 as the record date for determining the stockholders entitled to
notice of and to vote at the Meeting and any adjournment thereof. Stockholders
voted their shares as indicated below. Holders of Preferred Stock did not have
voting rights with respect to Item 1 below. With respect to Items 2 and 4, the
vote of holders of Common Stock and Preferred Stock was conducted together as an
aggregate. Item 3 was approved by the affirmative vote of a majority of the
shares of Common Stock and Preferred Stock present and entitled to vote, each
voting separately as a class.

<TABLE>
<CAPTION>
                                                                               Shares Voted 
                                                                               ------------ 

                                                                   For            Against        Abstain
                                                                   ---            -------        -------
<S>                                                              <C>            <C>             <C>
1.  The election of Robert N. Verratti as the Class I
     director of the Company for a three year term.              1,050,871          --            1,300
                                                                                  
2.  The approval and adoption of the Company's
     Amended and Restated 1995 Stock Option Plan                   826,249         47,167         3,300

3.  The amendment to the Company's Restated Certificate
     of Incorporation in order to increase the
     authorized common stock from 5,000,000 to
     20,000,000 shares.

             a.  Common Stock                                      991,551         59,320         1,300
             b.  Preferred Stock                                   408,777              0             0
             c.  Aggregate                                       1,400,328          1,000           700


4.  The ratification of the appointment by the Board
     of Directors of Arthur Andersen LLP as the Company's
     independent certified public accountants                    1,459,248          1,000           700

</TABLE>

                                       6
<PAGE>

                                     PART II

ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters.

     The Common Stock of CRW Financial, Inc. is quoted on the NASDAQ Small Cap
Market under the symbol "CRWF". The following table sets forth, for the periods
indicated, the range of high and low closing sale prices as reported on the
NASDAQ Small Cap Market since the Common Stock commenced public trading on May
11, 1995.



===============================================================================
-------------------------------------------------------------------------------


                                                           High        Low
                                                           ----        ---
Fiscal 1995
   Second Quarter (commencing May 11, 1995)               $1.71       $0.98
   Third Quarter                                           1.71        1.08
   Fourth Quarter                                          3.42        1.38
   
Fiscal 1996
   First Quarter                                           2.80        1.88
   Second Quarter                                         13.33        2.75
   Third Quarter                                          12.67        9.33
   Fourth Quarter                                         11.83        6.75
   
Fiscal 1997
   First Quarter (through March 28, 1997)                  9.38        6.25


===============================================================================


     As of March 22, 1997 there were 54 holders of record of the Common Stock of
CRW. Because a substantial portion of the Company's Common Stock is held in
street name, the Company believes that it has a significantly larger number of
beneficial owners of its Common Stock.

     CRW has never paid a cash dividend on its Common Stock. Under CRW's loan
agreement with its bank, CRW is prohibited from paying a cash dividend on its
Common Stock without the consent of the bank. CRW currently intends to retain
all earnings for use in its business and does not anticipate paying any cash
dividend on the Common Stock in the foreseeable future.

     On February 29, 1996, CRW sold an aggregate of 430,293 shares of its Series
A Convertible Preferred Stock, without par value ("Preferred Stock"), and
warrants (the "Warrants") to purchase 451,812 shares of common stock at an
exercise price of $1.94 per share to an investor group consisting of several
investment funds and certain individuals. The aggregate purchase price received
by CRW for such securities was approximately $2.5 million.

                                       7
<PAGE>

In December, 1996, the Preferred Stock was converted pursuant to its terms
into 1,290,879 shares of common stock. In January, 1997, the Warrants were
exercised pursuant to a cashless exercise whereby the warrants were exchanged
for 354,586 shares of common stock. The sale of such securities was conducted
pursuant to an exemption from registration provided by Rule 506 of Regulation D
under the Securities Act of 1933, as amended.

ITEM 6. SELECTED FINANCIAL DATA

     The historical consolidated financial statements of CRW have been deemed to
be those of CCS, restated to reflect the classification of the Collection
Business and CCI as discontinued operations. The selected historical
consolidated financial information of CRW set forth in the tables below have
been derived from the audited financial statements of CCS for the period from
July 18, 1992 to December 31, 1992 and for the years ended December 31, 1993 and
1994 and from the audited financial statements of CRW for the years ended
December 31, 1995 and 1996. The Company's CMC business did not have substantial
operations prior to January 1, 1994, therefore, the Company did not have any
revenues from continuing operations prior to that date. The following
information should be read in conjunction with and is qualified in its entirety
by reference to the historical consolidated financial statements and
accompanying notes of CRW included elsewhere in this Form 10-K. See Notes 1, 2,
3 and 13 to CRW's historical consolidated financial statements.


<TABLE>
<CAPTION>
                                                 Period
                                                 from
                                                 July 18,
                                                 1992 to               Year Ended December 31
                                                 December              ----------------------
                                                 31, 1992     1993         1994        1995       1996
                                                 --------     ----         ----        ----       ----
                                                             (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                            <C>           <C>          <C>         <C>        <C>
Statement of
 Operations Data:
Net revenues......................              $    --     $    --       $ 1,429    $ 2,949     $ 3,412
 Operating expenses, excluding
  non-cash and special charges....                  500       1,408         3,664      3,458       5,504
                                                    
Special compensation charge.......                   --          --            --         --       1,319
Depreciation and
 Amortization.....................                   --          --            23         48         162
                                                -------     -------       -------     -------    ------- 
Operating loss from
 continuing operations............                 (500)     (1,408)       (2,258)      (557)      (3,573)
Other income......................                   --          --            --         --       1,136
Equity in earnings of TLSP .......                   --          --            --         --         774
Interest expense..................                 (530)       (697)         (263)      (655)       (825)
                                                -------     -------       -------     -------    ------- 
Loss from continuing operations
 before income tax benefit........               (1,030)     (2,105)       (2,521)    (1,212)     (2,488)

Income tax benefit................                 (333)       (730)         (622)        --        (855)
                                                -------     -------       -------     -------    ------- 
Loss from continuing
 operations.......................                 (697)     (1,375)       (1,899)    (1,212)     (1,633)
Income (loss) from
 discontinued operations and
 gain of $28,176 in 1995 from
 merger, net of tax...............                 (590)       (356)          104     29,275      (1,152)
                                                -------     -------       -------    -------     ------- 
Income (loss) before                             
 extraordinary item...............               (1,287)     (1,731)       (1,795)    28,063      (2,785)
Extraordinary loss on
 extinguishment of debt,                             
 net of tax benefit...............                   --      (1,467)           --         --      (1,132)
                                                -------     -------       -------    -------     ------- 

Net income (loss).................               (1,287)     (3,198)       (1,795)    28,063      (3,917)
Preferred dividends...............                   --         (82)         (210)        --          --
                                                -------     -------       -------    -------     -------

Net income (loss) applicable 
 to common stockholders...........              $(1,287)    $(3,280)      $(2,005)   $28,063     ($3,917)
                                                =======     =======       =======    =======     ======= 

PRIMARY NET INCOME (LOSS) PER SHARE(1):

Continuing operations.............                                                    $(0.34)     $(0.43)
Discontinued operations and
 gain from merger..................                                                     8.30       (0.30)
Extraordinary item.................                                                       --       (0.30)
                                                                                     -------     -------
                                                                                       $7.96      $(1.03)
                                                                                     =======     =======
FULLY DILUTED NET INCOME (LOSS)
 PER SHARE(1):
  Continuing operations.............                                                  $(0.25)     $(0.43)
  Discontinued operations...........                                                    6.12       (0.30)
  Extraordinary item................                                                      --       (0.30)
                                                                                     -------     -------
                                                                                       $5.87      $(1.03)
                                                                                     =======     =======
</TABLE>
                                       8
<PAGE>


<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                                            -------------------------------------------------------
                                                1992       1993     1994      1995       1996
                                                ----       ----     ----      ----       ----
                                                           (IN THOUSANDS)
<S>                                           <C>       <C>       <C>       <C>       <C>
BALANCE SHEET DATA:
Net assets of discontinued operations(2)...   $12,003   $13,909   $15,650   $ 9,146   $ 8,235
Total assets ..............................    13,428    13,909    16,727    11,332    67,945
Bank and subordinated debt ................    10,755      --       5,066     7,005     9,185
Stockholders' equity ......................       414    13,350    11,345     3,186    34,873
</TABLE>

---------

(1)  Per share information is not presented for 1992 through 1994 as such
     information is not meaningful due to the formation of CRW in May 1995.

(2)  The net assets of discontinued operations represent the assets and
     liabilities of the Collection Division sold to NCOG and CCI's business
     acquired by HFS in the Merger. See Notes 2 and 13 to CRW's historical
     consolidated  financial statements included elsewhere in this Form 10-K.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS

The following discussion is based upon and should be read in conjunction
with the Selected Historical Financial Information and CRW's Financial
Statements, including the notes thereto, included elsewhere herein.

