<PAGE>   1
                                  UNITED STATES
                       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, 2000 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 NO. 0-21107

                           TELESPECTRUM WORLDWIDE INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<CAPTION>
<S>                                                                              <C>
           DELAWARE                                                                   23-2845501
  (STATE OR OTHER JURISDICTION OF                                                  (I.R.S. EMPLOYER

  INCORPORATION OR ORGANIZATION)                                                 IDENTIFICATION NUMBER)
</TABLE>

                 443 SOUTH GULPH ROAD, KING OF PRUSSIA, PA 19406
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

                                  610-878-7400
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

<TABLE>
<CAPTION>
                              NAME OF EACH EXCHANGE
TITLE OF EACH CLASS            ON WHICH REGISTERED
-------------------           ---------------------
<S>                           <C>
      NONE                              NONE
</TABLE>

          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 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. [ ]

      As of March 31, 2001 the aggregate market value of the common stock held
by non-affiliates of the registrant was $20,837,926. Such aggregate market value
was computed by reference to the closing sale price of the common stock as
reported on the OTC Bulletin Board on such date. For purposes of making this
calculation only, the registrant has defined affiliates as including all
directors, executive officers and beneficial owners of more than five percent of
the common stock of the registrant.

      As of March 31, 2001, there were 33,076,073 shares of the registrant's
common stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

      Parts of the following documents are incorporated by reference in Part III
of this Form 10-K Report: Proxy Statement for registrant's 2001 Annual Meeting
of Stockholders - Items 10, 11, 12 and 13.
<PAGE>   2
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S>            <C>                                                                                                              <C>
                                                          PART I
Item 1.        Business .................................................................................................        1
Item 2.        Properties ...............................................................................................        5
Item 3.        Legal Proceedings..........................................................................................       5
Item 4.        Submission of Matters to a Vote of Security Holders........................................................       5

                                                          PART II

Item 5.        Market for the Registrant's Common Equity and Related Stockholder Matters..................................       6
Item 6.        Selected Financial Data....................................................................................       6
Item 7.        Management's Discussion and Analysis of Financial Condition and Results of Operations......................       8
Item 7A.       Quantitative and Qualitative Disclosures about Market Risk.................................................      22
Item 8.        Financial Statements and Supplementary Data................................................................      22
Item 9.        Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......................      22


                                                         PART III

Item 10.       Directors and Executive Officers of the Registrant.........................................................      22
Item 11.       Executive Compensation.....................................................................................      23
Item 12.       Security Ownership of Certain Beneficial Owners and Management.............................................      23
Item 13.       Certain Relationships and Related Transactions.............................................................      23

                                                          PART IV

Item 14.       Exhibits, Financial Statement Schedule, and Report on Form 8-K.............................................      23
               Index to Financial Statements and Schedule.................................................................     F-1
</TABLE>


CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

We have made forward-looking statements in this Form 10-K including the
information concerning possible or assumed future results of our operations and
those preceded by, followed by or that include words such as "anticipates,"
"believes," "expects," "intends" or similar expressions. For those statements,
we claim the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995. You should
understand that the following important factors, in addition to those discussed
elsewhere in this document, particularly under "Risk Factors", could affect our
future results and could cause those results to differ materially from those
expressed in our forward-looking statements:

-     our significant debt service obligations;

-     our need to obtain additional financing to pursue our business objectives;

-     our increased debt restricting our ability to obtain financing or pursue
      other business objectives;

-     our results of operations are sometimes dependent on one or more
      significant clients;

-     adverse effects on results of operations if we do not maintain sufficient
      capacity utilization;

-     adverse effects on our Company if we do not obtain and implement new or
      enhanced technology;

-     adverse effects on our results of operations if we do not avoid high
      personnel turnover;

-     our reliance on telecommunications companies;

-     changes in laws regulating our industry;

-     fluctuations in quarterly operating results causing our stock price to
      change; and

-     events directly or indirectly relating to our Company causing our stock
      price to be volatile.
<PAGE>   3
                           TELESPECTRUM WORLDWIDE INC.


                                     PART I


ITEM 1.   BUSINESS

We began our operations when we completed our initial public offering in 1996
and on the same day acquired our six initial operating businesses, including its
consulting business, Technical Assistance Research Programs, Inc. ("TARP").
Through acquisitions in 1996 and 1997 and our merger of International Data
Response Corporation ("IDRC") in 1999, we expanded our capabilities beyond
traditional telemarketing and outsourced call center services and significantly
increased our available capacity. We sold our market research business in
January 1998 and our direct mail and fulfillment business in March 1998.

During the third quarter of 1999 we launched ChannelCare, our branded
multi-channel Customer Relationship Management (CRM) solutions for large
corporations and high growth technology companies. ChannelCare was able to
provide web-based sales and service, e-mail response, web telephony, video and
real-time chat as well as traditional customer service solutions within a
multi-channel contact environment. While the Company did successfully implement
several installations in this arena it was not able to achieve the necessary
scale. Accordingly, we have abandoned this technology and are not currently
pursuing this market.

During the first quarter of 2000 we placed all assets and liabilities
specifically related to TARP into a new wholly owned corporation called
e-Satisfy.com ("e-Satisfy"). e-Satisfy then acquired Customer Insites, Inc.
("CI") by exchanging 27.6% of e-Satisfy common stock for all of the issued
and outstanding capital stock of CI. The original strategic plan was to
capitalize on the seemingly endless potential offered by the internet and
provide customer satisfaction surveys for internet traffic. e-Satisfy quickly
ramped up the infrastructure and technological investments necessary to support
the projected growth. e-Satisfy was unsuccessful in implementing that strategic
plan and during the fourth quarter of 2000 scaled back to the operational level
in place prior to undertaking the internet strategy.

Today our core operations revolve around inbound and outbound telemarketing,
inbound customer service, interactive voice response, customer care, customer
care consulting, call center management, and market research.

INDUSTRY OVERVIEW

Telemarketing involves the direct communication of information to current or
prospective customers by telephone. Indirect marketing methods, such as radio,
television and print advertising, employ a "one-to-many" approach to convey
marketing information that can position products and services within a broad
market context. Direct marketing methods, such as telemarketing, employ a
"one-to-one" approach. This method delivers a marketing message directly to a
specific current or prospective customer and elicits an immediate customer
response. Many businesses have combined traditional indirect marketing methods
such as advertising with direct marketing methods such as telemarketing to
obtain greater returns from their investments in marketing activities.

We believe that overcapacity currently exists within the industry. This
overcapacity has resulted in pricing pressures on existing and new business. We
anticipate that these pressures will continue into the near future.

A significant amount of telemarketing services, both inbound and outbound, are
performed by prospective clients' in-house operations. This provides a
significant outsourcing opportunity for third party providers.

Advances in computer and telecommunications technology have assisted
telemarketing and customer care companies to more accurately identify and
contact current and prospective customers, as well as provide more accurate,
timely and complete customer and product information to the customer service
representatives. Providers of telemarketing and customer care services can offer
clients economies of scale in sharing the cost of new technology among a larger
base of users than might be possible with in-house operations, while at the same
time better matching available capacity to fluctuating client demand.

                                       1
<PAGE>   4
SERVICES OVERVIEW

Our call centers continue to provide traditional forms of customer service to
our clients through our ChannelCare segment. These services include responding
to customer calls via customer service representatives (CSRs), interactive voice
response services, call center management and consulting services. Responding to
customer calls involves the processing of customer inquiries by CSRs. The
customer will typically call a toll-free "800" or "888" number which is routed
to one of our centers. The incoming call is identified by the number dialed and
linked to the CSR that is trained and available to handle the call. At the same
time, through the latest computer telephony integration (CTI) technology,
relevant customer and/or product information is delivered to the CSRs computer
screen, complete with prompts and response text necessary to handle the inquiry.
When the call is completed, certain information gathered is stored and delivered
back to the client's central data files. Our interactive voice response services
involve responding to incoming customer calls via automated systems. Where
required, these calls are transferred to CSRs. Our call center management
services involve running most aspects of a client's call center, including
recruiting and staffing the CSRs, managing the operations and providing reports
that analyze the performance of the client's call center.

We also provide business-to-consumer and business-to-business outbound
telemarketing services through our Acquisition Services segment. These services
involve the placing of telephone calls on behalf of our clients, normally as
part of our clients' efforts to sell their products or services, or to obtain
new customers. Our clients provide us with the list of customers or prospective
customers to be called. These lists consist of individuals or businesses that
have characteristics that would indicate that they are potential purchasers of a
client's products or services. Our telemarketing sales representatives (TSRs)
use prepared scripts when making the calls. These scripts are either prepared by
our client or us and contain written questions and answers that are designed to
assist the TSR in handling these calls. We use our computerized call management
systems to make these calls. These systems have predictive dialers that
automatically dial telephone numbers, determine if live connections have been
made and present connected calls to our TSRs.

Our final service offering is from our e-Satisfy segment. e-Satisfy is a
customer relationship management ("CRM") company that measures the customer
experience for click and mortar companies. e-Satisfy performs baseline and
tracking customer satisfaction surveys. We expect to continue to use e-Satisfy
as a way to differentiate the Company in the marketplace.

COMPETITION

The telemarketing and CRM industries are intensely competitive. We compete with
numerous independent telemarketing and CRM firms as well as the in-house
operations of many of our existing or prospective clients. We compete for
telemarketing and CRM services based on quality, technological expertise,
customer service, price, value, range of service offerings, and available
capacity.

Most businesses that are significant consumers of telemarketing and CRM services
utilize more than one firm to outsource their business and often reallocate work
among various firms from time to time. Clients often request telemarketing and
CRM services to be provided on an individual project basis and we frequently are
required to compete for individual projects as they are initiated.

SALES AND MARKETING

As of December 31, 2000, we employed 23 sales personnel. Sales personnel are
compensated by salary and commissions based on sales performance.

We generally operate under short-term cancelable contractual relationships with
our telemarketing clients. Our CRM client contracts are generally for one to
three years. Our prices often include an initial fee, a base service charge and
separate charges for ancillary services. Service charges for telemarketing and
CRM services are based upon hourly rates or minute rates. Charges for other
services are normally assessed on a fee-for-service basis.

                                       2
<PAGE>   5
TARGETED INDUSTRIES

We target our marketing efforts toward clients in the following principal
industries:

Telecommunications

We provide customer acquisition services for major telecommunications companies
for their long distance, cellular and cable products and services. We also
provide customer acquisition services for regional telecommunications companies
for their advanced telephone features. We offer these clients telemarketing
services for their consumer and business customers. In addition, we answer
incoming customer service calls and provide customer care consulting services
for the telecommunications industry. The telecommunications industry provided
27%, 32%, and 38% of our total revenues in the three years ended December 31,
2000, respectively.

Financial Services

We provide banks and other financial services clients with a wide range of
services, including:

      - acquiring new customers;

      - encouraging product use;

      - encouraging balance transfers;

      - regaining customers; and

      - customer service.

The financial services industry provided 23%, 28%, and 27% of our total revenues
in the three years ended December 31, 2000, respectively.

Insurance

We work with large consumer insurance companies and their agents, complementing
their sales efforts by telemarketing products such as life and accidental death
and dismemberment insurance. In addition, we answer incoming customer service
and sales calls. As of December 31, 2000, we employed 331 licensed insurance
agents collectively holding state insurance licenses from 48 states. These
agents provide customer acquisition services for our clients. The insurance
industry provided 10%, 10%, and 9% of our total revenues in the three years
ended December 31, 2000.

Pharmaceutical and Health Care

We provide our pharmaceutical clients with product support and customer service
for their business and consumer customers. We also perform customer care
consulting for clients in the health care industry.

Utilities

We provide large public and private utilities with the following services:

      - deregulation education for consumers;

      - customer service;

      - consumer affairs services;

      - collection efforts; and

      - customer service surveys.

Consumer Products

We provide consumer products clients with customer service, order entry and
customer acquisition services.

Technology

We provide product support and customer service for clients in the computer
hardware and software industry. We also provide business-to-business
telemarketing such as product sales, lead generation and customer qualification
and provide call center management services for technology clients.

                                       3


<PAGE>   6


Government

We provide government agencies and quasi-government agencies with a wide range
of services either directly or through strategic alliances. These services
include customer service and transaction processing.


PERSONNEL AND TRAINING

As of December 31, 2000, we employed approximately 8,149 individuals on a
full-time basis and 625 individuals on a part-time basis. TSRs and CSRs account
for approximately 7,249 employees of our total workforce of 8,774. Our ability
to hire, train and manage qualified employees is critical to our ability to
provide high quality services to our clients.

GOVERNMENT REGULATION

Our sales practices are regulated at both the federal and state level. The
Federal Telephone Consumer Protection Act (TCPA) of 1991, enforced by the
Federal Communications Commission (FCC), imposes restrictions on unsolicited
automated telephone calls to residential telephone subscribers. Under the TCPA
it is unlawful to initiate telephone solicitations to residential telephone
subscribers before 8:00 a.m. or after 9:00 p.m., local time at the subscriber's
location, or to use automated telephone dialing systems or artificial or
prerecorded voices to call certain subscribers. The FCC rules further require
telemarketers to have procedures in place to maintain lists of residential
customers who do not want to receive telephone solicitations.