General

CRW's operating results have been restated to reflect the classification of
the collection business and CCI as discontinued operations. See Note 1 of the
notes to the accompanying financial statements for a description of the basis of
presentation.

Below is a summary of operating results for CRW and its Casino Money Centers,
Inc. subsidiary:


                                                    Year Ended December 31,
                                          -------------------------------------
                                            
                                            1994         1995            1996
                                            ----         ----            ----

Net revenues.............................   $ 1,429      $2,949       $ 3,412
Operating expenses, excluding non-cash
 charges.................................     3,664       3,458         5,504
Special compensation charges.............        --          --         1,319
Depreciation and amortization............        23          48           162
                                            -------      ------       -------
Operating income (loss)..................   $(2,258)     $ (557)       $(3,573)
                                            =======      ======       =======
                                       9
<PAGE>


<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31, 1996
                                                    ----------------------------------
                                                      Corporate      CMC       TOTAL
                                                      ---------      ---       -----
<S>                                                <C>             <C>        <C>

Net revenues......................................     $    --     $ 3,412    $ 3,412
Operating expenses, excluding non-cash charges....       2,292       3,212      5,504
Special compensation charge.......................       1,319          --      1,319
Depreciation and amortization.....................         112          50        162
                                                       -------     -------    -------
Operating income (loss)...........................     $(3,723)    $   150    $(3,573)
                                                       =======     =======    =======
</TABLE>

<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31, 1995
                                                    ----------------------------------
                                                      Corporate      CMC       TOTAL
                                                      ---------      ---       -----
<S>                                                <C>             <C>        <C>
Net revenues......................................     $    --     $ 2,949     $2,949
Operating expenses, excluding non-cash charges....       1,036       2,422      3,458
Depreciation and amortization.....................          22          26         48
                                                       -------     -------    -------
Operating income (loss)...........................     $(1,058)    $   501     $ (557)
                                                       =======     =======    =======
</TABLE>


<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31, 1994
                                                    ----------------------------------
                                                      Corporate      CMC       TOTAL
                                                      ---------      ---       -----
<S>                                                <C>             <C>        <C>
Net revenues......................................     $    --     $ 1,429    $ 1,429
Operating expenses, excluding non-cash charges....       2,541       1,123      3,664
Depreciation and amortization.....................          --          23         23
                                                       -------     -------    -------
Operating income (loss)...........................     $(2,541)    $   283    $(2,258)
                                                       =======     =======    =======

</TABLE>

                                       10
<PAGE>


Years Ended December 31, 1996 and 1995

Net Revenues

     CMC's revenues increased $463,000 (16%) to $3,412,000 in 1996 from
$2,949,000 in 1995 due to the opening of a new facility at the Northstar Casino
in December 1995.

Operating Expenses

     The Company's operating expenses increased $3,479,000 (99%) to $6,985,000
in 1996 from $3,506,000 in 1995. CMC's operating expenses increased $814,000
(33%) to $3,262,000 from $2,448,000 in 1995 due to the opening of the Northstar
facility in December 1995 and higher sales and administrative expenses which
were incurred in order to help facilitate CMC's growth. Corporate's operating
expenses increased $2,665,000 to $3,723,000 from $1,058,000 in 1995 due to
special compensation charges of $1,319,000 and payroll costs, professional fees,
travel and other expenses related to the formation and development of TLSP. The
special compensation charges included the accrual of $690,000 of severance pay
for certain employment contracts related to the collection business and a
$629,000 charge for the TLSP management warrants described in Note 5 to the
accompanying financial statements.

Other Income

     Other income was 1,136,000 in 1996 compared to zero in 1995 due to a gain
of $1,136,000 recognized in September 1996 from the exercise of certain of the
lender warrants described in Note 7 to the accompanying financial statements.
The exercise of the lender warrants resulted in the sale by CRW of 785,000
shares of TLSP common stock for $1,177,000 in cash.

Equity in Earnings of TLSP

     Equity in earnings of TLSP was $774,000 in 1996 compared to zero in 1995
due to the formation and initial public offering of TLSP in 1996 described in
Note 5 to the accompanying financial statements.

 Interest Expense

     Interest expense was $825,000 in 1996 compared to $655,000 in 1995
primarily due to higher borrowings made in 1996 to fund CRW's $2.1 million
investment in TLSP.

 Income Tax Benefit

     The income tax benefit of $855,000 in 1996 represents the future Federal
income tax benefit of the Company's operating loss. No income tax benefit was
recorded in 1995.

Years Ended December 31, 1995 and 1994

 Net Revenues

     CMC's revenues increased $1,520,000 (106%) to $2,949,000 in 1995 from
$1,429,000 in 1994 due to a full year of operations in 1995 at the Oneida Casino
in Green Bay, WI compared to only six months of operations in 1994.

Operating Expenses

     The Company's operating expenses decreased $181,000 (5%) to $3,506,000 in
1995 from $3,687,000 in 1994. CMC's operating expenses increased $1,302,000
(114%) to $2,448,000 from $1,146,000 in 1994 due to the opening of the Oneida
Casino operation in 1995 and higher sales and administrative expenses which were
incurred in order to help facilitate CMC's growth. Corporate's operating
expenses decreased $1,483,000 to $1,058,000 from $2,541,000 due to the
elimination of professional fees, payroll, travel and other expenses of CCS
employees eliminated in connection with the May, 1995 merger of CCS and HFS.

                                       11
<PAGE>

Interest Expense

     Interest expense was $655,000 in 1995 compared to $263,000 in 1994 due to
higher borrowings in 1995 to refinance debt and increase working capital.

 Income Taxes

     No income tax benefit was recorded in 1995 compared to a $622,000 income
tax benefit in 1994. The income tax benefit for 1994 reflects the future income
tax benefit of the Company's operating loss.

 Discontinued Operations

     Below is a summary of operating results for the discontinued operations of
the collection business and CCI:

                                                Year Ended December 31,
                                                -----------------------
                                           1994          1995          1996
                                           ----          ----          ----
                                                   (in thousands)
Net revenues ........................    $ 34,035      $ 32,073      $ 27,432
Operating expenses ..................      33,669        30,738        29,329
                                         --------      --------      --------
Operating income (loss) .............         366         1,335        (1,897)
Other expenses ......................         200          --               9
Income taxes (benefit) ..............          62           236          (754)
                                         --------      --------      --------
Net income (loss) ...................    $    104      $  1,099      $ (1,152)
                                         ========      ========      ========

Years Ended December 31, 1996 and 1995

Net Revenues

     Net revenues decreased $4,641,000 (14%) to $27,432,000 in 1996 from
$32,073,000 in 1995 due to a $3,331,000 decrease in CCI's revenues due to the
sale of CCI to HFS in the May 1995 merger, a $512,000 decrease in revenues from
the collection business' largest customer, a decrease in revenues from several
of the collection business' larger customers, including Bell South and the New
Jersey Department of Motor Vehicles, partially offset by $1,510,000 of revenues
generated in 1996 from the market research division which began operations in
January 1996 and ceased operations in August 1996.

Operating Expenses

     Operating expenses decreased $1,409,000 (5%) to $29,329,000 in 1996 from
$30,738,000 in 1995 due to the 14% decrease in revenues and a $169,000 decrease
in depreciation and amortization. The operating expenses in 1996 decreased only
7% as compared to a the 14% decrease in revenues due to the high level of fixed
costs incurred by the collection business.

Income Taxes (Benefit)

     Income taxes (benefit) of $(754,000) in 1996 and $236,000 in 1995
represents an effective tax rate of approximately 40% for the future tax
liability (benefit) of the collection business operating income and losses.

                                       12
<PAGE>


Years Ended December 31, 1995 and 1994

Net Revenues

     Net revenues decreased $1,962,000 (6%) to $32,073,000 in 1995 from 
$34,035,000 in 1994 due to a $4,547,000 decrease in CCI's revenues due to the
sale of CCI to HFS in the May 1995 merger, partially offset by a $2,585,000
increase in collection revenues. The increase in collection revenues was
primarily due to the Company's June 1994 acquisition of Kaplan and Kaplan, Inc.

Operating Expenses

     Operating expenses decreased $2,931,000 (9%) to $30,738,000 in 1995 from
$33,669,000 in 1994 primarily due to the 6% decrease in revenues.

Income Taxes

     Income taxes of $236,000 in 1995 and $62,000 in 1994 represents an
effective tax rate of approximately 40% in 1995 and 37% in 1994 for the future
tax liability for CCI and collection business operating income.

Inflation

     Inflation has not had a significant impact on CRW's operations to date.

Liquidity and Capital Resources

     During the year ended December 31, 1996, net cash used in operating
activities was $2,303,000 compared to $903,000 of net cash provided by
operations for the year ended December 31, 1995. The increase in net cash used
in operating activities was primarily due to the increased operating loss.

     Net cash used in investing activities in 1996 was $2,488,000 and consisted
of a $2,110,000 investment in TLSP, $132,000 of capital expenditures and
$246,000 of capital expenditures for discontinued operations.

     Net cash provided by financing activities in 1996 was $5,475,000 and
consisted of $2,500,000 of proceeds from a bank loan, $2,345,000 of proceeds
from the sale of preferred stock, $318,000 of payments on long-term debt and
$1,128,000 of proceeds from the exercise of stock options, partially offset by
$190,000 of cash used for financing activities of discontinued operations.

     CRW has a $7.5 million revolving line of credit from a bank which is due on
August 31, 1997. Total outstanding borrowings under the revolving credit loan as
of March 28, 1997 was $6.5 million. The Company plans to repay the revolving
credit loan with proceeds from sale of its NCOG Common Stock. If the Company is
unable to sell its NCOG common stock, or the proceeds from the sale of such
stock is not sufficient to repay the revolving line of credit, CRW plans to
extend the expiration date of its revolving line of credit or refinance it with
proceeds from a new loan. CRW believes that its cash on hand, cash to be
generated from the sale of NCOG common stock and available borrowings under the
revolving line of credit or from proceeds of debt collateralized by its NCOG
and/or TLSP common stock are adequate to meet its needs through December 31,
1997.

                                       13
<PAGE>



Net Operating Loss Carryforward

     CRW has a June 30 fiscal year end. As of June 30, 1996, CRW had available
approximately $3,500,000 of net operating loss carryforwards. As of December 31,
1996, CRW had accumulated an additional loss carryforward of approximately
$3,300,000. The net operating loss carryforwards will be used to offset the
Company's gain on the sale of its collection business.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     See Index to Consolidated Financial Statements on Page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by Item 10 will be contained in the Company's
definitive proxy statement for the 1997 annual meeting of stockholders, or in an
amendment to this Form 10-K, to be filed with the Securities and Exchange
Commission by April 30, 1997, and is hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION

     The information required by Item 11 will be contained in the Company's
definitive proxy statement for the 1997 annual meeting of stockholders, or in an
amendment to this Form 10-K, to be filed with the Securities and Exchange
Commission by April 30, 1997, and is hereby incorporated by reference

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by Item 12 will be contained in the Company's
definitive proxy statement for the 1997 annual meeting of stockholders, or in an
amendment to this Form 10-K, to be filed with the Securities and Exchange
Commission by April 30, 1997, and is hereby incorporated by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by Item 13 will be contained in the Company's
definitive proxy statement for the 1996 annual meeting of stockholders, or in an
amendment to this Form 10-K, to be filed with the Securities and Exchange
Commission by April 30, 1997, and is hereby incorporated by reference.

                                       14
<PAGE>



                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a) Attached hereto and filed as part of this report are the financial
statement schedules and exhibits listed below:

     1. FINANCIAL STATEMENTS

     CONSOLIDATED FINANCIAL STATEMENTS

        Report of Independent Public Accountants
        Consolidated Balance Sheets - December 31, 1995 and 1996
        Consolidated Statements of Operations - For the Years ended
          December 31, 1994, 1995 and 1996 Consolidated Statements of
          Stockholders' Equity - For the Years ended December 31, 1994,
          1995 and 1996.
        Consolidated Statements of Cash Flows - For the Years ended December 31,
          1994, 1995 and 1996.
        Notes to Consolidated Financial Statements

     2. EXHIBITS, INCLUDING THOSE INCORPORATED BY REFERENCE

     3.1  Restated Certificate of Incorporation of the Registrant (3)

     3.2  Amendment to Restated Certificate of Incorporation of the
          Registrant (1)

     3.3  Amended Bylaws of the Registrant (2)

     4.1  Loan and Security Agreement dated May 11, 1995 between Mellon Bank,
          N.A. ("Mellon") and the Registrant (2)

     4.2  Amendment to Loan and Security Agreement dated September 12, 1995
          between Mellon and the Registrant (1)

     4.3  Second Amendment to Loan and Security Agreement dated September 19,
          1996 between Mellon and the Registrant (1)

     4.4  Third Amendment to Loan and Security Agreement dated December 30, 1996
          between Mellon and the Registrant (1)

     4.5  Fourth Amendment to Loan and Security Agreement dated February 4, 1997
          between Mellon and the Registrant (1)

     4.6  Fifth Amendment to Loan and Security Agreement dated March 29, 1997
          between Mellon and the Registrant (1)

     4.7  Certificate of Designation, Preferences and Rights of Series A
          Convertible Preferred Stock (the "Preferred Stock") of the
          Registrant (5)

     4.8  Specimen of Series A Convertible Preferred Stock Certificate (5)

     4.9  Form of Warrant issued in connection with Preferred Stock (5)

     4.10 Term Loan Note and Addendum dated November 1, 1995 executed by the
          Registrant in favor of J. Brian O'Neill and Miriam P. O'Neill (1)

                                       15
<PAGE>

     10.1 Agreement of Lease dated as of July, 1994, between CRW Building
          Limited Partnership and Casino and Credit Services, Inc. ("CCS") (3)

     10.2 Sublease Agreement dated May 10, 1995 between CCS and the
          Registrant (2)

     10.3 Sublease Agreement between TeleSpectrum Worldwide Inc. and the
          Registrant (1)

     10.4 Lease Agreement dated July 1, 1996 between the Registrant and Lee Park
          Investors, L.P. (1)

     10.5 Lease Agreement dated December 5, 1996 between the Registrant and 210
          Mall Boulevard Associates (1)

     10.6 Employment Agreement dated May 11, 1995 between J. Brian O'Neill and
          the Registrant (2)

     10.7 Employment Agreement dated May 11, 1995 between Jonathan P. Robinson
          and the Registrant (2)

     10.8 Amended and Restated 1995 Stock Option Plan of the Registrant (4)

     10.9 Securities Purchase Agreement dated February 29, 1996 between the
          Registrant and certain purchasers defined therein (5)

     10.10 Asset Acquisition Agreement dated February 2, 1997 among the
          Registrant, Kaplan & Kaplan, Inc., NCO Group, Inc., CRWF Acquisition,
          Inc. and K & K Acquisition, Inc. (6)

     21   Subsidiaries of the Registrant (1)

     23   Consent of Arthur Andersen LLP (1)

     (b)  CRW filed a Form 8-K with the Securities and Exchange Commission in
          October 1996 pertaining to Item 5 of such form.



-----------

     (1)  Filed with this Annual Report on Form 10-K.

     (2)  Filed as an Exhibit to the Registration Statement on Form S-1 (No.
          33-62700) and incorporated herein by reference.

     (3)  Filed as an Exhibit to the Form 10-K filed with the Securities and
          Exchange Commission on March 29, 1996 and incorporated herein by
          reference.

     (4)  Filed as an Exhibit to CRW's definitive proxy statement for its 1996
          Annual Meeting of Stockholders and incorporated herein by reference.

     (5)  Filed as an Exhibit to CRW's Form 8-K dated February 29, 1996 and
          incorporated herein by reference.

     (6)  Filed as an Exhibit to CRW's Form 8-K dated February 2, 1997 and
          incorporated herein by reference.

                                       16
<PAGE>


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS





Report of Independent Public Accountants                                   F-2


Consolidated Balance Sheets -- December 31, 1995 and 1996                  F-3


Consolidated Statements of Operations -- For the Years
     ended December 31, 1994, 1995 and 1996                                F-4


Consolidated Statements of Stockholders' Equity--
     For the Years ended December 31, 1994, 1995 and 1996                  F-5


Consolidated Statements of Cash Flows--
     For the Years ended December 31, 1994, 1995 and 1996                  F-6


Notes to Consolidated Financial Statements                                 F-7

                                      F-1
<PAGE>



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To CRW Financial, Inc.:

     We have audited the accompanying consolidated balance sheets of CRW
Financial, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1995 and 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of CRW Financial,
Inc. and subsidiaries as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.