The Federal Trade Commission (FTC) regulates both general sales practices and
telemarketing specifically. Under the Federal Trade Commission Act, the FTC has
broad authority to prohibit a variety of advertising or marketing practices that
may constitute "unfair or deceptive acts and practices."

The FTC also administers the Federal Telemarketing and Consumer Fraud and Abuse
Prevention Act of 1994 (TCFAPA). Under the TCFAPA, the FTC has issued
regulations prohibiting a variety of deceptive, unfair or abusive practices in
telemarketing sales. Generally, these rules prohibit misrepresentations of the
cost, quantity, terms, restrictions, performance or characteristics of products
or services offered by telephone solicitation or of refund, cancellation or
exchange policies. The regulations also regulate the use of prize promotions in
telemarketing to prevent deception and require that a telemarketer identify
promptly and clearly the seller on whose behalf the telemarketer is calling, the
purpose of the call and the nature of the goods or services offered. The
regulations also require that telemarketers maintain records on various aspects
of their business.

Most states have enacted statutes similar to the FTC Act prohibiting unfair or
deceptive acts and practices. A number of states have enacted legislation and
other states are considering enacting legislation to regulate telemarketing. For
example, telephone sales in certain states are not final until a written
contract is delivered to and signed by the buyer, and such a contract often may
be canceled within three business days. At least one state also prohibits
telemarketers from requiring credit card payment, and several other states
require certain telemarketers to obtain licenses, post bonds or submit sales
scripts to the state's attorney general.

We are also affected by laws applicable to our client's businesses. For example,
"anti-slamming" legislation requires telecommunication carriers to provide
substantial verification from their customers that they have authorized a change
in the carrier of their telephone service. This legislation places penalties on
telecommunications carriers that do not obtain the required verification. In
addition, our employees who complete the sale of insurance products are required
to be licensed by various state insurance commissions and to participate in
regular continuing education programs, which we currently provide.

Violation of the rules and regulations applicable to telemarketing practices may
result in injunctions against certain operations, in monetary penalties or
disgorgement of profits; moreover, such violations may give rise to private
actions for damages. We believe we are in compliance with applicable rules and
regulations.

                                       4
<PAGE>   7
ITEM 2.   PROPERTIES

Our corporate headquarters are located in 21,000 square feet of rented office
space in King of Prussia, Pennsylvania. As of December 31, 2000 we operated the
following material facilities:
<TABLE>
<CAPTION>
<S>                                                                                                                   <C>
                                                                                                                       NUMBER OF
      ACQUISITION SERVICES CENTERS                                                                                    WORKSTATIONS
      ----------------------------                                                                                    ------------
      Beckley, WV                                                                                                            270
      Charleston, WV                                                                                                         240
      Endicott, NY                                                                                                           240
      Fayetteville, NC                                                                                                       116
      Huntington, WV                                                                                                         240
      Salisbury, NC                                                                                                          104
      Scranton, PA                                                                                                           240
      Steubenville, OH                                                                                                       180
      Wheeling, WV                                                                                                           240
      Winnipeg, Manitoba                                                                                                     218
      Aliquippa, PA                                                                                                          240
      Pittsburgh, PA                                                                                                         180
      Duluth, MN                                                                                                             182
      Fergus Falls, MN                                                                                                       114
      Bemidji, MN                                                                                                            104
      Milbank, SD                                                                                                            116
      North Bay, Ontario                                                                                                     190
      Toronto, Ontario                                                                                                       516
      St. Catherine, Ontario                                                                                                 228
                                                                                                                           -----
      Total Acquisition Services                                                                                           3,958
                                                                                                                           -----

      CHANNELCARE CENTERS
      -------------------
      Annapolis, MD                                                                                                          200
      Linthicum, MD                                                                                                          136
      Woodlawn, MD                                                                                                           347
      Great Arrow (Buffalo, NY)                                                                                              312
      San Diego, CA                                                                                                          444
      Chantilly, VA                                                                                                           66
      Barbourville, KY                                                                                                       126
      King of Prussia, PA                                                                                                     98
      University                                                                                                             250
                                                                                                                           -----
      Total ChannelCare                                                                                                    1,979
                                                                                                                           -----

      CHANNELCARE MANAGED CENTERS
      ---------------------------
      White Plains, NY                                                                                                        35
      Littleton, MA                                                                                                           40
      Cheektowaga, NY                                                                                                        330
                                                                                                                           -----
                                                                                                                             405
                                                                                                                           -----
      Total                                                                                                                6,342
                                                                                                                           =====
</TABLE>

The ChannelCare managed centers are not owned or leased by us, but are operated
by us as managed call centers for our clients.

ITEM 3.   LEGAL PROCEEDINGS

We are from time to time involved in litigation incidental to our business. We
do not believe that the resolution of any existing litigation will result in a
material adverse effect on our business, results of operations, or financial
condition. See Note 9 to our consolidated financial statements.

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

We did not submit any matters to a vote of security holders during the fourth
quarter of 2000.

                                       5
<PAGE>   8
                                     PART II

ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
          MATTERS

Our common stock trades on the OTC Bulletin Board under the symbol TLSP. Prior
to October 30, 2000, our common stock was traded on the NASDAQ National Market.
However, our common stock failed to maintain a minimum bid price and,
accordingly, was delisted at the close of business on October 30, 2000. The
following table sets forth, for the periods indicated, the high and low bid
quotations for each share of our common stock, as reported on the NASDAQ
National Market through October 30, 2000 and the OTC Bulletin Board thereafter.


<TABLE>
<CAPTION>
                                                             High              Low
                                                       ---------------   --------------
           1999
<S>                           <C>                      <C>               <C>
                              First Quarter                 12.000            7.938
                              Second Quarter                 8.563            6.063
                              Third Quarter                  8.375            5.250
                              Fourth Quarter                 7.625            4.000
           2000
                              First Quarter                  9.813            6.063
                              Second Quarter                 7.250            3.063
                              Third Quarter                  4.500            0.625
                              Fourth Quarter                 0.875            0.234
</TABLE>

On March 31, 2001, there were 227 holders of record of the shares of our
outstanding common stock and the closing price for a share of common stock as
reported by the OTC Bulletin Board was $0.63. We have not paid any dividends
since our inception. The declaration and payment of dividends in the future will
be determined by the board of directors in light of conditions then existing,
including our earnings, financial condition, bank covenants and capital
requirements. Our current lending agreements prohibit the payment of dividends.

ITEM 6.   SELECTED FINANCIAL DATA

You should read the data set forth below together with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and our
consolidated financial statements and related notes thereto included elsewhere
herein.

                                       6
<PAGE>   9
TeleSpectrum Worldwide Inc.


<TABLE>
<CAPTION>
                                                                                                                        PERIOD FROM
                                                                                                                      APRIL 26, 1996
                                                                                                                      (INCEPTION) TO
                                                                           YEAR ENDED DECEMBER 31                       DECEMBER 31,
                                                                           ----------------------
                                                  2000               1999 (3)            1998              1997           1996 (1)
                                                  ----               --------            ----              ----           --------
                                                                  (IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)
<S>                                           <C>                <C>                <C>               <C>               <C>
STATEMENT OF OPERATIONS:
Revenues                                      $ 303,568          $ 266,810          $ 167,428         $ 178,922         $ 53,154
                                                -------            -------            -------           -------           ------
Operating Expenses:
   Cost of services                             237,171            195,573            130,406           154,846           33,010
   Selling, general and administrative           70,220             53,898             41,785            41,793           14,058
   Impairment - long lived assets               171,151 (4)              -                  -           139,072 (2)            -
   Restructuring charge                          10,254 (5)              -                  -                 -                -
   Goodwill amortization                          8,449              4,431              1,178             7,249            2,147
                                                -------            -------            -------           -------           ------
           Total operating expenses             497,245            253,902            173,369           342,960           49,215
                                                -------            -------            -------           -------           ------
           Operating income (loss)             (193,677)            12,908             (5,941)         (164,038)           3,939
   Interest (expense) income, net               (17,279)            (7,026)            (1,246)           (1,876)             433
   Investment gain                                    -                  -                  -             1,760                -
                                                -------            -------            -------           -------           ------
           Income (loss) from continuing
           operations before taxes             (210,956)             5,882             (7,187)         (164,154)           4,372
   Income tax benefit (expense)                       -                  -                247             2,310           (1,693)
   Minority interest                              7,836 (6)              -                  -                 -                -
                                                -------            -------            -------           -------           ------
           Income (loss) from
           continuing operations             $ (203,120)           $ 5,882           $ (6,940)       $ (161,844)         $ 2,679
                                             ==========            =======            ========        ==========          =======

   Basic earnings (loss) per share
   from continuing operations                   $ (6.42)            $ 0.21            $ (0.27)          $ (6.42)          $ 0.15
                                              ==========            =======           ========        ==========          =======

   Diluted earnings (loss) per
   share from continuing operations             $ (6.42)            $ 0.18            $ (0.27)          $ (6.42)          $ 0.15
                                              ==========            =======           ========        ==========          =======
</TABLE>



<TABLE>
<CAPTION>
                                                                                        DECEMBER 31,
                                                            -----------------------------------------------------------------------
                                                            2000                 1999            1998          1997          1996
                                                            ----                 ----            ----          ----          ----
BALANCE SHEET DATA:

<S>                                                         <C>                <C>            <C>           <C>           <C>
        Cash and cash equivalents                           $ 5,258                  -          $ 794         $ 774       $ 28,171
        Working capital, including net assets
        of discontinued operations                            5,373             13,912         16,702        20,655         49,373
        Total assets                                        129,373            318,407        103,689       144,721        296,539
        Long-term debt, net of current maturities           132,413            113,846          2,876         3,800          4,199
        Stockholders' equity (deficit)                      (64,273)           139,433         76,568        80,377        240,511
</TABLE>

------------------

(1)   TeleSpectrum Worldwide Inc. was incorporated on April 26, 1996;
      accordingly there are no historical results prior to that date

(2)   This impairment charge for goodwill was recorded in the fourth quarter of
      1997

(3)   Results include the merger with IDRC from June 30, 1999. See Note 4 to our
      Consolidated Financial Statements

(4)   See Note 4 to our Consolidated Financial Statements

(5)   See Note 3 to our Consolidated Financial Statements

(6)   Minority interest represents the portion of e-Satisfy.com owned by other
      individuals (27.6%)

                                       7
<PAGE>   10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

We have made forward-looking statements in this Form 10-K including the
information concerning possible or assumed future results of our operations and
those preceded by, followed by or that include words such as "anticipates,"
"believes," "expects," "intends" or similar expressions. For those statements,
we claim the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995. You should
understand that the following important factors, in addition to those discussed
elsewhere in this document, particularly under "Risk Factors", could affect our
future results and could cause those results to differ materially from those
expressed in our forward-looking statements:

      -     our significant debt service obligations;

      -     our need to obtain additional financing to pursue our business
            objectives;

      -     our increased debt restricting our ability to obtain financing or
            pursue other business objectives;

      -     our results of operations are sometimes dependent on one or more
            significant clients;

      -     adverse effects on our results of operations if we do not maintain
            sufficient capacity utilization;

      -     adverse effects on our Company if we do not obtain and implement new
            or enhanced technology;

      -     adverse effects on our results of operations if we do not avoid high
            personnel turnover;

      -     our reliance on telecommunications companies;

      -     changes in laws regulating our industry;

      -     fluctuations in quarterly operating results causing our stock price
            to change; and

      -     events directly or indirectly relating to our Company causing our
            stock price to be volatile.

BASIS OF PRESENTATION

The consolidated financial statements of the Company have been prepared on the
basis of accounting principles applicable to a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the normal
course of business. At December 31, 2000, the Company had a stockholders'
deficit of $64.3 million, and had incurred a net loss of approximately $203.1
million during 2000. The Company has been unable to meet the required debt
service payments with its lenders, requiring a number of amendments to its loan
agreements, financial covenant waivers and deferral of scheduled principal
payments. As discussed in Note 8, the Company has a entered into a new loan
agreement (the "New Credit Facilities") with its senior lending group during
April 2001 whereby amortization payments are required only for excess cash flow,
as defined, or upon the occurrence of certain events and only if after making
such payments the Company still has a minimum $5.0 million in available working
capital from cash on hand plus availability under the working capital revolver.
All amounts are due upon termination of the New Credit Facilities on July 1,
2002, consequently, the Company has classified amounts related to its Credit
Facilities as long-term liabilities in the accompanying Consolidated Balance
Sheets. The New Credit Facilities contain affirmative and negative covenants
including requirements to maintain certain levels of revenue, EBITDA, interest
coverage and capital expenditures. During the fourth quarter of 2000, Management
initiated a cost reduction program targeted to reduce costs by $15.0 million
annually. The savings will result from staff reductions, reduced
telecommunications costs, center closings and the reduction of other
infrastructure costs. The benefits of the cost reduction program are expected to
be realized beginning in the first quarter of 2001.

The covenants in the New Credit Facilities are based upon the Company's business
plan for 2001. If planned operating results are not achieved or if covenants are
not met, the Company could default on the New Credit Facilities and all amounts
due thereunder would be due immediately.