                                                         ARTHUR ANDERSEN LLP


Philadelphia, Pa.,
    March 14, 1997

                                      F-2
<PAGE>


                      CRW FINANCIAL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                          DECEMBER 31,
                                                                   ------------------------
                                                                        1995       1996     
                                                                        ----       ----     
                                                                       (In Thousands --
                                                                     Except Share Amounts)
<S>                                                                  <C>         <C>       
                               ASSETS
CURRENT ASSETS:
   Cash ....................................................         $    764    $  1,448  
   Net assets of discontinued operation  (Notes 2 and 13) ..            9,146       8,235  
   Other current assets ....................................              262         319  
                                                                     --------    --------  
       Total current assets ................................           10,172      10,002  
PROPERTY AND EQUIPMENT, net ................................               79         143  
INTANGIBLE ASSETS, net .....................................              569         475  
INVESTMENT IN TELESPECTRUM WORLDWIDE INC ...................             --        54,655  
DEFERRED INCOME TAX ASSET ..................................              403       2,586  
OTHER ASSETS ...............................................              109          84  
                                                                     --------    --------  
                                                                     $ 11,332    $ 67,945  
                                                                     ========    ========  
                                                                    
                 LIABILITIES AND STOCKHOLDERS' EQUITY               
                                                                    
CURRENT LIABILITIES:                                                
   Revolving line of credit ................................            1,000       8,500  
   Current portion of long-term debt .......................              321         353  
   Accounts payable ........................................              164         340  
   Accrued expenses ........................................              977       1,489  
                                                                     --------    --------  
      Total current liabilities ............................            2,462      10,682  
                                                                     --------    --------  
LONG-TERM DEBT .............................................            5,684         332  
                                                                     --------    --------  
OTHER LONG-TERM LIABILITIES ................................             --           160  
                                                                     --------    --------  
DEFERRED  INCOME  TAXES ....................................             --        21,898  
                                                                     --------    --------  
COMMITMENTS AND CONTINGENCIES (Note 10)                             
STOCKHOLDERS' EQUITY:                                               
   Preferred Stock, no par value, 500,000 shares authorized,        
       no shares issued and outstanding.....................             --          --         
                                                                     --------    --------  
   Common Stock, $.01 par value, 20,000,000 shares                  
      authorized 3,370,632 and 5,366,442 shares issued              
      and outstanding, respectively ........................               34          54  
   Additional paid-in capital ..............................            4,102      39,686  
   Accumulated deficit .....................................             (950)     (4,867) 
                                                                     --------    --------  
       Total stockholders' equity ..........................            3,186      34,873  
                                                                     --------    --------  
                                                                     $ 11,332    $ 67,945  
                                                                     ========    ========  
</TABLE>                                                            
                                                               
        The accompanying notes are an integral part of these statements.

                                      F-3
<PAGE>


                      CRW FINANCIAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                 YEAR ENDED DECEMBER 31,
                                                                                 -----------------------
                                                                            1994          1995           1996
                                                                            ----          ----           ----
                                                                          (In Thousands - Except Share Amounts)
<S>                                                                        <C>          <C>            <C>

NET REVENUES ..................................................        $  1,429         $  2,949         $  3,412
                                                                       --------         --------         --------
OPERATING EXPENSES:
       Compensation ...........................................           1,770            1,650            2,986
       Special compensation charges ...........................            --               --              1,319
       Other operating costs ..................................           1,894            1,808            2,518
       Depreciation and amortization ..........................              23               48              162
                                                                       ========         ========         ========
         Operating  income (loss) .............................          (2,258)            (557)          (3,573)
    INTEREST EXPENSE ..........................................            (263)            (655)            (825)
    EQUITY IN EARNINGS OF TELESPECTRUM WORLDWIDE INC...........            --               --                774
    OTHER INCOME (Note 5) .....................................            --               --              1,136
                                                                       --------         --------         --------


LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX BENEFIT......          (2,521)          (1,212)          (2,488)
    INCOME TAX BENEFIT ........................................            (622)            --               (855)
                                                                       --------         --------         --------
LOSS FROM CONTINUING OPERATIONS ...............................          (1,899)          (1,212)          (1,633)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of income taxes
   (benefit) of $62, $236 and $(754)  (Note 13) ...............             104            1,099           (1,152)

    GAIN ON MERGER OF CCS AND HFS, (Note 3) ...................            --             28,176             --
                                                                       --------         --------         --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM .......................          (1,795)          28,063           (2,785)
    EXTRAORDINARY LOSS ON EXTINGUISHMENT OF DEBT ..............            --               --             (1,132)
                                                                       --------         --------         --------
NET INCOME (LOSS) .............................................          (1,795)          28,063           (3,917)
    PREFERRED DIVIDENDS .......................................            (210)            --               --
                                                                       --------         --------         --------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS ...........        $ (2,005)        $ 28,063         ($ 3,917)
                                                                       ========         ========         ========
PRIMARY NET INCOME (LOSS) PER COMMON SHARE:

   Continuing operations ......................................                         $  (0.34)        $  (0.43)
   Discontinued operations  and gain on merger ................                             8.30            (0.30)
   Extraordinary item .........................................                              --             (0.30)
                                                                                        --------         --------
                                                                                        $   7.96         $  (1.03)
                                                                                        ========         ========
FULLY DILUTED NET INCOME (LOSS)  PER COMMON SHARE:



   Continuing operations ......................................                         $  (0.25)        $  (0.43)
   Discontinued operations ....................................                             6.12            (0.30)
   Extraordinary item .........................................                              --             (0.30)
                                                                                        --------         --------
                                                                                        $   5.87         $  (1.03)
                                                                                        ========         ========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      F-4
<PAGE>




                      CRW FINANCIAL, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY






<TABLE>
<CAPTION>
                                                                   COMMON     ADDITIONAL                      TOTAL
                                         PREFERRED     COMMON       STOCK      PAID-IN     ACCUMULATED    STOCKHOLDERS'
       (In Thousands)                      STOCK       STOCK       WARRANTS    CAPITAL       DEFICIT         EQUITY
                                           -----       -----       --------    -------       -------         ------
<S>                                       <C>            <C>        <C>       <C>            <C>           <C>
BALANCE, DECEMBER 31, 1993 ....          $  3,000     $     34    $    273     $ 14,643     $ (4,600)      $ 13,350
Dividends Accrued on Preferred                                                                           
Stock .........................              --           --          --           --           (210)          (210)
Net Loss ......................              --           --          --           --         (1,795)        (1,795)
                                         --------     --------    --------     --------     --------       --------
BALANCE, DECEMBER 31, 1994 ....             3,000           34         273       14,643       (6,605)        11,345
                                                                                                         
HFS Stock Received By CCS                                                                                
Shareholders ..................              --           --          --        (14,821)     (22,408)       (37,229)
Cancellation of Stock Options .              --           --          --            715         --              715
Conversion of Preferred Stock .            (3,000)        --          (273)       3,273         --             --
Forfeiture of Accrued Dividends                                                                          
 on Preferred Stock ...........              --           --          --            292         --              292
Net Income ....................              --           --          --           --         28,063         28,063
                                         --------     --------    --------     --------     --------       --------
BALANCE, DECEMBER 31, 1995 ....              --             34        --          4,102         (950)         3,186
Sale  of Preferred Stock ......             2,345         --          --           --           --            2,345
Conversion of Preferred Stock .            (2,345)          13        --          2,332         --             --
Net Loss ......................              --           --          --           --         (3,917)        (3,917)
Exercise of Stock Options and  
Warrants ......................              --              7        --          1,121         --            1,128         
Adjustment to Investment in
TeleSpectrum Worldwide Inc.
(Note 1) ......................              --           --          --         32,131         --           32,131
                                         --------     --------    --------     --------     --------       --------
BALANCE, DECEMBER 31, 1996 ....          $   --       $     54    $   --       $ 39,686     $ (4,867)      $ 34,873
                                         ========     ========    ========     ========     ========       ========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      F-5
<PAGE>



                      CRW FINANCIAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS



<TABLE>
<CAPTION>
                                                                                 YEAR ENDED DECEMBER 31,
                                                                               1994      1995        1996
                                                                               ----      ----        ----
CASH FLOWS FROM OPERATING ACTIVITIES:                                                 (In Thousands)
<S>                                                                        <C>        <C>         <C>

Net income (loss)                                                          $ (1,795)   $ 28,063    $ (3,917)
Adjustments to reconcile net income (loss)  to net cash
Provided by (used in) operating activities-

   Deferred income taxes                                                       (560)       --        (1,609)
   Gain on merger                                                              --       (28,176)       --
 Non-cash special compensation charge                                          --          --           629

 Discontinued operations--noncash charges and working capital changes         2,828         297       1,260
 Equity in TLSP earnings                                                       --          --          (774)
 Extraordinary loss on extinguishment of debt                                  --          --         1,132
 Depreciation and amortization                                                   23         132         162
 (Increase) decrease in assets-
          Accounts receivable                                                   (57)       (204)        147
          Other assets                                                         --          (105)       (179)
Increase (decrease) in liabilities-
          Accounts payable                                                       24         158         174
          Accrued expenses and other liabilities                                210         738         672
                                                                           --------    --------    --------
              Net cash provided by (used in) operating activities               673         903      (2,303)
                                                                           --------    --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES:
      Investment in TeleSpectrum Worldwide Inc.                                --          --        (2,110)
      Cash paid for acquisitions                                               (300)        (25)       --
      Purchases of property and equipment                                       (41)        (64)       (132)
      Investing activities of discontinued operations                        (4,328)     (2,416)       (246)
                                                                           --------    --------    --------
              Net cash used in investing activities                          (4,669)     (2,505)     (2,488)
                                                                           --------    --------    --------
CASH FLOWS FROM FINANCING ACTIVITIES:
       Proceeds from issuance of long-term debt                               3,200       7,000        --
       Repayment of long-term debt                                             (245)     (3,104)       (318)
       Proceeds from (repayments of) line of credit                           1,800      (1,800)      2,500
       Payment of financing costs                                               (63)       (264)       --
       Proceeds from exercise of stock options                                 --          --         1,128
       Financing activities of discontinued operations                          (58)       (104)       (180)
       Sale of preferred stock                                                 --          --         2,345
                                                                           --------    --------    --------
              Net cash provided by financing activities                       4,634       1,728       5,475
                                                                           --------    --------    --------
NET INCREASE IN CASH                                                            638         126         684
CASH, BEGINNING OF PERIOD                                                      --           638         764
                                                                           --------    --------    --------
CASH, END OF PERIOD                                                        $    638    $    764    $  1,448
                                                                           ========    ========    ========
</TABLE>

        The accompanying notes are an integral part of these statements 

                                      F-6
<PAGE>



                      CRW FINANCIAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1996

1. Background:

     CRW Financial, Inc. ("CRW" or the "Company") was a subsidiary of Casino &
Credit Services, Inc. ("CCS") prior to May 11, 1995, and CRW's operations were a
division of CCS from July 1992 to May 11, 1995 when CCS contributed all of its
assets and subsidiaries other than Central Credit, Inc. ("CCI") to a newly
formed subsidiary, CRW Financial, Inc. CCS then spun-off CRW in a distribution
of CRW stock to CCS Shareholders on May 11, 1995. The historical financial
statements of CRW have been deemed to be those of CCS, restated to present CCI
as a discontinued operation.

     CRW founded TeleSpectrum Worldwide Inc. in April 1996. TeleSpectrum
Worldwide Inc. ("TLSP") provides teleservices solutions to clients in the
telecommunications, insurance, financial services, pharmaceuticals, and
healthcare, consumer products and high technology industries. CRW formed TLSP in
April 1996 to acquire several teleservices businesses in connection with an
initial public offering of TLSP's common stock. CRW accounts for its investment
in TLSP under the equity method of accounting. In 1996, CRW recorded a $32.1
million increase, net of deferred income taxes, to its investment in TLSP to
reflect the increase in TLSP's equity due to its initial public offering of its
common stock and other issuances of its common stock in connection with the
acquisitions of certain businesses.

     In February, 1997, CRW sold the assets of its collection business (see Note
2). Accordingly, the accompanying financial statements have been restated to
present the collection business as a discontinued operation. The continuing
operations consist of the Company's Casino Money Centers, Inc. subsidiary and
CRW's corporate mangement costs.

2. Sale of Collection Business

     On February 2, 1997, CRW sold the assets of its collection business to NCO
Group, Inc. ("NCO") for $3.75 million in cash and 345,178 shares of NCO common
stock and a warrant to purchase 250,000 shares of NCO common stock at $27.625
per share and the assumption of certain liabilities. The NCO common stock and
warrant have been valued at $9,050,000. CRW will record an after-tax gain of
approximately $2 million on the sale of the collection business. The gain will
not result in the payment of any Federal income taxes as the Company has
approximately $6.8 million of net operating loss carryforwards (see Note 8).

                                      F-7
<PAGE>

                      CRW FINANCIAL, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                                DECEMBER 31, 1996



3. Merger Agreement and Distribution of Certain Businesses:

     On November 1, 1994, CCS entered into a merger agreement (the "Merger
Agreement") with Hospitality Franchise Systems, Inc. ("HFS") providing for,
among other things, the merger of CCS into HFS ("the Merger"). The merger closed
on May 11, 1995. Immediately prior to the Merger, each outstanding share of 7%
Convertible Preferred Stock of CCS was converted to one share of CCS Common
Stock and CCS contributed all of the assets and liabilities of its collection
business and its stock in all of its subsidiaries other than CCI to a new
subsidiary, CRW Financial, Inc. and distributed the stock of CRW to CCS
stockholders in a transaction intended to be tax-free for federal income tax
purposes to CCS, CRW and the stockholders of CCS. Each outstanding share of
CCS Common Stock was then exchanged for .588 shares of HFS. In connection with
the Merger and the Distribution, each CCS Stock Option outstanding was cancelled
in exchange for .130 shares of HFS stock and three shares of CRW Common Stock
for every five shares of CCS Common Stock subject to such CCS Stock Option. CRW
has also agreed to indemnify HFS and CCS with respect to certain CCS losses,
damages, claims and liabilities arising prior to the Merger and the
Distribution. In connection with the merger, a gain was recorded as follows (in
thousands):

              Consideration paid by HFS in the merger          $37,229
              Compensation expense for stock options
                cancelled in merger                               (715)
              Carrying value of net assets of
                discontinued operations                         (6,968)
              Transaction costs                                 (1,070)
              Purchase price adjustment                           (300)
                                                               -------
                                                               $28,176
                                                               =======




4. Summary of Significant Accounting Policies:

Principles of Consolidation

     The consolidated financial statements include the accounts of CRW and its
wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.

Use of Estimates in Preparation of Financial Statements

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect 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
reporting period. Actual results could differ from those estimates.

                                      F-8
<PAGE>



                      CRW FINANCIAL, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                                DECEMBER 31, 1996


Property and Equipment

     Property and equipment are stated at cost. CRW provides for depreciation on
a straight-line basis over estimated useful lives of three to five years.
Leasehold improvements are amortized over the lease term. Property and
equipment, for continuing operations, consist of the following (in thousands):


                                                          DECEMBER 31,
                                                     ---------------------
                                                     1995             1996
                                                     -----           -----
Office Equipment                                     $  85           $ 154
Furniture and Fixtures                                  --              16
Leasehold improvements                                  --              12
                                                     -----           -----
                                                        85             182
Less-Accumulated depreciation                           (6)            (39)
                                                     -----           -----
                                                     $  79           $ 143
                                                     =====           =====

Intangible Assets

                                                          DECEMBER 31,
                                                          ------------
                                                LIFE          1995       1996
                                                ----          ----       ----
                                                        (In Thousands)
Goodwill, net of accumulated
 amortization of $43 and $70
 in 1995 and 1996,
 respectively                                 15 years        $355       $328

Deferred financing costs, net of
 accumulated amortization of
 $129 and $223 in 1995 and 1996,
 respectively                                  3 years         214        147
                                                              ----       ----
                                                              $569       $475
                                                              ====       ====

     The Company determines impairments to goodwill and other intangibles based
upon management's estimates of undiscounted future cash flows over the remaining
useful life of the intangible asset. If the amount of such estimated
undiscounted future cash flows is less than the net book value of the related
intangible asset, the intangible asset is written down to the amount of the
estimated discounted cash flows. No such write-downs of intangible assets were
made in 1994, 1995 or 1996.

Income Taxes


     The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standard No. 109, "Accounting for Income Taxes" (SFAS No.
109). Under SFAS No. 109, deferred income tax assets and liabilities are
determined based on differences between the financial reporting and income tax
basis of assets and liabilities measured using enacted income tax rates and laws
that are expected to be in effect when the differences reverse.

                                      F-9
<PAGE>

                      CRW FINANCIAL, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                                DECEMBER 31, 1996


Statement of Cash Flows

     For the years ended December 31, 1994,1995 and 1996 the Company paid
interest expense of $263,000, $692,000 and $791,000, respectively. The Company
did not pay any income taxes for the years ended December 31, 1994, 1995 and
1996.


     The following table lists noncash assets that were acquired and liabilities
which were assumed as a result of the acquisitions discussed in Note 6:

                                                FOR THE YEAR ENDED DECEMBER 31,
                                                        (In Thousands)

                                                     1994          1995
                                                     ----          ----
Noncash assets:
Goodwill                                              $300           $25
Net assets acquired by discontinued operation        2,515            --
                                                    ------          ----
                   Net cash investing activity      $2,815           $25
                                                    ======          ====

Stock Split

     On October 3, 1996, the Company declared a three-for-one stock split
payable on October 24, 1996 to all holders of record on October 14, 1996.
All amounts and per share amounts in the accompanying financial statements
have been retroactively restated to reflect this stock split as if it
occurred on December 31, 1993.