The factors noted above raise substantial doubt concerning the ability of the
Company to continue as a going concern. The consolidated financial statements do
not include any adjustments relating to the recoverability and classification of
asset carrying values or the amount and classification of liabilities that might
result should the Company be unable to continue as a going concern. Management
believes that the working capital needs of the Company through July 1, 2002 will
be provided by the cash generated from ongoing operations and the New Credit
Facilities. However, there can be no assurance that the Company will be able to
comply with the amended covenants through July 1, 2002 or refinance the amended
facility by this date.

                                       8
<PAGE>   11
RESULTS OF OPERATIONS

Background

We provide services to our customers through our Acquisition Services,
ChannelCare and e-Satisfy.com segments.

The Acquisition Services segment provides both business-to-consumer and
business-to-business acquisition services, primarily direct sales initiated by
us on behalf of our clients.

The ChannelCare segment provides customer service expertise to our clients. Our
customer service expertise includes the more traditional inbound services of
customer care support, typically through toll-free telephone numbers, for
activities such as responses to clients' customer service inquiries, catalogue
sales and electronic order processing and consulting services to a wide range of
clients.

The e-Satisfy.com segment, a customer satisfaction research company, measures,
monitors and improves the customer service experience.

On June 30, 1999 we completed mergers with International Data Response
Corporation ("IDRC") and CRW Financial, Inc. ("CRW"). The CRW merger was
recorded as a treasury stock transaction and accordingly, did not affect the
results of operations during 1999. The IDRC merger was accounted for as a
purchase, and accordingly the net tangible liabilities and results of operations
of IDRC have been included in our consolidated financial statements commencing
on June 30, 1999. As discussed below, all of the goodwill arising from this
transaction was written off during the fourth quarter of 2000.

During the first quarter of 2000 we placed all assets and liabilities
specifically related to TARP into a new wholly owned corporation called
e-Satisfy.com ("e-Satisfy"). e-Satisfy then acquired Customer Insites, Inc.
("CI") by exchanging 27.6% of e-Satisfy common stock for all of the issued and
outstanding capital stock of CI. We then retained an investment banker to raise
capital for e-Satisfy. The original strategic plan was to capitalize on the
seemingly endless potential offered by the internet and provide customer
satisfaction surveys for internet traffic. e-Satisfy quickly ramped up the
infrastructure and technological investments necessary to support the projected
growth. e-Satisfy was unsuccessful in implementing that strategic plan and
during the third quarter of 2000 implemented a significant cost reduction
program eliminating 46 positions representing 66% of their domestic operation.
e-Satisfy shifted its business strategy back to the traditional TARP business
and maintained the site monitor capability, which has the ability to service the
internet. e-Satisfy did not raise, nor is it currently seeking, any additional
capital. e-Satisfy incurred significant losses during 2000 resulting in a
deficiency of net assets in their balance sheet. Accordingly, we are recognizing
100% of their operations in the consolidated statement of operations until such
time as they recover from that deficiency. We anticipate that e-Satisfy will be
cash flow neutral for the majority of 2001. As discussed below, the majority of
the goodwill arising from e-Satisfy and its predecessor TARP, was written off
during the fourth quarter of 2000.

The same investment banker was also engaged to raise additional capital to
assist in the strategic initiatives of ChannelCare during the first quarter of
2000. During that time we were evaluating alternative business growth strategies
surrounding our multi-channel CRM solutions including, but not limited to,
independently operating this business segment. The Company did not raise, nor is
it currently seeking, any additional capital for ChannelCare and currently has
no plans to spin off this business segment.

During 1999 the Company began two significant technology initiatives. The first
initiative, referred to by the acronym "TESS", was intended to bring reporting
consistency, automation efficiencies, labor tracking, and workflow scheduling to
our Customer Acquisition segment. The project has proven to be unsuccessful and
all efforts to complete it were halted during the fourth quarter of 2000 and the
project has been abandoned. Accordingly, the entire accumulated net book value
was written off at December 31, 2000.

During the second quarter of 1999 the Company announced a strategic partnership
with two technology providers to deliver integrated eBusiness call center
solutions to leading-edge, Internet-enabled call center services utilizing a
Web-based front office software solution and an Internet interaction management
solution. The anticipated demand for this functionality was initially projected
at very high levels and the Company purchased licenses and built an
infrastructure to accommodate those projections. While the Company did
successfully implement several installations in this arena it did not reach the
volumes originally projected nor was it able to attain a sufficient level of
revenues to sustain the program. Consequently, the software licenses used in the
eCRM software platform have been deactivated and the related maintenance has
been discontinued. As

                                       9
<PAGE>   12
required by SFAS No. 121, the Company computed the projected undiscounted future
cash flows associated with the continuing software investment and compared it to
the carrying value as of December 31, 2000. This analysis indicated that a
permanent impairment had occurred and the investment was written down to the
estimated fair market value.

The Company continually evaluates whether events and circumstances have occurred
which indicate the remaining balance of goodwill and other intangibles may not
be recoverable. Due to the poor operating performance during 2000 we performed a
comprehensive review by business segment of the carrying value of the goodwill
and other intangibles that existed at year end. That review indicated that a
permanent impairment had occurred resulting in a total impairment charge of
$155.5 million and an ending goodwill balance at December 31, 2000 of $1.6
million which related entirely to e-Satisfy.

During the fourth quarter of 2000, as part of a continuing analysis of the
Company's operational strategies, the Board of Directors of the Company approved
a restructuring plan designed to streamline operations and improve profitability
by closing certain call centers and reducing overhead costs. The restructuring
plan resulted in pre-tax charges of $10.3 million which will require a cash
outlay of approximately $5.9 million, the majority of which will be paid over
the next twelve to eighteen months. The restructuring charges impacted our
Acquisition Services and ChannelCare segments by $3.8 million and $4.7 million,
respectively, with the balance affecting our general corporate operations.

EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA")

EBITDA represents net income(loss) before income taxes, interest income and
expense, depreciation and amortization. EBITDA should not be considered in
isolation or as a substitute for earnings from continuing operations, cash flows
or other data prepared in accordance with generally accepted accounting
principles or as a measure of profitability or liquidity. EBITDA is being
presented because we believe that it provides useful information regarding our
ability to incur and/or service debt. The unadjusted EBITDA for the year ended
December 31, 2000 derived from our consolidated results of operations was
($160.7) million. EBITDA during the same period was $23.1 million after
excluding the affects of e-Satisfy.com, and items which were non-recurring in
nature. The gross impact of these non-recurring items were comprised primarily
of impairment of long-lived assets ($171.1 million), restructuring charges
($10.3 million), bad debts and other software write-downs (totaling $5.7
million) offset by the effect of e-Satisfy.com.

The following discussions should be read in conjunction with "Selected Financial
Data" and the consolidated financial statements contained within this report on
Form 10-K.

                                       10
<PAGE>   13
Comparison of the results of operations for 2000 to 1999

<TABLE>
<CAPTION>
                                                                                 RESULTS OF OPERATIONS
                                                                                 (DOLLARS IN MILLIONS)


                                                            YEAR ENDED               AS A           YEAR ENDED         AS A
                                                            DECEMBER 31,         PERCENTAGE OF      DECEMBER 31,    PERCENTAGE OF
                                                              2000                REVENUES             1999           REVENUES
                                                            -----------          -------------      -----------     -------------

<S>                                                       <C>                     <C>               <C>              <C>
Revenues:
   Acquisition Services                                    $  192.4                  63 %            $177.8             67%
   ChannelCare                                                104.8                  35                79.0             29
   e-Satisfy.com                                                6.4                   2                10.0              4
                                                           --------                 ---              ------            ---
      Total revenues                                          303.6                 100               266.8            100

Cost of services:
   Acquisition Services                                       149.0                  77               133.3             75
   ChannelCare                                                 83.3                  79                58.4             74
   e-Satisfy.com                                                4.9                  77                 3.9             39
                                                           --------                 ---              ------            ---
      Total cost of services                                  237.2                  78               195.6             73

Selling, general and administrative                            70.2                  23                53.9             20
Impairment - long-lived assets                                171.1                  56
Restructuring charge                                           10.3                   4
Amortization of goodwill                                        8.4                   3                 4.4              2
                                                           --------                 ---              ------            ---
      Total operating expenses                                497.2                 164               253.9             95
                                                           --------                 ---              ------            ---

Operating income (loss)                                      (193.6)                (64)               12.9              5

Interest expense, net                                         (17.3)                 (6)               (7.0)            (3)
                                                           --------                 ---              ------            ---
Income (loss) before taxes                                   (210.9)                (70)                5.9              2
Income tax benefit                                                -                   -                   -              -
Minority interest                                               7.8                   3
                                                           --------                 ---              ------            ---

Income (loss) from continuing operations                   $ (203.1)                (67)%             $ 5.9              2%
                                                           ========                 ===              ======            ===
</TABLE>

REVENUES

Our total revenues for the twelve months ended December 31, 2000 were $303.6
million, representing an increase of $36.8 million or 14% from the 1999 total of
$266.8. This increase is primarily attributable to the addition of IDRC centers
for the first two quarters of 2000 resulting in increased revenues of $59.5
million offset by a decrease in fulfillment of $10.2 million and e-Satisfy.com
of $3.6 million. We had one client, from the telecommunications industry, which
made up over 10 percent of our revenue.

Acquisition Services Segment

Our Acquisition Services segment revenues were $192.4 million for the twelve
months ended December 31, 2000. These revenues accounted for 63% of our total
revenue and represented an increase of $14.6 million or 8% of 1999 revenues of
$177.8 million. The increase in Acquisition Services revenue is primarily
attributable to the addition of IDRC centers for the entire year ended December
31, 2000 resulting in increased revenue of $42.9 million offset by the decline
in fulfillment revenue of $10.2 million and overall reductions in business
volumes.

ChannelCare Segment

Our ChannelCare segment revenues were $104.8 million for the twelve months ended
December 31, 2000. These revenues accounted for 35% of our total revenues and
increased by $25.8 million or 33% from the twelve months ended December 31,
1999. The increase is primarily due to the addition of IDRC centers for the
entire year ended December 31, 2000 resulting in increased revenues of $16.5
million with the remaining increase of $9.3 million coming from our voice
response business ($2.1 million) and a new center acquired in November 1999
offset by a general decrease in business volumes.

                                       11
<PAGE>   14
e-Satisfy.com Segment

Our e-Satisfy.com segment revenues were $6.4 million for the twelve months ended
December 31, 2000. These revenues accounted for 2% of total revenue and
decreased by $3.6 million or 36% from the twelve months ended December 31, 1999.
During 2000, e-Satisfy.com focused on developing its business-to-business
internet strategy after the acquisition of CI in February 2000. During the same
period of 1999, the focus was on the traditional TARP business before the CI
acquisition.

COST OF SERVICES

Our cost of services were $237.2 million for the twelve months ended December
31, 2000, an increase of $41.6 million or 21% from cost of services of $195.6
million for the twelve months ended December 31, 1999. As a percentage of total
revenues, cost of services were 78% and 73% for each of the twelve months ended
December 31, 2000 and 1999, respectively.

Acquisition Services Segment

Our Acquisition Services segment cost of services for the twelve months ended
December 31, 2000 were 77% of acquisition services revenues and increased by
$15.7 million or 12% from the twelve months ended December 31, 1999. Costs of
services for the twelve months ended December 31, 1999 were 75% of Acquisition
Services revenues. The increase in cost of services as a percentage of revenue
is attributable to lower revenue per hour due to competitive pricing pressures
and lower utilization of call center capacity.

ChannelCare Segment

Our ChannelCare segment cost of services accounted for 79% of our ChannelCare
revenues for the twelve months ended December 31, 2000 and increased by $24.9
million or 43% from the twelve months ended December 31, 1999. Cost of services
for the twelve months ended December 31, 1999 were 74% of ChannelCare revenues.
The increase in cost of services as a percentage of revenues is due to a change
in the client mix and an increase in infrastructure to support anticipated
higher volumes.

e-Satisfy.com Segment

Our e-Satisfy.com segment cost of services accounted for 77% of our
e-Satisfy.com revenues for the twelve months ended December 31, 2000 and
increased by $1.0 million or 26% from the twelve months ended December 31, 1999.
Cost of services for the twelve months ended December 31, 1999 were 39% of
e-Satisfy.com revenues. The increase in cost of services as a percentage of
revenue is a result of a charge to write-off software associated with the
traditional business platform which will not be used in the future and the
change in the traditional business strategy.

SELLING, GENERAL AND ADMINISTRATIVE

Our SG&A expenses were $70.2 million for the twelve months ended December 31,
2000, an increase of $16.3 million or 30% from the twelve months ended December
31, 1999. As a percentage of revenue, SG&A expenses were 23% and 20% for each of
the twelve months ended December 31, 2000 and 1999 respectively. Of the $70.2
million, $11.0 million relates directly to e-Satisfy.com which increased $6.1
million from 1999. The $6.1 million increase is due to a charge to write-off
software associated with the traditional TARP business of $1.5 million and
increases in salaries and infrastructure associated with the changes in
e-Satisfy.com business strategies. Overall software maintenance fees and
depreciation and amortization increased $7.5 million for the twelve months ended
December 31, 2000 over the same period in the preceding year due to the IDRC
acquisition and increases in technology spending. Bad debt expense decreased by
$4.0 million from $6.8 million to $2.8 million for the twelve months ended
December 31, 1999 and 2000, respectively. The remaining increase in SG&A is
attributable to the IDRC merger.