Net Income (Loss) Per Common Share

     Net income (loss) per common share is computed using the weighted average
number of shares of CRW Common Stock and CRW Common Stock equivalents
outstanding during the period. If the inclusion of CRW common stock equivalents
has an anti-dilutive effect in the aggregate, it is excluded from the
calculation. The weighted average number of shares outstanding in 1995 and 1996
for purposes of computing primary net income (loss) per common share was
3,526,794 and 3,793,846 and was 4,780,485 and 3,793,846, for purposes of
calculating fully diluted net income (loss) per share. Net loss per common share
has not been presented for 1994 as such presentation is not meaningful due to
the formation of CRW in May 1995 (see Note 3).


Reclassifications

     Certain amounts in the 1994 and 1995 financial statements and notes have
been reclassified to conform with the 1996 presentation.

5. Investment in TLSP:

     On April 29, 1996 CRW formed a wholly owned subsidiary, TeleSpectrum
Worldwide Inc. ("TLSP"). TLSP entered into asset purchase agreements to acquire
six teleservices business contingent upon an initial public offering of its
common stock. CRW made a $2,100,000 capital contribution to TLSP on May 23,
1996 (Note 7). On May 23, 1996, in connection with the acquisitions and initial
public offering, CRW issued warrants to its CEO, CFO, Director of Acquisitions
and a consultant to purchase 839,108 shares of TLSP stock from CRW at $1.50 per
share. The Company obtained an appraisal which indicated that the warrants had a
fair value of $0.75 per warrant on May 23, 1996. Accordingly, the Company
recorded a special non-cash compensation charge of $629,000 on May 23, 1996.

                                      F-10
<PAGE>

                      CRW FINANCIAL, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                                DECEMBER 31, 1996

     In September, 1996, certain subordinated lenders described in Note 7
exercised warrants to purchase 784,997 shares of TLSP stock from CRW at $1.50
per share. As a result, the Company received cash proceeds of $1,177,000 and
recorded a gain on the sale of $1,136,000. After these exercises, CRW owned
7,725,140 shares of TLSP common stock. If all of the remaining warrants to
purchase TLSP stock are exercised, CRW will receive approximately $2,345,000 of
cash and would then own 6,162,130 shares of TLSP.

     As of December 31, 1996, CRW has an investment in TLSP that is accounted
for on the equity method. The net investment balance at December 31, 1996 is
$54,655,000. 

     The condensed results of operations for the period from April 1996
(Inception) to December 31, 1996 and financial position as of December 31, 1996
of TLSP, is as follows (in thousands):


Condensed Statement of Operations Information:
Revenue                                              $ 61,474
Operating Income                                        5,516
Net Income                                              3,650

Condensed Balance Sheet Information:
Current Assets                                       $ 66,721
Non-Current Assets                                    232,334
Current Liabilities                                    48,445
Non-Current Liabilities                                10,099
Stockholders' Equity                                  240,511

     The Company's share of undistributed net income was $774,000 in 1996, which
is net of approximately $622,000 of related expenses incurred by the Company in
the formation of TLSP.

6. Acquisitions:

     In February 1994, the Company acquired certain assets of Strip Check
Cashing Services, Inc. ("SCC") for $300,000 in cash. SCC provides check cashing
services in Las Vegas, Nevada. In August 1995, CMC purchased the assets of All
Check Cashing, Inc. for $25,000 in cash and a $50,000 promissory note. The note
bears interest at 9% and is due in twenty-nine monthly installments of $1,925.

     The above acquisitions were accounted for using the purchase method of
accounting. The excess of the consideration paid for the acquisitions over the
fair market value of the assets purchased and liabilities assumed was
approximately $398,000 and was recorded as goodwill which is being amortized
over 15 years.

7. Debt:


                                                         December 31,
                                                         ------------
                                                      1995         1996
                                                      ----         ----
                                                        (In Thousands)
Revolving line of credit with bank                   $6,000       $8,500
Convertible subordinated note to stockholder            962          664
Note payable to All Check Cashing (see Note 5)           43           21
                                                         --           --
                                                      7,005        9,185
Less-Current portion                                 (1,321)      (8,853)
                                                     -------      -------
                                                     $5,684         $332



     In connection with the Merger and the Distribution discussed in Note 1, CRW
assumed certain bank debt of CCS and refinanced it with proceeds from a
$6,000,000 three-year revolving line of credit which bears interest at the
bank's prime rate plus 1 1/2 %. Proceeds from the line of credit were used to
repay all of CCS's bank debt and to provide additional working capital. During
1996, available borrowings under the line of credit were increased to $8,500,000
and the expiration date of the line was changed to December 31, 1997. In
connection with the February 2, 1997 sale of CRW's collection business, CRW
repaid $2,000,000 of the line of credit, available borrowings were reduced to
$7,500,000 and the expiration date of the line of credit was changed to August
31, 1997. The Company is required to repay the line of credit with proceeds from
the sale of its NCO common stock. In connection with the line of credit, CRW has
issued to the bank warrants to purchase an aggregate of 325,554 shares of its
Common Stock at an average exercise price of $1.13 per share. Borrowings under
the line of credit are collateralized by substantially all of the assets of the
Company, including its investments in TLSP and NCO.

                                      F-11
<PAGE>



                      CRW FINANCIAL, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                                DECEMBER 31, 1996


     In November, 1995, the Company issued a $1,000,000 convertible subordinated
note to J. Brian O'Neill, the Company's CEO. The note bears interest at 12.5%
and requires 36 monthly payments of $33,454. The remaining principal balance due
under the note as of December 31, 1996 is convertible into 428,400 shares of CRW
Common Stock. In addition, the note contains a provision which allows Mr.
O'Neill to repay to CRW principal payments made by CRW under the note during the
previous 24 months and convert such repayments into CRW common stock. As of
December 31, 1996, Mr. O'Neill had the right to repay CRW $303,000 and convert
such amount into approximately 185,000 shares of CRW common stock. Proceeds from
the loan were used for capital expenditures and to increase working capital.
Principal payments of $336,000 and $328,000 are due under the note in 1997 and
1998, respectively.

     On May 23, 1996, CRW issued $2,100,000 of subordinated notes to certain
directors, shareholders and employees. The subordinated notes were repaid in
September 1996 with proceeds from the bank line. Proceeds from the subordinated
notes were used to capitalize TLSP (see Note 5). In connection with the
subordinated notes, CRW issued warrants ("lender warrants") to the subordinated
lenders and to CRW's bank to purchase 1,433,454 and 74,445 shares of TLSP common
stock, respectively, from CRW for $1.50 per share. The Company obtained an
appraisal which indicated that the lender warrants had a fair value of $0.75 per
warrant on May 23, 1996. Accordingly, the debt was discounted $1,131,000 to
reflect the value of the lender warrants. The repayment of the subordinated debt
in September 1996 resulted in an extraordinary loss of $1,131,000.

8. Income Taxes:

     The net income tax provision (benefit) consists of the following:


                                              FOR THE YEARS ENDED DECEMBER 31,
                                              --------------------------------
                                                1994       1995       1996
                                                ----       ----       ----
                                                       (In Thousands)
Income taxes (benefit) from:
     Continuing operations                     $(622)     $  --     $ (855)
     Discontinued operation                       62        236       (754)
                                                 ---        ---       -----
       Net income taxes (benefit)              $(560)      $236     $(1,609)
                                               =====       ====     =======


     The net income tax benefit in 1994 and 1996 has been allocated to
continuing operations and the discontinued operation by applying CRW's effective
income tax rate to loss from continuing operations and income from the
discontinued operation. The net income tax benefits relate to operating losses
incurred during the periods. The tax benefits result from the reduction of the
deferred tax liabilities. No deferred state tax benefit has been recorded.


     The statutory federal income tax rate is different from the effective
income tax rate as indicated below:



                                                FOR THE YEARS ENDED DECEMBER 31,
                                                --------------------------------
                                                   1994      1995        1996
                                                   ----      ----        ----
Statutory federal income tax rate (benefit)      (34.0)%    (34.0)%     (34.0)%
Non-deductible expenses                            0.5         --        17.3
Operating losses not tax benefited                 9.7       34.0          --
Reduction of deferred tax asset
valuation allowance                                 --         --       (17.7)
                                                  ------    ------      ------
                                                 (23.8)%       -- %     (34.4)%
                                                 =======     =====      =======

                                      F-12
<PAGE>

                      CRW FINANCIAL, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                                DECEMBER 31, 1996




     Deferred taxes are determined based on the estimated future tax effects of
differences between the financial statement and income tax bases of assets and
liabilities given the provisions of tax laws. The net deferred tax asset related
to continuing operations is comprised of the following:

                                             FOR THE YEARS ENDED DECEMBER 31,
                                             --------------------------------
                                                1995               1996
                                                ----               ----
                                                     (In Thousands)
Non-current deferred taxes related to
 continuing operations:
  Gross assets                                $ 965             $  2,586
  Gross liabilities                              --              (21,898)
                                              -----             --------
                                                965              (19,312)
   Deferred tax asset
    valuation allowance                        (562)                  --
                                              -----             --------
Net deferred taxes related to
 continuing operations                        $ 403             $(19,312)
                                              =====             ======== 


     The Company did not have a valuation allowance against deferred tax assets
at December 31, 1996, as it believes it is more likely than not that the
deferred tax assets will be realized.