Goodwill Amortization

Our goodwill amortization was $8.4 million, representing 3% of total revenues
for the twelve months ended December 31, 2000, and increased by $4.0 million
from the twelve months ended December 31, 1999. This increase is primarily
attributable to the IDRC merger and the CI acquisition. As discussed above, the
majority of goodwill was written off at December 31, 2000 which will
significantly decrease goodwill amortization in the future.

Interest Expense, Net

                                       12
<PAGE>   15
We incurred net interest expense of $17.3 million for the twelve months ended
December 31, 2000 which represents an increase of $10.3 million from the twelve
months ended December 31, 1999. This increase in interest expense is primarily
attributable to increased debt levels from the IDRC merger, amortization of debt
issuance costs, an increase in the average interest rate of approximately 100
basis points, nonrecurring fees of $0.6 million payable to the lenders under our
credit facility and $0.9 million for charges related to our covenant waivers
received in the fourth quarter of 2000.

Minority Interest

Minority interest represents the portion of e-Satisfy.com owned by other
individuals (27.6%). For the twelve months ended December 31, 2000 minority
interest was $7.8 million. There was no minority interest for the twelve months
ended December 31, 1999. The Company recorded 72.4% of e-Satisy.com's losses
until the minority interest accumulated balance in the net assets of
e-Satisfy.com reached zero, at which time we reflected 100% of the affiliates
losses. In the future, should e-Satisfy.com become profitable, the reverse will
be true.

INCOME TAXES

There was no income tax provision for the years ended December 31, 2000 and
1999. As of December 31, 2000 and 1999, we had a net operating loss carryforward
of approximately $128.1 million and $94.5 million, respectively. Due to the
uncertainty surrounding the potential realization of the deferred tax assets,
the Company has provided a full valuation allowance at December 31, 2000 and
1999.

                                       13
<PAGE>   16
Comparison of the results of operations for 1999 to 1998.

<TABLE>
<CAPTION>
                                                    YEAR ENDED           AS A        YEAR ENDED           AS A
                                                    DECEMBER 31,     PERCENTAGE OF   DECEMBER 31,     PERCENTAGE OF
                                                       1999            REVENUES         1998            REVENUES
                                                    -----------      -------------   -----------      -------------

<S>                                                 <C>              <C>             <C>              <C>
Revenues:
   Acquisition Services                             $ 177.8              67 %         $ 115.8             69 %
   ChannelCare                                         79.0              29              43.0             26
   e-Satisfy.com                                       10.0               4               8.6              5
                                                      -----              --             -----            ---
      Total revenues                                  266.8             100             167.4            100

Cost of services:
   Acquisition Services                               133.3              75              96.4             83
   ChannelCare                                         58.4              74              30.7             71
   e-Satisfy.com                                        3.9              39               3.3             38
                                                      -----              --             -----            ---
      Total cost of services                          195.6              73             130.4             78

Selling, general and administrative                    53.9              20              41.7             25
Amortization of goodwill                                4.4               2               1.2              -
                                                      -----              --             -----            ---
      Total operating expenses                        253.9              95             173.3            103
                                                      -----              --             -----            ---

Operating income (loss)                                12.9               5              (5.9)            (3)

Interest expense, net                                  (7.0)             (3)             (1.2)            (1)
                                                      -----             -----           -----            ---
Income (loss) before taxes                              5.9               2              (7.1)            (4)
Income tax benefit                                        -               -               0.2              -
                                                      -----             -----           -----            ---

Income (loss) from continuing operations              $ 5.9               2 %          $ (6.9)            (4)%
                                                      =====             =====          =======            ====
</TABLE>


REVENUES

Our total revenues for 1999 were $266.8 million, representing an increase of 59%
from 1998. This increase is largely a result of increased hours provided by the
merger with IDRC or $72.0 million. Approximately 11% and 10% of 1999 and 1998
total revenues, respectively, were generated by services provided on behalf of a
client in the telecommunications industry. The majority of this revenue was
generated by the Acquisition Services segment.

Acquisition Services Segment

Our Acquisition Services revenues were $177.8 million for 1999. These revenues
accounted for 67% of our total revenues for 1999 and represented an increase of
$62.0 million or 54% from Acquisition Services revenues of $115.8 million for
1998. The increase in revenues was primarily attributable to our merger with
IDRC which increased revenues by approximately $44.1 million and an increase in
fulfillment revenues of $7.2 million. Services initiated for new clients totaled
$4.8 million.

ChannelCare Segment

Our ChannelCare segment revenues were $79.0 million for 1999. These revenues
accounted for 29% of our total revenues for 1999 and increased by $36.0 million
or 84% from ChannelCare revenues of $43.0 million for 1998. The increase in
revenues for 1999 was attributable to our merger with IDRC which increased
revenues by approximately $27.8 million and additional customer growth of $8.2
million reflecting increased capacity with the number of call centers, exclusive
of IDRC, going from 5 in 1998 to 10 in 1999.

                                       14
<PAGE>   17
e-Satisfy.com Segment

Our e-Satisfy.com segment revenues were $10.0 million for the twelve months
ended December 31, 1999. These revenues accounted for 4% of total revenues and
increased by $1.4 million or 16% from the twelve months ended December 31, 1998.

COST OF SERVICES

Our cost of services were $195.6 million for 1999 an increase of $65.2 million
or 50% from cost of services of $130.4 million for 1998. As a percentage of
total revenues, cost of services were 73% and 78% for 1999 and 1998,
respectively.

Acquisition Services Segment

Our Acquisition Services segment cost of services for 1999 were 75% and 83% of
Acquisition Services revenues in 1999 and 1998, respectively and increased by an
aggregate of $36.9 million or 38% from 1998. The lower operating cost margins
were due to lower administrative labor costs, slightly higher revenue per hour
and an overall lower cost per minute for long distance telephone charges. In
addition, 1998 included costs related to call center closures totaling $1.3
million.

ChannelCare Segment

Our ChannelCare segment cost of services accounted for 74% and 71% of our
ChannelCare revenues in 1999 and 1998, respectively and increased by $27.7
million or 90% from 1998. The increased operating cost margins were due to start
up costs incurred in opening new centers, lower revenue per hour due to
competitive pricing pressures, offset by lower overall cost per minute for long
distance telephone charges.

e-Satisfy.com Segment

Our e-Satisfy.com segment cost of services accounted for 39% of our
e-Satisfy.com revenue for the twelve months ended December 31, 1999 and
increased by $0.6 million or 18% for the twelve months ended December 31, 1998.
Cost of services for the twelve months ended December 31, 1998 were 38% of
e-Satisfy.com revenues.

SELLING, GENERAL AND ADMINISTRATIVE

SG&A expenses were $53.9 million for 1999, an increase of $12.2 million or 29%
from 1998. As a percentage of total revenues, SG&A expenses were 20% and 25% for
1999 and 1998, respectively. The major increases in the aggregate dollars year
over year are attributable to the IDRC merger and the associated duplicative
corporate facilities, overhead and travel costs of customer support, human
resources/payroll, marketing, accounting, general management and severance costs
incurred related to reductions in force to decrease redundant overhead. Bad debt
expense for 1999 was $6.8 million versus $2.3 million in 1998. In addition, we
incurred approximately $1.3 million in costs related to corporate overhead
reductions during 1998.

AMORTIZATION OF GOODWILL

Our goodwill amortization was $4.4 million for 1999 compared to $1.2 million in
1998. In 1999, additional costs totaling $152.3 million were added to goodwill,
due primarily to the merger with IDRC. Our amortization in 1998 consisted of the
amortization of goodwill associated with our ChannelCare segment.

INTEREST EXPENSE, NET

We incurred net interest expense of $7.0 million for 1999 which represented an
increase of $5.8 million from 1998. This increase was due to the increased
borrowings under our credit facility and amortization of debt issuance costs
totaling $0.7 million in 1999.

INCOME TAXES

There was no income tax provision for the year ended December 31, 1999. The 1998
income tax benefit from continuing operations represented the offset of the
provision for income taxes for discontinued operations. As of December 31, 1999
and 1998, we had a net operating loss carryforward of approximately $94.5
million and $39.9 million, respectively. In addition, as of December 31, 1999,
included in the net operating loss carryforward, was approximately $51.2 million
of operating loss carryforward, with a full valuation allowance, acquired from
IDRC and CRW in the June 30, 1999 merger.


                                       15
<PAGE>   18
LIQUIDITY AND CAPITAL RESOURCES

DOLLARS IN MILLIONS
CASH FLOWS PROVIDED BY (USED IN):
---------------------------------

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                             ----------------------------------------
                                                             2000              1999             1998
                                                             ----              ----             ----
<S>                                                        <C>                <C>             <C>
Operating Activities                                       $ 25.5             $ 2.4           $ (1.5)
Investing Activities                                        (21.6)            (25.6)            28.1
Financing Activities                                          1.3              22.5            (26.6)
</TABLE>

Year Ended December 31, 2000

The $25.5 million of cash provided by operating activities consisted primarily
of the net loss of $203.1 million and non cash items including depreciation and
amortization of $27.3 million, $2.8 million for bad debts, impairment of
long-lived assets of $171.1 million, a loss on disposal of fixed assets of $3.8
million and restructuring charges of $10.3 million, offset by working capital
requirements, including an increase in accounts payable of $6.2 million, a
decrease in accounts receivable of $15.3 million, total accrued expenses of $8.4
million and other liabilities of $2.1 million.

The $21.6 million of cash used in investing activities primarily consisted of
property and equipment purchases attributed to maintaining and enhancing our
technology platforms and costs related to new call centers. Certain of these
assets were impaired in 2000. See Background.

The $1.3 million of net cash provided by financing activities primarily
consisted of borrowings related to long-term debt.

Year Ended December 31, 1999

The $2.4 million of cash provided by operating activities consisted of $5.9
million of net income and non cash items including depreciation and amortization
of $16.7 million and $6.8 million for bad debts, offset by working capital
requirements including an increase in accounts receivable of $8.4 million,
prepaid expenses and other of $9.8 million, and a decrease in accounts payable
of $5.5 million and other liabilities of $1.2 million.

The $25.6 million of cash used in investing activities primarily consisted of
property and equipment purchases attributed to maintaining and enhancing our
technology platforms and costs related to new call centers.

The $22.5 million of net cash provided by financing activities primarily
consisted of borrowings related to long-term debt.

See Financing Matters below for additional information regarding the finances of
the Company.

Year Ended December 31, 1998

The $1.5 million of cash used in operating activities consisted of the net loss
of $6.5 million and non-cash items including depreciation and amortization of
$9.7 million, $2.3 million for bad debts, offset by working capital requirements
including a decrease in accrued expenses of $4.2 million and accrued
compensation of $3.8 million.

The $28.1 million of cash provided by investing activities primarily consisted
of $37.8 million of proceeds from the sale of our market research and direct
mail and fulfillment segments, primarily offset by $9.1 million of purchases of
property and equipment.

The $26.6 million of net cash used in financing activities primarily consisted
of $29.0 million of net payments under our credit facility offset by $2.0
million of proceeds from the exercise of stock options and sale of common stock.

Financing Matters

                                       16
<PAGE>   19
In connection with the mergers on June 30, 1999, the Company entered into $135.0
million in credit facilities consisting of Term A, Term B, Term C and working
capital revolver facilities (the "Credit Facilities") incurring costs of $5.0
million which are being amortized using the effective interest method over the
life of the Credit Facilities. For the year ended December 31, 2000, debt
issuance cost amortization was $1,502,000. The Company borrowed $20.0 million
under the Term A facility, $20.0 million under the Term B facility and $50.0
million under the Term C facility. In addition, the Company can borrow the
lesser of $45.0 million or 85% of eligible receivables, as defined, under its
working capital revolver facility. The working capital revolver facility also
provides for the issuance of letters of credit subject to certain borrowing
limits. There were no letters of credit outstanding as of December 31, 2000. At
December 31, 2000, the Company had $2.4 million available under the working
capital revolver facility. The unused portion of the working capital revolver
facility is subject to an annual fee of 0.50%.

Borrowings under the Credit Facilities are collateralized by substantially all
of the assets of the Company. The Credit Facilities require interest rate caps
and contain covenants, the most restrictive of which require the maintenance of
certain financial ratios, restrict future indebtedness, limit capital
expenditures and prohibit cash dividends.

The proceeds received during June 1999 from the Credit Facilities were used to
refinance $98.0 million in principal and interest outstanding under the IDRC
credit facilities and $10.9 million in principal, interest and early termination
fees outstanding under the Company's April 14, 1998 Secured Credit Facility. The
remaining Credit Facilities proceeds were used in the mergers to repay certain
notes including accrued interest, redeem preferred stock and pay transaction
fees aggregating $9.7 million. During the years ended December 31, 2000 and
1999, the weighted average interest rate on borrowings under the then existing
credit facilities was 10.5% and 9.6%, respectively.

During April 2000, the Company signed an amendment to the Credit Facilities that
modified the Company's debt covenants effective February 2000 including the
leverage ratio and the fixed charge coverage ratio and obtained additional
borrowing capacity totaling $6.0 million in the form of a Revolving Credit
Commitment raising the total capacity on revolvers to $51.0 million. In
addition, the annual limitation allowed for capital expenditures decreased for
the year 2000 from $32.5 million to $25.0 million.

The Company and its banking group entered into various amendments of the
Company's Credit Facilities commencing September 30, 2000. These amendments
included the deferral of principal and interest of $2.2 million and $3.0
million, respectively, the waiver of financial covenants, imposed additional
interest at 2% of outstanding principal beginning October 1, 2000 ("Incremental
Interest") and a restriction on certain payments through November 17, 2000. On
October 27, 2000, the Company and its bank group agreed to terminate the
Revolving Credit Commitment of $6.0 million obtained during April 2000, which
had never been utilized. On November 10, 2000, the Company paid the $3.0 million
deferred interest, which represented accrued interest for the third quarter of
2000.

On November 17, 2000, the Company signed Amendment #7 to the Credit Facilities
which deferred principal payments of $2.2 million due September 30, and December
31, 2000, respectively, waived financial covenants, imposed a fee equal to 0.5%
per month of outstanding principal (the "Waiver Fee"), required weekly principal
payments of $150,000 and allowed a sweep of excess available funds, as defined,
under certain circumstances, through February 15, 2001. During the extension
period of Amendment #7, the Company made the required principal payments
totaling $2.1 million as well as the required interest payment of $3.2 million,
which represented accrued interest for the fourth quarter of 2000.

On February 15, 2001, the Company signed an extension to Amendment #7 which
extended the waiver period to March 31, 2001, discontinued the weekly principal
payments, limited expenditures for capital assets, and pledged the Company's
interest in e-Satisfy as collateral.

On April 16, 2001, the Company entered into a new loan agreement with its
lenders (the "New Credit Facilities") under which all amounts outstanding under
Term A, B, and C and $35.0 million of the working capital revolver plus accrued
Incremental Interest and the Waiver Fee, totaling $120.6 million were converted
into a Term Loan that bears interest at a Base Rate plus the Applicable Margin,
as defined (approximately 10.0% at April 16, 2001) and matures July 1, 2002 (the
"Maturity Date"). The remaining $10.0 million of the original working capital
revolver carries forward as a revolver and the Company can borrow the lesser of
$10.0 million or 65% of eligible receivables, as defined. As of April 16, 2001,
the Company has $1.4 million available under this revolver. The unused portion
of the working capital revolver facility is subject to an annual fee of 0.50%.
In addition, an annual agency fee equal to 25 basis points of the aggregate
commitment is payable on the Maturity Date.

Borrowings under the New Credit Facilities are collateralized by substantially
all of the assets of the Company. The New Credit Facilities contain covenants,
the most restrictive of which require the maintenance of certain financial
ratios, restrict future indebtedness, limit capital expenditures and prohibit
cash dividends.

                                       17
<PAGE>   20
The payment of interest accrued for the first quarter of 2001 on the old credit
facility totaling $2.6 million may be deferred by 50% at the discretion of the
Company. Interest on the New Credit Facilities is payable monthly, however, at
the discretion of the Company, up to 25% of the monthly interest may be deferred
for any months through and including December 31, 2001. Any amounts so deferred
are converted into Deferred Interest Notes, as defined, and bear interest at the
same rate as the Term Loan and mature on the Maturity Date.

Under certain circumstances the Company may be required to make mandatory
principal payments, as defined ("Mandatory Prepayments"). In general Mandatory
Prepayments are required upon certain triggering events, such as the sale of
assets, issuance of debt or equity securities, receipt of insurance proceeds or
similar events or the Company generates excess cash flow, as defined ("Excess
Cash Flow"). Excess Cash Flow is generally defined as quarterly EBITDA less
permitted capital expenditures, cash interest, and the sum of $1.25 million plus
certain payments. No Mandatory Prepayments are required unless the Company has a
minimum of $5.0 million in available working capital from cash on hand plus
availability under the working capital revolver after such Excess Cash Flow
payment has been made.

In connection with the New Credit Facilities the Company is being charged a fee
totaling 15% of the aggregate commitments (the "Refinancing Fee") payable at the
Maturity Date. In the event the Company pays off the New Credit Facilities in
its entirety prior to the Maturity Date, the Refinancing Fee is reduced to 5.0%,
10.0%, and 12.5% if the early payoff is prior to June 30, 2001, September 30,
2001, and December 31, 2001, respectively. The Refinancing Fee will be amortized
using the effective interest method over the life of the New Credit Facilities
and the remaining unamortized debt issuance costs related to the old credit
facility, totaling $2.5 million, will be written off during the second quarter
of 2001.

Management believes that the New Credit Facilities will need to be refinanced
prior to the Maturity Date. Although the terms of any refinancing are not
presently determinable, the refinancing could result in substantial dilution to
the Company's current equity holders.

Note Payable to Stockholder

As discussed in Note 4, the majority stockholders of IDRC invested the proceeds
from the exchange of their IDRC preferred stock of $4,873,000 for a term note
with the Company. This note bears interest at 10% and was payable one year from
the closing depending upon certain covenants as defined in the agreement which
to date did not allow for payment. On April 16, 2001 this note was restructured.
The new agreement matures June 30, 2004, bears interest at 10% for the year
ending December 31, 2001, 15% for the two years ending December 31, 2003 and 20%
for the six months ending June 30, 2004. The agreement requires prepayment in
the event more than 90% of the Company's common stock is acquired or
substantially all of the assets are sold. Under certain circumstances, as
defined in the agreement, if prior to December 31, 2002, the Company issues debt
or equity securities of $10.0 million or more, the holder has the right to
purchase a pro-rata share, as defined, of the securities issued with up to one
half of the total amount due such holder under similar terms.

e-Satisfy Debt

During the second quarter of 2000, the Company renegotiated the terms of a note
payable to the former principals of TARP. The original scheduled payment of $1.2
million due June 30, 2000 was changed to payments of $300,000 on the first day
of July, October, November and December plus interest at 10%. Payments of
$300,000 and $100,000 were made the first of July and October, respectively. The
Company was prohibited from paying the November installment by its senior lender
making the Company in default on this agreement at that time. On April 9, 2001,
the Company entered into a new agreement which bears interest at 10% from June
30, 2000 and requires principal payments of $50,000 per month through March 2002
and $40,000 per month through August 2002, at which time the remaining balance
of $1,466,000 is payable in full.

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

During June 2000 the same TeleSpectrum shareholder advanced an additional
$500,000 to e-Satisfy.com in return for convertible promissory notes and 250,000
warrants to purchase e-Satisfy.com common stock. The notes bear interest at 8%
and were due October 15, 2000 if additional equity totaling $5,000,000 (a
"Subsequent Financing") was not obtained by July 31, 2000. Upon consummation of
a Subsequent Financing, the notes automatically convert to 357,143 shares of
Series A

                                       18
<PAGE>   21
Common Stock of e-Satisfy.com after August 31, 2000. A Subsequent Financing was
not obtained putting e-Satisfy.com into technical default on these notes.
e-Satisfy.com is currently negotiating with the lender to obtain a forbearance
agreement. On November 8, 2000, the lender subordinated their position to the
factoring arrangement discussed below. The warrants expire in seven years and
were exercisable at $2.00 per warrant unless a Subsequent Financing was not
obtained by August 31, 2000, in which case they are $.01 per warrant.

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

In August 2000 e-Satisfy.com entered into a factoring arrangement with a bank
(the "Factoring") which is secured by substantially all the assets of
e-Satisfy.com. Qualifying receivables up to $800,000 may be sold to the lender
in exchange for an 80% advance on the receivables purchased, creating a 20%
reserve to cover potential losses and fees. The receivables are sold with total
recourse and accordingly, the transaction was recorded as a financing. The
outstanding debt balance at December 31, 2000 was $59,000. Finance charges are
approximately 1% per month of the outstanding balance. The Factoring was
terminated during January 2001.

OTHER

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

During the fourth quarter of 2000 the Company announced that Kurt Dinkelacker
had joined the Company as Chief Financial Officer. During the first quarter of
2001, the Company announced that J. Peter Pierce has joined the Company as
Chairman and Chief Executive Officer.

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." In June 1999, the FASB issued SFAS No. 137,
which deferred the effective date of SFAS No. 133. This was followed in June
2000 by the issuance of SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities," which amends SFAS No. 133. SFAS No.
133 and SFAS No. 138 establish new accounting rules and disclosure requirements
for most derivative instruments and hedging activities. SFAS No. 133 and SFAS
No. 138 require all derivatives to be recognized as assets or liabilities at
fair value. Fair value adjustments are made either through earnings or equity,
depending upon the exposure being hedged and the effectiveness of the hedge. The
Company has adopted these standards effective January 1, 2001. The initial
adoption of these standards will not have a material impact on the Company's
financial statements.

OTHER INFORMATION -  - RISK FACTORS

You should consider the following risk factors that pertain to our Company. The
realization of any of these risks could result in significant harm to our
results of operations, financial condition, cash flows, business or the market
price of our common stock.

Keep these risk factors in mind when reading "forward-looking" statements
elsewhere in this Form 10-K (See "Cautionary Statement Concerning
Forward-Looking Statements" in Item 7).

We have significant debt service obligations.

As of December 31, 2000, we had approximately $124.7 million of outstanding
senior debt under our $135 million senior debt facility. Under all of our
outstanding debt instruments, we are required to make monthly interest payments.
While we have no scheduled principal amortization in 2001, our debt becomes due
on July 1, 2002. In addition, under certain circumstances principal repayments
could be required in 2001. Our credit agreement with our lenders imposes
numerous financial covenants that we will need to meet in order to avoid a
default under our new debt agreement which closed April 16, 2001. These
covenants include:

-     maintaining a minimum level of revenue;

                                       19
<PAGE>   22
-     maintaining minimum EBITDA levels;

-     maintaining minimum interest coverage ratios;

-     potential mandatory prepayments;

-     hire qualified personnel;

-     limiting capital expenditures; and

-     limiting dividends.

If we are unable to service our debt or meet our other contractual obligations,
our lenders may take certain actions that could limit our operations and require
immediate repayment. Our internally generated cash flow or other available
financing might not be sufficient to sustain operations if this were to occur.
If these sources are not sufficient, we will be required to seek additional debt
or equity financing and this financing may not be available on terms acceptable
to us, if at all.

Our significant debt levels restrict our ability to obtain financing or pursue
other business objectives.

Our debt restricts our ability to obtain other financing and pursue other
business objectives. This will be magnified if our general credit rating
deteriorates. If this occurs, we may find it more difficult to:

-     obtain additional financing over and above our new credit facilities;

-     make acquisitions;

-     enter into strategic relationships;

-     make capital expenditures;

-     respond to business opportunities;

-     address competitive pressures or adverse industry developments; and

-     withstand economic downturns.

Our results of operations are sometimes dependent on one or more significant
clients.

Approximately 11% of our revenues for the years ended December 31, 2000 and
1999, respectively, were generated from one client in the telecommunications
industry. We may develop future relationships with clients that represent a
large concentration of our revenues. These types of relationships are often
cancelable by the client upon relatively short notice. Our business may be
harmed by any unexpected termination or non-renewal of such a relationship.

Our results of operations will be adversely affected if we do not maintain
sufficient capacity utilization.

Our results of operations are substantially dependent upon our ability to use
our call center capacity at efficient levels. Capacity utilization is a term
that identifies how much of a call center's workstations are being used to
perform services. Low capacity utilization at a call center reduces
profitability. This occurs because costs are being incurred for employees and
other overhead costs at a time when revenue is not being produced by these
employees and workstations. We have in the past experienced periods of low
capacity utilization and have sometimes accepted less profitable client
engagements to fill this capacity. We have also experienced, and may experience
in the future, at least short-term, excess capacity when we open a new call
center or terminate or complete a large client program.

Our business will be harmed if we do not obtain and implement new or enhanced
technology.

We are significantly dependent upon technology. We may not be successful in
anticipating continuing technological changes or in implementing new or enhanced
technology. In addition, we may not be able to afford such new or enhanced
technology.

                                       20
<PAGE>   23
Our results of operations will be adversely affected if we do not avoid high
personnel turnover.

Our industry is very labor intensive and has experienced high personnel
turnover. Many of our employees receive modest hourly wages. A higher turnover
rate among our employees would increase our recruiting and training costs and
decrease our productivity. Our insurance product sales and technology-based
inbound customer service require specifically trained employees. We may not be
able to continue to hire, train and retain a sufficient labor force of qualified
employees.

We rely heavily on telecommunications companies and our business will be
adversely affected if our telecommunications costs increase or our service is
interrupted.

Our business is heavily dependent upon service provided by various local and
long distance telephone companies. Telecommunications costs are one of our most
significant expenses. Our results of operations will be materially adversely
affected by any significant increases in the cost of telephone services that are
not recoverable through an increase in the price of our services, or any
significant interruption in telephone services.

Our quarterly operating results will fluctuate and this will cause our stock
price to change.