     The tax effect of significant temporary differences representing deferred
tax assets and liabilities related to continuing operations are as follows:

                                            FOR THE YEARS ENDED DECEMBER 31,
                                            --------------------------------
                                                     (In Thousands)
                                               1995                  1996
                                               ----                  ----
Depreciation                                  $ 200                $    17
Net Operating loss carryforwards                662                  2,333
Investment in TLSP                               --               ( 21,898)

Accruals and reserves                           103                    236
                                              -----               --------
                                                965               ( 19,312)
 Deferred tax asset valuation allowance        (562)                    --
                                              -----               --------
 Net deferred tax asset (liability)           $ 403               ($19,312)
                                              =====               ======== 

     CRW has a June 30 fiscal year-end. As of June 30, 1996, CRW had a net
operating loss carryforward of approximately $3,500,000. As of December 31,
1996, CRW has an additional loss carryforward of approximately $3,300,000 which
will be included in the Company's June 30, 1997 tax return.



                                      F-13
<PAGE>


                      CRW FINANCIAL, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                                DECEMBER 31, 1996

9. Stockholders' Equity:

     On February 29, 1996, CRW sold $2.5 million of its Series A Convertible
Preferred Stock (the "Preferred Stock") to an investor group consisting of
several investment funds and certain individuals. In addition, the investor
group received warrants to purchase 451,812 shares of CRW Common Stock at an
exercise price of $1.94 per share. In December 1996 the Preferred Stock was
converted into 1,290,879 shares of Common Stock. In January, 1997, the warrants
were exercised pursuant to a cashless exercise whereby the warrants were
exchanged for 354,586 shares of CRW common stock. In connection with the sale of
the Preferred Stock, the Company's Chief Executive Officer, J. Brian O'Neill,
entered into a put agreement which provided the investor group with the right to
require Mr. O'Neill to purchase their Preferred Stock at a price of $3.87 per
share on March 1, 1999. In connection with the put agreement, the Company
granted Mr. O'Neill a warrant to purchase 300,000 shares of CRW common stock at
an exercise price of $1.94 per share. The warrant expires on August 31, 1999.

10. Commitments and Contingencies:

     CRW has noncancelable related-party leases discussed in Note 11, for its
office facilities, automobiles and certain office equipment. Rent expense under
leases related to continuing operations leases was zero in 1994 and $420,000 in
1995 and $378,000 in 1996. The future minimum lease payments under leases
related to continuing operations at December 31, 1996, net of sublease
commitments is as follows (in thousands):

              1997                    $149
              1998                     288
              1999                     288
              2000                     288
              2001                     289
                                    ------
                                    $1,302
                                    ======

     CRW has contracts with certain of its employees that provide for minimum
salaries of approximately $490,000 in 1997, and $183,333 in 1998.

     CRW is a party to a number of lawsuits incidental to the ordinary course of
business of its Collection Division. NCOG did not assume any potential liability
under such lawsuits in connection with NCOG's acquisition of the Collection
Division's net assets in February 1997. The Company intends to vigorously defend
all such actions and, in the current opinion of management, the ultimate
resolution of such actions will not have a material adverse effect on the
Company's business, financial condition or results of operations. The actual
results of these claims, however, could be materially different.

     One of such lawsuits was filed in August 1996 by Eugene Piscitelli, an
employee of the Company, in the United States District Court for the Eastern
District of Pennsylvania. Mr. Piscitelli has made a claim against the Company
for an unspecified amount of money damages in excess of jurisdictional limits
based on claims of alleged fraud in the inducement by the Company and alleged
breach by the Company of his employment agreement with respect to compensation
matters. The Company believes that Mr. Piscitelli's claims have no merit and
intends to vigorously defend this action.

11. Related Party Transactions:

     CRW leases an aggregate of 13,000 square feet from 210 Mall Boulevard
Associates, a partnership controlled by Mr. O'Neill. The lease requires monthly
payments of $23,478 through December, 2001. NCO has subleased this facility
through July 31, 1997. CRW plans to sublease this facility again in August 1997.
CRW leases an aggregate of 22,000 square feet in King of Prussia, Pennsylvania
from CRW Building Limited Partnership, a partnership which is controlled by J.
Brian O'Neill, CRW's Chief Executive Officer. The lease commenced on April 1,
1995 and requires monthly base rent payments through April 1, 2005 of $28,875.
CRW believes the lease to be at the prevailing commercial market rate. CRW has
subleased this facility to TeleSpectrum Worldwide Inc.

                                      F-14
<PAGE>

                      CRW FINANCIAL, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                                DECEMBER 31, 1996

In 1996, CRW paid approximately $365,000 in rent under this lease. The
aggregate minimum rent due on those leases, net of sublease commitments through
the end of their terms, is $1,252,000. In addition, CRW leased space from Lee
Park Investors, L.P., a partnership controlled by Mr. O'Neill and paid rent of
$46,000 in 1996.

    12. Stock Option Plan:

     The Company established the CRW 1995 Stock Option Plan (the "Plan") for its
employees, directors and certain other individuals. The Company may grant either
non-qualified or incentive stock options under the Plan. An aggregate of
3,000,000 shares of Common Stock have been reserved for the Plan. A committee of
the Board of Directors administers the Plan and determines the terms of the
option grants. Options vest as determined by the Board and expire no later than
10 years from the date of grant. Each option entitles the holder to purchase one
share of Common Stock at the indicated exercise price. As of December 31, 1996,
options to acquire 1,965,000 shares had been granted at exercise prices ranging
from $0.97 to $10.00 per share. All of the options outstanding are exercisable.

     The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for the CRW 1995 Stock
Option Plan. All options granted under the plan have been with exercise prices
equal to the fair market value of the stock on the date of grant. Accordingly,
no compensation expense has been recognized for the grants under the Plan. Had
compensation cost for the Plan been determined consistent with the methodology
prescribed under SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company's income (loss) and income (loss) per share would have been
approximately ($4,560,000) and $27,722,000, or ($0.93) per share and $8.59 per
share, for 1996 and 1995, respectively. The pro forma effect for 1996 and 1995
is not representative of the pro forma effect on earnings in future years since
it does not take into consideration the pro forma compensation expense related
to grants made prior to 1995. The fair value of each option granted during 1996
and 1995 is estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions: dividend yield of 0%,
expected volatility of 82%, risk-free interest rate of 5.23% in 1996 and 6.39%
in 1995, and an expected life of 3 years. The weighted average fair value at the
date of grant for options granted during 1996 and 1995 was $1.54 and $0.97 per
share, respectively. The weighted average remaining contractual life of the
outstanding stock options at December 31, 1996 was seven years.

     The following table summarizes the aggregate option activity under the
plan:

                                                                   Weighted
                                                                    Average
                                                                 Exercise Price
                            Activity         Exercise Price        Per Share
                            --------         --------------        ---------
Balance outstanding,                                               
   January 1, 1995                --                   --             --
    Granted                    825,000       $0.97 - $1.27           $0.99
    Exercised                     --                   --             --
    Canceled                      --                   --             --
                            ----------       --------------          -----
                                                                   
Balance outstanding,                                               
   December 31, 1995           825,000       $0.97 - $1.27           $0.99
                                                                   
    Granted                  1,140,000       $1.94 - $10.00          $3.37
    Exercised                 (482,475)      $0.97 - $7.92           $1.89
    Canceled                      --                   --             --
                            ----------       --------------          -----
                                                                   
Balance outstanding,                                               
   December 31, 1996         1,482,525       $0.97 - $10.00          $2.50
                            ==========       ==============          =====




                                      F-15
<PAGE>

                      CRW FINANCIAL, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                                DECEMBER 31, 1996


     Options to purchase 1,482,525 and 825,000 shares of Common Stock were
exercisable at an average exercise price of $2.50 and $0.99 at December 31, 1996
and 1995, respectively. At December 31, 1996, 1,035,000 shares were available
for future grants under the Plan.

     During 1996 and 1995, the Company received proceeds of $1,060,000 and zero,
respectively, from the exercise of stock options.