We expect that our quarterly operating results will fluctuate due to many
factors, a number of which are beyond our control. We believe that
period-to-period comparisons of our historical results may not be meaningful.
You should not rely on these historical results as an indication of our future
results. Our results of operations in future periods may not meet the
expectations of analysts and investors, in which case the price of our common
stock would likely decrease. Factors which may also have an impact on our
operating results include:

-     our ability to retain existing clients and attract new clients;

-     the timing of our clients' marketing campaigns and customer service
      programs;

-     the timing of additional selling, general and administrative expenses
      incurred to acquire and support such new business;

-     changes in our revenue mix among our various service offerings;

-     the introduction of new or enhanced services and products;

-     price competition;

-     our ability to upgrade and develop our information technology systems;
      technical difficulties, system downtime or Internet brownouts;

-     government regulations;

-     general economic conditions and economic conditions specific to the
      teleservices industry; and

-     seasonality in our business, particularly during the months of August and
      December.

Events directly or indirectly relating to our Company will cause our stock price
to be volatile.

The market price of our common stock has been highly volatile. This volatility
may adversely affect the price of our common stock in the future. Factors that
could cause such volatility include:

-     the volume of trading in our stock;

-     our quarterly operating results;

-     deviations in results of operations from analyst estimates;

-     changes in general conditions in the economy;

-     developments within the teleservices industry; and

                                       21
<PAGE>   24
-     other developments affecting us or our competitors.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

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

We pay interest to the Credit Facilities banks based on a floating interest
rate, either the prime rate or LIBOR. Based on the outstanding balance under the
Credit Facilities at December 31, 2000, we would be required to pay an
additional $1.2 million in interest annually for every 1.0% increase in the
average prime rate or LIBOR. To reduce the risk associated with a large increase
in interest rates, we have in place two derivative financial instruments known
as interest rate caps each with notional amounts of $29.5 million. Under the
terms of the interest rate cap agreements, we would receive quarterly cash
payments when the 3-month LIBOR rate at the end of any quarter exceeded 7.5%.
The payment would be determined by multiplying the difference between the actual
LIBOR rate and 7.5% by the notional amounts of $29.5 million which decrease over
time. The interest rate cap agreements expire on September 30, 2002. These
interest rate caps are required under the terms of the $135.0 million Credit
Facilities, which dictates that we establish and maintain three year interest
rate caps at 200 basis points above the three-month LIBOR rate with notional
amounts not less than 66.0% of the term loan balance. The three-month LIBOR
interest rate did not exceed 7.5% at the end of any quarter during fiscal year
2000. We have restructured this arrangement subsequent to year end. See
Financing Matters in Item 7.

Foreign Currency Risk

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

As of December 31, 2000, approximately $1.9 million of the Credit Facilities
proceeds have been loaned to our Canadian subsidiary (acquired in the June 30,
1999 merger with IDRC). The loan proceeds have been converted to Canadian
dollars. Under the terms of the Credit Facilities agreement, principal
repayments may require conversion of all or a portion of our Canadian dollar
loan to U.S. dollars. An unfavorable change in the Canadian dollar exchange rate
at the time of the conversion could cause a foreign currency exchange loss. At
this time, we do not believe that such a conversion would be required. The other
foreign subsidiaries/affiliates are limited in their operations and the level of
investment by the parent company so that risk of foreign currency fluctuations
is not expected to be material.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

      The financial statements of Telespectrum Worldwide Inc. listed in the
index appearing under Item 14 herein are filed as part of the Report.

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

None


                                    PART III

Certain information required by Part III is omitted from the Report by virtue of
the fact that we expect to file with the Securities and Exchange Commission a
definitive proxy statement relating to our Annual Meeting of Stockholders
pursuant to Regulation 14A (the "Proxy Statement") not later than 120 days after
the end of the fiscal year covered by this Report, and certain information to be
included therein is incorporated herein by reference.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The information concerning our directors required by this Item is
incorporated by reference to the information contained in the Proxy Statement
under the caption "Election of Directors."

                                       22
<PAGE>   25
ITEM 11.  EXECUTIVE COMPENSATION.

         The information required by this Item is incorporated by reference to
the information contained in the Proxy Statement under the captions "Election of
Directors," "Executive Compensation" and "Compensation Pursuant to Plans."

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The information required by this Item is incorporated by reference to
the information contained in the Proxy Statement under the captions "Election of
Directors" and "Principal Stockholders" and "Security Ownership of Management."

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information required by this Item is incorporated by reference to
the information contained in the Proxy Statement under the caption "Certain
Transactions."

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORT ON FORM 8-K

(a)   Documents filed as part of this report:

      1.    Financial Statements.

            The financial statements listed in the accompanying Table of
            Contents to Financial Statements and Financial Statement Schedules
            at page F-1 are filed as part of this Form 10-K.

      2.    Financial Statement Schedule.

            The financial statement schedule listed in the accompanying Table of
            Contents to Financial Statements and Financial Statement Schedule at
            page F-1 is filed as part of this Form 10-K.

            All other schedules have been omitted because they are not
            applicable, or not required, or the information is disclosed in the
            Financial Statements or notes thereto.

      3.    Exhibits. (See (c) below)

(b)   Report on Form 8-K


            There was one Report on Form 8-K with respect to Item 5 filed by us
            on December 1, 2000. There were no other reports on Form 8-K filed
            by us during the fourth quarter of the fiscal year ended December
            31, 2000.

(c)   Exhibits.

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

<TABLE>
<CAPTION>
Exhibit
Number                                  Description
<S>                           <C>

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

3.02                          Bylaws of TeleSpectrum Worldwide Inc. are incorporated by reference to
                              exhibit 3.02 of our Registration Statement on Form S-1 (File No.,
                              333-004349).
</TABLE>

                                       23
<PAGE>   26
<TABLE>
<CAPTION>
<S>                           <C>
**    10.01                   TeleSpectrum Worldwide Inc. Amended and Restated 1996 Equity
                              Compensation Plan is incorporated by reference to exhibit 10.04 of our
                              Annual Report on Form 10-K for the fiscal year ended December 31, 1999.

      10.02                   Agreement and Plan of Merger dated as of January 14, 1999 by and among
                              TeleSpectrum Worldwide Inc., International Data Response Corporation,
                              McCown De Leeuw & Co. III, L.P., McCown De Leeuw & Co. Offshore (Europe)
                              III, L.P., McCown De Leeuw & Co. III, (Asia), and The Gamma Fund LLC is
                              incorporated by reference to Exhibit 2.1 of our current Report on Form 8-K
                              filed on January 26, 1999.

      10.03                   Amendment No. 1 to Agreement and Plan of Merger dated as of February 26,
                              1999 by and among TeleSpectrum Worldwide Inc., International Data Response
                              Corporation, McCown De Leeuw & Co. III, L.P., McCown De Leeuw & Co.
                              Offshore (Europe) III, L.P., McCown De Leeuw & Co. III, (Asia), and The
                              Gamma Fund LLC is incorporated by reference to Exhibit 10.10 of our
                              Registration Statement on Form S-4 (File No. 333-80251).

      10.04                   Amendment No. 2 to Agreement and Plan of Merger dated as of May 13,
                              1999 by and among TeleSpectrum Worldwide Inc., International Data
                              Response Corporation, McCown De Leeuw & Co. III, L.P., McCown De
                              Leeuw & Co. III, (Asia), and The Gamma Fund LLC is incorporated by
                              reference to Exhibit 10.15 of our Registration Statement on Form S-4
                              (File No. 333-80251).

      10.05                   Agreement and Plan of Merger and Reorganization, dated as of
                              September 3, 1998 by and among CRW Financial, Inc., TeleSpectrum
                              Worldwide Inc., and CRW Acquisition Corp. is incorporated by
                              reference to Exhibit 10.13 of our Registration Statement on Form S-4
                              (File No. 333-80251).

      10.06                   Amended and Restated Credit Agreement dated as of April 16, 2001,
                              between Telespectrum Worldwide Inc., Lenders named therein, and
                              BNP Paribas as agent.*

**    10.07                   Employment Agreement dated as of January 1, 2000, between TeleSpectrum
                              Worldwide Inc. and Francis J. Pennella is incorporated by reference to
                              exhibit 11.14 of our Annual Report for the fiscal year ended December 31,
                              1999 on Form 10-K.

**    10.08                   Employment Agreement dated as of January 1, 2001, between TeleSpectrum
                              Worldwide Inc. and J. Peter Pierce.*

**    10.09                   Employment Agreement dated as of January 2, 2001, between TeleSpectrum
                              Worldwide Inc. and Christopher Williams.*

**    10.10                   Employment Agreement dated as of September 29, 2000, between
                              TeleSpectrum Worldwide Inc. and Kurt Dinkelacker.*

**    10.11                   Employment Agreement dated as of January 2, 2001, between TeleSpectrum
                              Worldwide Inc. and Joseph Nezi.*

      21.0                    Subsidiaries of the Registrant.*

      23.01                   Consent of Arthur Andersen LLP.*
</TABLE>


-----------------

* Filed herewith

** Constitutes a management contract or a compensatory plan or arrangement.

                                       24
<PAGE>   27
                                   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.


                                                 TeleSpectrum Worldwide Inc.


Date: April 16, 2001                             By:  /S/ KURT E. DINKELACKER
                                                    ----------------------------
                                                      KURT E. DINKELACKER
                                                    CHIEF FINANCIAL 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.

      EACH PERSON, IN SO SIGNING ALSO MAKES, CONSTITUTES AND APPOINTS J. PETER
PIERCE, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER OF TELESPECTRUM
WORLDWIDE INC., AND KURT E. DINKELACKER, CHIEF FINANCIAL OFFICER OF TELESPECTRUM
WORLDWIDE INC. AND EACH OF THEM ACTING ALONE, AS HIS TRUE AND LAWFUL
ATTORNEYS-IN-FACT, IN HIS NAME, PLACE AND STEAD, TO EXECUTE AND CAUSE TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ANY OR ALL AMENDMENTS TO THE
REPORT.

<TABLE>
<CAPTION>
<S>                                                            <C>                                              <C>
                    NAME                                             CAPACITY                                      DATE
                    ----                                             --------                                      ----

           /S/ J. PETER PIERCE                                 Chairman of the Board and                        April 16, 2001
         -----------------------------                         Chief Executive Officer
           J. PETER PIERCE                                     (Principal Executive Officer)


           /S/ KURT E. DINKELACKER                             Chief Financial Officer                          April 16, 2001
         ------------------------------                        (Principal Financial and
           KURT E. DINKELACKER                                 Accounting Officer)


           /S/ FENTON R. (PETE) TALBOTT                        Director                                         April 16, 2001
         ------------------------------
           FENTON R. (PETE) TALBOTT

           /S/ CHRISTOPHER WILLIAMS                            Director                                         April 16, 2001
         ------------------------------
           CHRISTOPHER WILLIAMS

           /S/ JOSEPH V. DEL RASO                              Director                                         April 16, 2001
         ------------------------------
           JOSEPH V. DEL RASO

         /S/ ROBERT B. HELLMAN, JR.                            Director                                         April 16, 2001
         ------------------------------
           ROBERT B. HELLMAN, JR.

           /S/ BRITTON H. MURDOCH
         ------------------------------                        Director                                         April 16, 2001
           BRITTON H. MURDOCH

           /S/ J. BRIAN O'NEILL                                Director                                         April 16, 2001
         ------------------------------
           J. BRIAN O'NEILL

           /S/ RICHARD W. VIRTUE                               Director                                         April 16, 2001
         ------------------------------
           RICHARD W. VIRTUE
</TABLE>

                                       25
<PAGE>   28
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

                        PART II -- FINANCIAL INFORMATION

                                TABLE OF CONTENTS


ITEM 8.   FINANCIAL STATEMENTS and SUPPLEMENTARY DATA


<TABLE>
<CAPTION>
<S>                                                                                     <C>
   Report of Independent Public Accountants                                             F-2
   Consolidated Balance Sheets as of December 31, 2000 and 1999                         F-3
    For the Years Ended December 31, 2000, 1999 and 1998:
         Consolidated Statements of Operations                                          F-4
         Consolidated Statements of Stockholders' Equity (Deficit)                      F-5
         Consolidated Statements of Cash Flows                                          F-6
   Notes to Consolidated Financial Statements                                           F-7

FINANCIAL STATEMENT SCHEDULE:
   Report of Independent Public Accountants                                             S-1
   Schedule II -- Valuation and Qualifying Accounts for the
      Years Ended December 31, 2000, 1999 and 1998                                      S-2
</TABLE>

                                      F-1
<PAGE>   29
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To TeleSpectrum Worldwide Inc.:

We have audited the accompanying consolidated balance sheets of TeleSpectrum
Worldwide Inc. (a Delaware corporation) and subsidiaries as of December 31, 2000
and 1999, and the related consolidated statements of operations, stockholders'
equity(deficit) and cash flows for each of the three years in the period ended
December 31, 2000. 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 auditing standards generally accepted
in the United States. 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 financial position of TeleSpectrum Worldwide Inc. and
subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company had a loss from operations in 2000, and has a
net capital deficiency of $64.3 million. The Company has been unable to meet the
required debt service payments with its lenders, and has required a number of
amendments to avoid being in default of its credit agreements. These facts raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters, including the amendment and
restatement of its credit agreements, are also described in Note 1. The
accompanying financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts and classification
of recorded liabilities that might be necessary should the Company be unable to
continue as a going concern.