13. Discontinued Operations:

     The following table summarizes the operating results of the collection
business and CCI (in thousands):

                                            FOR THE YEARS ENDED DECEMBER 31,
                                            -------------------------------
                                             1994        1995          1996
                                             ----        ----          ----
Net revenues                               $34,035      $32,073      $27,432
Operating expenses                          33,669       30,738       29,329
Other expenses                                 200          --             9
                                           -------      -------      -------
Income (loss) before income taxes              166        1,335       (1,906)
Income taxes (benefit)                          62          236         (754)
                                           -------      -------      -------
Income (loss) from discontinued
  operation                                   $104       $1,099      ($1,152)
                                           =======      =======      =======


     The following table summarizes the net assets of the collection business as
of December 31, 1995 and 1996 (in thousands):


                                                             December 31,
                                                             ------------
                                                         1995             1996
                                                         ----             ----
Current assets                                        $  7,893         $  6,857
Property and equipment                                   3,241            2,584
Intangible assets, net                                   4,768            4,391
Other assets                                               454              475
                                                      --------         --------
Total assets                                            16,356           14,307
Current liabilities                                     (7,010)          (5,993)
Long-term debt and liabilities                            (200)             (79)
                                                      --------         --------
Net assets                                            $  9,146         $  8,235
                                                      ========         ========

                                      F-16
<PAGE>

                      CRW FINANCIAL, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                                DECEMBER 31, 1996




Acquisitions of Discontinued Operations:

     In April 1994, the collection business acquired certain assets of National
Child Support Recovery Service, Inc. ("NCSR") and Find Dad, Inc. ("Find Dad") in
exchange for the assumption of approximately $325,000 in liabilities. In
September 1994, the collection business sold the NCSR and Find Dad assets in
exchange for a $125,000 note and a $200,000 contingent payment agreement.
Although this contingent payment agreement was based on a fixed amount of future
cash collections, it has been deemed to not be a determinable component of the
sale proceeds, and as a result the note has been recorded as a receivable by the
Company but the $200,000 contingent payment arrangement was written off in 1994
as a $200,000 loss on this transaction.

     In May 1994, the collection business acquired certain assets and assumed
certain liabilities (amounting to approximately $376,000) of PCC Credit, Inc.
("PCC") for approximately $415,000. The agreement also provides for up to
$470,000 of additional payments which are contingent on the results of PCC's
operations from May 1994 to April 1998. These contingent payments have not been
recorded by the Company as the payments will be recorded when such amounts are
determinable.

     In June 1994, the collection business acquired certain assets and assumed
certain liabilities (amounting to approximately $2,300,000) of Tri-State Credit
Corporation and its subsidiary Kaplan & Kaplan, Inc. ("Kaplan"), a Crofton,
Maryland based commercial collection agency and entered into a ten-year
noncompete agreement with Kaplan's sole shareholder who also entered into a
four-year employment agreement with the Company. The purchase price consisted of
a $1,338,000 cash payment and a $500,000 payment for the noncompete agreement.

Investments in RTC Partnerships

     In January 1994, CRW entered into two partnerships with the Resolution
Trust Corporation ("RTC") in which a subsidiary of CRW is the general partner of
a partnership which is general partner and the RTC is a limited partner. CRW
accounts for these partnerships under the equity method. The Company has
contributed approximately $143,000 of capital to the partnerships and has been
retained by the partnerships as a collection agent for which it is paid a
percentage of collections as a fee. The Company records such contingent fee
revenue upon receipt of payment from the partnership. Revenues paid by the
partnership to the Company in 1994, 1995 and 1996 were approximately $1,429,000,
$1,018,000 and $1,058,000, respectively.

Certain 1994 Charges

     In 1994, the Company recorded charges of $950,000 related to the
consolidation of its information systems, accounting and human resources
departments from Phoenix and Dallas to Conshohocken, Pennsylvania and other
restructuring efforts. The Company accounted for its restructuring charges in
accordance with Emerging Issues Task Force (EITF) Issue 94-3.

Major Customer

     Net revenues from the California Student Aid Commission were $2,013,000,
$4,220,000 and in $3,708,000 in 1994, 1995 and 1996, respectively.

                                      F-17
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                             CRW FINANCIAL, INC.

                                          By: /s/ J. Brian O'Neill
                                              -------------------------------
                                                  J. Brian O'Neill
                                                  Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
      Signature                               Title                                     Date
      ---------                               -----                                     ----

<S>                            <C>                                                 <C>
/s/  J. Brian O'Neill          Chief Executive Officer and Director                April 7, 1997
------------------------       (Principal Executive Officer)
    J.Brian O'Neill

/s/ Jonathan P. Robinson       Chief Financial Officer and Principal              April 7, 1997
------------------------       Financial and Accounting Officer
Jonathan P. Robinson            

 /s/ Robert N. Verratti        Vice Chairman of the Board and                     April 7, 1997
------------------------       Director
Robert N. Verratti

/s/ Bernard Morgan             Director                                           April 7, 1997
------------------------
Bernard Morgan

/s/ Mark J. DeNino             Director                                           April 7, 1997
------------------------
Mark J. DeNino


 /s/ Eustace W. Mita           Director                                           April 7, 1997
-------------------------
Eustace W. Mita

</TABLE>

                                       17
<PAGE>

                                 EXHIBIT INDEX


 3.1   Restated Certificate of Incorporation of the Registrant(3)

 3.2   Amendment to Restated Certificate of Incorporation of the Registrant (1)

 3.3   Amended Bylaws of the Registrant (2)

 4.1   Loan and Security Agreement dated May 11, 1995 between Mellon Bank, N.A.
       ("Mellon") and the Registrant (2)

 4.2   Amendment to Loan and Security Agreement dated September 12, 1995 between
       Mellon and the Registrant (1)

 4.3   Second Amendment to Loan and Security Agreement dated September 19, 1996
       between Mellon and the Registrant (1)

 4.4   Third Amendment to Loan and Security Agreement dated December 30, 1996
       between Mellon and the Registrant (1)

 4.5   Fourth Amendment to Loan and Security Agreement dated February 4, 1997
       between Mellon and the Registrant (1)

 4.6   Fifth Amendment to Loan and Security Agreement dated March 29, 1997
       between Mellon and the Registrant (1)

 4.7   Certificate of Designation, Preferences and Rights of Series A
       Convertible Preferred Stock (the "Preferred Stock") of the Registrant (5)

 4.8   Specimen of Series A Convertible Preferred Stock Certificate (5)

 4.9   Form of Warrant issued in connection with Preferred Stock (5)

 4.10  Term Loan Note and Addendum dated November 1, 1995 between the 
       Registrant in favor of J. Brian O'Neill and Miriam P. O'Neill (1)

10.1   Agreement of Lease dated as of July, 1994, between CRW Building Limited
       Partnership and Casino and Credit Services, Inc. ("CCS") (3)

10.2   Sublease Agreement dated May 10, 1995 between CCS and the Registrant (2)

10.3   Sublease Agreement between TeleSpectrum Worldwide Inc. and the 
       Registrant (1)

10.4   Lease Agreement dated July 1, 1996 between the Registrant and Lee Park
       Investors, L.P. (1)

10.5   Lease Agreement dated December 5, 1996 between the Registrant and
       210 Mall Boulevard Associates (1)

10.6   Employment Agreement dated May 11, 1995 between J. Brian O'Neill and the
       Registrant (2)

                                       18
<PAGE>


10.7   Employment Agreement dated May 11, 1995 between Jonathan P. Robinson and
       the Registrant (2)

10.8   Amended and Restated 1995 Stock Option Plan of the Registrant (4)

10.9   Securities Purchase Agreement dated February 29, 1996 between the
       Registrant and certain purchasers defined therein (5)

10.10  Asset Acquisition Agreement dated February 2, 1997 among the Registrant,
       Kaplan & Kaplan, Inc., NCO Group, Inc., CRWF Acquisition, Inc., and K & K
       Acquisition, Inc. (6)

21     Subsidiaries of the Registrant (1)

23     Consent of Arthur Andersen LLP (1)

-----------------------
(1)  Filed with this Annual Report on Form 10-K.

(2)  Filed as an Exhibit to the Registration Statement on Form S-1 
     (No. 33-62700) and incorporated herein by reference.

(3)  Filed as an Exhibit to the Form 10-K filed with the Securities and Exchange
     Commission on March 29, 1996 and incorporated herein by reference.

(4)  Filed as an Exhibit to CRW's definitive proxy statement for its 1996 Annual
     Meeting of Stockholders and incorporated herein by reference.

(5)  Filed as an Exhibit to CRW's Form 8-K dated February 29, 1996 and 
     incorporated herein by reference.

(6)  Filed as an Exhibit to CRW's Form 8-K dated February 2, 1997 and
     incorporated herein by reference.


                                       19