                                                          /s/Arthur Andersen LLP



Philadelphia, Pa.,
   February 23, 2001 (except with respect to the matter described in Note 8, as
to which the date is April 16, 2001)

                                      F-2
<PAGE>   30
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
                  --------------------------------------------

                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------

                      (In thousands, except share amounts)

<TABLE>
<CAPTION>
                                                                                                          December 31,
                                                                                             --------------------------------------
                                              ASSETS                                             2000                    1999
                                              ------                                             ----                    ----
<S>                                                                                          <C>                     <C>
CURRENT ASSETS:
   Cash and cash equivalents                                                                   $ 5,258                     $ -
   Accounts receivable, net of allowance for doubtful
      accounts of $3,457 and $5,117                                                             54,745                  72,879
   Prepaid expenses and other                                                                    6,173                   5,809
                                                                                               -------                 -------

                  Total current assets                                                          66,176                  78,688

PROPERTY, PLANT AND EQUIPMENT, net                                                              44,473                  59,455

GOODWILL AND OTHER INTANGIBLES, net of accumulated
   amortization of  $1,623 and $7,134                                                           15,003                 174,703

OTHER ASSETS                                                                                     3,721                   5,561
                                                                                               -------                 -------

                  Total assets                                                               $ 129,373               $ 318,407
                                                                                             =========               =========

                          LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
   Current maturities of long-term debt                                                        $ 3,844                $ 16,411
   Cash overdraft                                                                                    -                   4,912
   Accounts payable                                                                             15,457                   9,305
   Accrued expenses                                                                             11,540                  11,376
   Accrued costs for closed call centers                                                        11,960                   4,622
   Accrued compensation                                                                          8,903                  10,381
   Interest payable                                                                              5,023                   2,530
   Other current liabilities                                                                     4,076                   5,239
                                                                                               -------                 -------

                  Total current liabilities                                                     60,803                  64,776

LONG-TERM DEBT, net of current maturities                                                      132,413                 113,846

OTHER NONCURRENT LIABILITIES                                                                       430                     352

COMMITMENTS AND CONTINGENCIES (see Note 9)

STOCKHOLDERS' EQUITY (DEFICIT):
   Preferred stock, $.01 par value, 5,000,000 shares authorized, no
      shares issued or outstanding                                                                   -                       -
   Common stock, $.01 par value, 200,000,000 shares authorized, 40,022,656
      shares issued and 33,076,073 shares outstanding at December 31, 2000, and
      39,558,746 shares issued and 32,612,163 shares outstanding at
      December 31, 1999                                                                            400                     396
   Additional paid-in capital                                                                  339,099                 338,848
   Common stock purchase warrants                                                                7,840                   7,840
   Due from stockholders                                                                          (952)                   (952)
   Deferred compensation                                                                             -                    (163)
   Accumulated deficit                                                                        (360,524)               (157,404)
   Treasury stock, 6,946,583 shares at cost                                                    (48,810)                (48,810)
   Cumulative currency translation adjustment                                                   (1,326)                   (322)
                                                                                                -------                 -------

                  Total stockholders' equity (deficit)                                         (64,273)                139,433
                                                                                               -------                 -------

                  Total liabilities and stockholders' equity (deficit)                       $ 129,373               $ 318,407
                                                                                             =========               =========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-3
<PAGE>   31
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                      ------------------------------------------------------

                                                          2000                 1999                  1998
                                                          ----                 ----                  ----

<S>                                                   <C>                  <C>                   <C>
REVENUES                                                $303,568             $266,810              $ 167,428
                                                      ----------              -------               --------
OPERATING EXPENSES:
      Cost of services                                   237,171              195,573                130,406
      Selling, general and administrative                 70,220               53,898                 41,785
      Impairment - long-lived assets                     171,151                    -                      -
      Restructuring charge                                10,254                    -                      -
      Goodwill amortization                                8,449                4,431                  1,178
                                                      ----------              -------               --------
                       Total operating expenses          497,245              253,902                173,369
                                                      ----------              -------               --------
                        Operating income (loss)         (193,677)              12,908                 (5,941)

INTEREST INCOME                                              480                  944                     71

INTEREST EXPENSE                                         (17,759)              (7,970)                (1,317)
                                                      ----------              -------               --------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND MINORITY INTEREST:              (210,956)               5,882                 (7,187)

INCOME TAX BENEFIT                                             -                    -                    247

MINORITY INTEREST                                          7,836                    -                      -
                                                      ----------              -------               --------
INCOME (LOSS) FROM CONTINUING OPERATIONS                (203,120)               5,882                 (6,940)

INCOME FROM DISCONTINUED OPERATIONS                            -                    -                    479
                                                      ----------              -------               --------
NET INCOME (LOSS)                                     $ (203,120)             $ 5,882               $ (6,461)
                                                      ==========              =======               ========

BASIC EARNINGS (LOSS) PER SHARE:
      Continuing operations                              $ (6.42)              $ 0.21                $ (0.27)
      Discontinued operations                                  -                    -                   0.02
                                                      ----------              -------               --------

NET INCOME (LOSS) PER BASIC SHARE                        $ (6.42)              $ 0.21                $ (0.25)
                                                      ==========              =======               ========
DILUTED EARNINGS (LOSS) PER SHARE:
      Continuing operations                              $ (6.42)              $ 0.18                $ (0.27)
      Discontinued operations                                  -                    -                   0.02
                                                      ----------              -------               --------
NET INCOME (LOSS) PER DILUTED SHARE                      $ (6.42)              $ 0.18                $ (0.25)
                                                      ==========              =======               ========
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-4
<PAGE>   32


<TABLE>
<CAPTION>
                                                                                                            Common
                                                            Common Stock               Additional           Stock            Due
                                                     ---------------------------        Paid-In            Purchase         From
                                                       Shares            Amount         Capital            Warrants     Stockholders
                                                     ----------         --------      ------------         --------     ------------

<S>                                                 <C>                  <C>           <C>               <C>            <C>
Balance, January 1, 1998                             25,213,074           $ 252        $ 237,186               -              -
   Exercise of common stock options                     330,411               4            1,496               -              -
   Issuance of common stock below fair market
         value                                          227,964               2              824               -              -
   Issuance of options to purchase common
         stock below fair market value                        -               -              670               -              -
   Amortization of deferred compensation                      -               -                -               -              -
   Comprehensive income (loss):
      Net loss                                                -               -                -               -              -
      Cumulative currency translation adjustment              -               -                -               -              -
      Total comprehensive loss                      -----------           -----         --------           -----          -----

Balance, December 31, 1998                           25,771,449             258          240,176               -              -
   Exercise of common stock options                     345,010               3            1,580               -              -
   CRW merger                                         5,173,186              52           48,567               -              -
   IDRC merger                                        8,269,101              83           46,911           7,840           (952)
   Partial release of escrowed shares                         -               -            1,614               -              -
   Amortization of deferred compensation                      -               -                -               -              -
   Comprehensive income
      Net income                                              -               -                -               -              -
      Cumulative currency translation adjustment              -               -                -               -              -
      Total comprehensive income                    -----------           -----         --------           -----          -----

Balance, December 31, 1999                           39,558,746             396          338,848           7,840           (952)
   Exercise of common stock options                     463,910               4              251               -              -
   Amortization of deferred compensation                      -               -                -               -              -
   Comprehensive income                                       -               -                -               -              -
      Net loss                                                -               -                -               -              -
      Cumulative currency translation adjustment              -               -                -               -              -
      Total comprehensive income                              -               -                -               -              -
                                                     ----------           -----        ---------         -------         ------
Balance, December 31, 2000                           40,022,656           $ 400        $ 339,099         $ 7,840         $ (952)
                                                     ==========           =====        =========         =======         ======
</TABLE>




<TABLE>
<CAPTION>
                                                                                                        Cumulative
                                                                      Retained                           Currency         Total
                                                      Deferred        Earnings             Treasury     Translation    Stockholders'
                                                     Compensation     (Deficit)             Stock        Adjustment        Equity
                                                     ------------     ---------             -----       -----------    ------------

<S>                                                  <C>             <C>               <C>            <C>            <C>
Balance, January 1, 1998                                   -         $ (156,825)               -          $ (236)        $ 80,377
   Exercise of common stock options                        -                  -                -               -            1,500
   Issuance of common stock below fair market
         value                                             -                  -                -               -              826
   Issuance of options to purchase common
         stock below fair market value                  (670)                 -                -               -                -
   Amortization of deferred compensation                 307                  -                -               -              307
   Comprehensive income (loss):
      Net loss                                             -             (6,461)               -               -                -
      Cumulative currency translation adjustment           -                  -                -              19                -
      Total comprehensive loss                                                                                             (6,442)
                                                     ----------      -----------       ----------       --------       ----------
Balance, December 31, 1998                              (363)          (163,286)               -            (217)          76,568
   Exercise of common stock options                        -                  -                -               -            1,583
   CRW merger                                              -                  -          (48,810)              -             (191)
   IDRC merger                                             -                  -                -               -           53,882
   Partial release of escrowed shares                      -                  -                -               -            1,614
   Amortization of deferred compensation                 200                  -                -               -              200
   Comprehensive income
      Net income                                           -              5,882                -               -                -
      Cumulative currency translation adjustment           -                  -                -            (105)               -
      Total comprehensive income                                                                                            5,777

                                                     ----------      -----------       ----------       --------       ----------
Balance, December 31, 1999                              (163)          (157,404)         (48,810)           (322)         139,433
   Exercise of common stock options                        -                  -                -               -              255
   Amortization of deferred compensation                 163                  -                -               -              163
   Comprehensive income                                    -                  -                -               -                -
      Net loss                                             -           (203,120)               -               -                -
      Cumulative currency translation adjustment           -                  -                -          (1,004)               -
      Total comprehensive income                           -                  -                -               -         (204,124)
                                                     ----------      -----------       ----------       --------       ----------
Balance, December 31, 2000                              $  -         $ (360,524)       $ (48,810)       $ (1,326)       $ (64,273)
                                                     ==========      ===========       ==========       ========       ==========
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-5
<PAGE>   33
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                            Year Ended December 31,
                                                                               ---------------------------------------------
                                                                                    2000             1999          1998
                                                                               -------------   -------------   --------------
OPERATING ACTIVITIES:
<S>                                                                            <C>            <C>            <C>
   Net income (loss)                                                           $  (203,120)   $     5,882    $    (6,461)
   Adjustments to reconcile net income (loss) to net
   cash provided by (used in) operating
      activities:
        Depreciation and amortization                                               18,836         12,285          8,532
        Goodwill amortization                                                        8,449          4,431          1,178
        Provision for bad debts                                                      2,833          6,800          2,325
        Impairment -  - long-lived assets                                          171,151           --             --
        Restructuring charge                                                        10,254           --             --
        Loss on disposal of fixed assets                                             3,826           --             --
        Non-cash compensation                                                          163            320            633
        Other items, net                                                              --              500            468
        Changes in the following, net of acquisitions:
           Accounts receivable                                                      15,301         (8,421)         1,088
           Prepaid expenses and other                                                 (370)        (9,798)          (739)
           Accounts payable                                                          6,152         (5,466)         1,832
           Accrued expenses                                                        (14,256)        (5,132)        (4,211)
           Accrued costs for closed call centers                                     7,338           (947)        (1,130)
           Accrued compensation                                                     (1,478)           610         (3,833)
           Interest payable                                                          2,493          2,530           --
           Other liabilities                                                        (2,091)        (1,235)        (1,185)
                                                                                   -------        -------        -------
                  Net cash provided by (used in) operating activities               25,481          2,359         (1,503)
                                                                                   -------        -------        -------
INVESTING ACTIVITIES:

   Purchases of property and equipment                                             (21,637)       (26,414)        (9,099)
   Business acquisition and mergers                                                   --              965           --
   Payments of notes payable to sellers and acquisition liabilities                   --             --           (1,930)
   Net cash acquired in acquisition of Customer Insights                                71           --             --
   Proceeds from sale of assets                                                       --             --            1,908
   Proceeds from sale of discontinued operations                                      --             --           37,750
   Purchase of investment                                                             --             --             (500)
   Payments of deferred transaction costs                                             --             (174)          --
                                                                                   -------        -------        -------
                  Net cash (used in) provided by investing activities              (21,566)       (25,623)        28,129
                                                                                   -------        -------        -------
FINANCING ACTIVITIES:

   Proceeds from exercise of stock options                                             255          1,463          1,500
   Proceeds from sale of common stock                                                 --             --              500
   Net payments on secured credit facility                                            --             --          (29,000)
   Cash overdraft                                                                   (4,912)         3,254          1,658
   Borrowings under long-term debt                                                  21,203        130,796           --
   Payments of debt                                                                (15,078)      (112,118)          (349)
   Payments of capital lease obligations                                              (125)          (734)          (915)
   Payment for treasury stock                                                         --             (191)          --
                                                                                   -------        -------        -------
                  Net cash provided by (used in) financing activities                1,343         22,470        (26,606)
                                                                                   -------        -------         ------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                 5,258           (794)            20
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                          --              794            774
                                                                                   -------        -------         ------
CASH AND CASH EQUIVALENTS, END OF YEAR                                         $     5,258    $       --       $     794
                                                                               ===========    ============     ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-6
<PAGE>   34
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2000


1.    NATURE OF BUSINESS:

TeleSpectrum Worldwide Inc. and subsidiaries ("TeleSpectrum" or the "Company")
was incorporated in Delaware on April 26, 1996 and provides services to its
customers through its business segments: Acquisition Services (formerly referred
to as Telemarketing), ChannelCare (formerly referred to as Customer Care) and
e-Satisfy.com, a 72.4% owned affiliate. Acquisition Services encompasses direct
sales initiated by the Company on behalf of its clients. ChannelCare encompasses
the Company's line of inbound customer service, customer care, and customer care
consulting services. The e-Satisfy.com segment measures, monitors and improves
the customer service experience. On August 12, 1996, the Company completed its
initial public offering and, concurrent with the offering, the Company began
material operations with the acquisition of the net assets of a number of
businesses. In December 1997, the Company committed to a plan to dispose of its
Market Research segment and Direct Mail and Fulfillment segment. The results of
operations of the Market Research segment and Direct Mail and Fulfillment
segment have been accounted for as discontinued operations (see Note 4). As
discussed further in Note 4, the Company completed mergers with International
Data Response Corporation ("IDRC") and CRW Financial, Inc. ("CRW") on June 30,
1999.

Basis of Presentation

The consolidated financial statements of the Company have been prepared on the
basis of accounting principles applicable to a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the normal
course of business. At December 31, 2000, the Company had a stockholders'
deficit of $64.3 million, and had incurred a net loss of approximately $203.1
million during 2000. The Company has been unable to meet the required debt
service payments with its lenders, requiring a number of amendments to its loan
agreements, financial covenant waivers and deferral of scheduled principal
payments. As discussed in Note 8, the Company has entered into a new loan
agreement (the "New Credit Facilities") with its senior lending group during
April 2001 whereby amortization payments are required only for excess cash flow,
as defined, or upon the occurrence of certain events and only if after making
such payments the Company still has a minimum $5.0 million in available working
capital from cash on hand plus availability under the working capital revolver.
All amounts are due upon termination of the New Credit Facilities on July 1,
2002, consequently, the Company has classified amounts related to its Credit
Facilities as long-term liabilities in the accompanying Consolidated Balance
Sheets. The New Credit Facilities contain affirmative and negative covenants
including requirements to maintain certain levels of revenue, EBITDA, interest
coverage and capital expenditures. During the fourth quarter of 2000, Management
initiated a cost reduction program targeted to reduce costs by $15.0 million
annually. The savings will result from staff reductions, reduced
telecommunications costs, center closings and the reduction of other
infrastructure costs. The benefits of the cost reduction program are expected to
be realized beginning in the first quarter of 2001.

The covenants in the New Credit Facilities are based upon the Company's business
plan for 2001. If planned operating results are not achieved or if covenants are
not met, the Company could default on the New Credit Facilities and all amounts
due thereunder would be due immediately.

The factors noted above raise substantial doubt concerning the ability of the
Company to continue as a going concern. The consolidated financial statements do
not include any adjustments relating to the recoverability and classification of
asset carrying values or the amount and classification of liabilities that might
result should the Company be unable to continue as a going concern. Management
believes that the working capital needs of the Company through July 1, 2002 will
be provided by the cash generated from ongoing operations and the New Credit
Facilities. However, there can be no assurance that the Company will be able to
comply with the amended covenants through July 1, 2002 or refinance the amended
facility by this date.

                                      F-7
<PAGE>   35
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000



2. SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

The accompanying financial statements include the accounts of TeleSpectrum
Worldwide Inc., its wholly-owned subsidiaries and majority owned affiliate. All
material intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Revenue Recognition

The Company recognizes revenues on Acquisition Services programs as services are
performed, generally based on hours incurred. For certain of these programs,
revenues are reduced for estimated customer cancellations. ChannelCare revenue
is recognized on a per hour basis or at the time calls are answered on a per
minute basis. The Company recognizes all other revenues as the services are
performed.

Due to varying billing cycles, the Company has customers for which services have
been performed and no billing has been created ("Unbilled Receivables"). At
December 31, 2000 and 1999, Unbilled Receivables totaled $9,980,000 and
$11,323,000, respectively, and are included in accounts receivable in the
consolidated balance sheets.

Recently Issued Accounting Standards

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." In June 1999, the FASB issued SFAS No. 137,
which deferred the effective date of SFAS No. 133. This was followed in June
2000 by the issuance of SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities," which amends SFAS No. 133. SFAS No.
133 and SFAS No. 138 establish new accounting rules and disclosure requirements
for most derivative instruments and hedging activities. SFAS No. 133 and SFAS
No. 138 require all derivatives to be recognized as assets or liabilities at
fair value. Fair value adjustments are made either through earnings or equity,
depending upon the exposure being hedged and the effectiveness of the hedge. The
Company has adopted these standards effective January 1, 2001. The initial
adoption of these standards will not have a material impact on the Company's
financial statements.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. At December 31, 2000,
cash equivalents consisted primarily of investments in money market accounts.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Property and equipment
capitalized under capital leases are recorded at the present value of the
minimum lease payments due over the term of the lease. Depreciation and
amortization are provided using the straight-line method over the estimated
useful lives or the lease term, whichever is shorter.

Expenditures for maintenance, repairs and betterments that do not prolong the
useful life of an asset have been charged to operations as incurred. Additions
and betterments that substantially extend the useful life of the asset are
capitalized.

                                      F-8
<PAGE>   36
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000


Upon sale or other disposition of assets, the cost and related accumulated
depreciation and amortization are removed from the respective accounts, and the
resulting gain or loss, if any, is included in income.

Capitalized Software Development Costs

The Company capitalizes both acquired and internally developed or modified
software used as an integral part of the operations of the Company, in
accordance with Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The Company
capitalizes certain internal and external costs directly associated with
developing or modifying the internal use software, which begins with the
application development stage and ends when the project is substantially
complete and ready for its intended use.

Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." 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. The Company recognizes valuation allowances for a deferred tax asset if
the realizability of some portion or all of the deferred tax asset is uncertain.

Currency Translation

The accounts of the international subsidiaries are translated in accordance with
SFAS No. 52, "Foreign Currency Translation," which requires that assets and
liabilities of international operations be translated using the exchange rate in
effect at the balance sheet date. The results of operations are translated at
average exchange rates during the year. The effects of exchange rate
fluctuations in translating assets and liabilities of international operations
into U.S. dollars are accumulated and reflected as a cumulative currency
translation adjustment in the consolidated statements of stockholders' equity.
Foreign currency transaction gains or losses are included in net income. There
were no significant foreign currency transaction gains or losses for the periods
presented.

Goodwill Impairment

The Company measures goodwill impairment under Accounting Principles Board
("APB") Opinion No. 17 "Intangible Assets," based on a discounted cash flow
approach. Whenever events or circumstances have occurred that indicates an
impairment may have occurred, the Company will estimate the future discounted
cash flow of the business segment to which goodwill relates. When such estimate
of the future discounted cash flows, net of the carrying value of the net
tangible and identified intangible assets, is less than the carrying amount of
goodwill, the difference is charged to operations. For purposes of determining
future discounted cash flows of the business segments to which goodwill relates,
the Company, based upon historical results, current projections and internal
earnings targets, determines the projected operating cash flows, net of income
taxes, of the individual business segment. These projected future cash flows are
then discounted at a rate corresponding to the Company's estimated cost of
capital. The Company recognized an impairment charge during the fourth quarter
of 2000 (see Note 4).

Impairment of Long-Lived Assets

The Company accounts for possible impairments of long-lived assets in accordance
with SFAS No. 121, "Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." SFAS No. 121 requires that long-lived
assets to be held and used by the Company be reviewed for possible impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. If changes in circumstances indicate that the
carrying amount of an asset that an entity expects to hold and use may not be
recoverable, future cash flows expected to result from the use of the asset and
its disposition must be estimated. If the undiscounted value of the future cash
flows is less than the carrying amount of the asset, an impairment will be
recognized. The Company recognized an impairment charge during the fourth
quarter of 2000 (see Note 4).

                                      F-9
<PAGE>   37
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000


Earnings Per Share ("EPS")

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

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

<TABLE>
<CAPTION>
                                                         2000          1999         1998
                                                         ----          ----         ----
<S>                                                   <C>            <C>          <C>
        (Loss) Income available to common
          stockholders before adjustments used
          in computing basic earnings per share       $(203,120)     $ 5,882      $(6,461)
        Additional goodwill amortization from
          contingent shares                                  --         (210)          --
                                                      ---------      -------      -------
        (Loss) Income available to common
          stockholders used in computing
          diluted earnings per share                  $(203,120)     $ 5,672      $(6,461)
                                                      =========      =======      =======


        Shares used in computing basic
          (loss) earnings per share                      31,636       28,587       25,528
        Dilutive effect of options and warrants              --        3,176           --
                                                      ---------      -------      -------
        Shares used in computing diluted
          (loss) earnings per share                      31,636       31,763       25,528
                                                      =========      =======      =======
</TABLE>

In connection with the IDRC merger, discussed in Note 4, certain shares of
TeleSpectrum common stock issuable to the holders of IDRC common stock and
options, were placed into escrow. These shares represent "contingent
consideration" and accordingly, would only be considered in the computation of
diluted earnings per share. These contingent shares, totaling 1,280,676, were
not included in the computation for the year ended December 31, 2000 because
they would have been antidilutive.

Fair Value of Financial Instruments

Cash, accounts receivable, accounts payable and accrued liabilities are
reflected in the accompanying financial statements at the fair value due to the
short-term nature of those instruments. The carrying amount of the long-term
debt and capitalized lease obligations approximates fair value at the balance
sheet dates. It was not practicable to estimate the fair value of the Credit
Facilities due to the activities discussed in Note 8 relative to the
restructuring of these instruments.

Reclassifications

Certain prior period amounts have been reclassified to conform with the current
year presentation.

3. RESTRUCTURING CHARGE:

During the fourth quarter of 2000, as part of a continuing analysis of the
Company's operational strategies, the Board of Directors of the Company approved
a restructuring plan designed to streamline operations and improve profitability
by closing certain call centers and reducing overhead costs. The restructuring
plan resulted in pre-tax charges of $10,254,000 which will require a cash outlay
of approximately $5,908,000, the majority of which will be paid over the next
twelve to eighteen months. The key components of the restructuring plan are:

                                      F-10
<PAGE>   38
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000


1.   Close four call centers (two from Acquisition Services and two from
     ChannelCare)
2.   Close our Fulfillment operation
3.   Reduce general overhead costs

The implementation of the restructuring plan resulted in a charge for
restructuring and asset impairments. The restructuring charge relates to
employee separation costs and costs associated with exiting facilities. The
asset impairment charge relates to the reduction of fixed assets in idled
facilities to their net realizable value. Each of these general cost categories
is discussed below.

Employee separations costs totaled $1,640,000 with a total headcount reduction
of 142 employees related to both call center closures and overhead reductions in
force.

Costs to exit facilities and related activities totaled $4,468,000, with
$4,268,000, resulting from the closure of four call centers. The amount is
computed as the remaining contractual obligations in each closed center net of
estimated income from subletting. The centers were physically closed in the
first quarter of 2001. The remainder related to the potential loss of grants
previously received which may result from decreased volumes in certain
facilities. No cash payments were made during 2000 related to these charges.

Costs incurred to reduce fixed assets related to owned production equipment,
computers and leasehold improvements to net realizable value in idled facilities
were $4,146,000. No cash payments were made during 2000 related to these
charges.

The restructuring charges impacted our Acquisition Services and ChannelCare
segments by $3,825,000 and $4,712,000, respectively, with the balance affecting
our general corporate operations (See Note 16).

4. ACQUISITION, MERGERS, IMPAIRMENTS AND DIVESTITURES:

IDRC Merger

On January 14, 1999, TeleSpectrum and IDRC entered into a merger agreement which
was amended on February 26, 1999 and May 13, 1999 and consummated on June 30,
1999. Under this agreement, holders of outstanding shares of IDRC common stock,
options and warrants to purchase IDRC common stock were entitled to receive
their pro rata portion of an aggregate of 9,200,000 shares of TeleSpectrum
common stock and warrants exercisable for 2,500,000 shares of TeleSpectrum
common stock. In addition, the IDRC preferred stock was exchanged for $6,000,000
of cash, plus all accrued and unpaid dividends of $1,400,000. The majority
stockholders of IDRC invested the proceeds from the exchange of their IDRC
preferred stock of $4,873,000 for a term note with the Company (See Note 8). The
merger was accounted for as a purchase and, accordingly, the net tangible
liabilities and results of operations of IDRC have been included in the
consolidated financial statements as of June 30, 1999.

The total purchase price of IDRC was $58,700,000 which consisted of (in
thousands except share and per share amounts):

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

                                      F-11
<PAGE>   39
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000

<TABLE>
<S>                                                                                                 <C>
      Value of shares and options held in escrow                                                     (9,164)
      Transaction costs                                                                               1,442
                                                                                                    -------
               Total purchase price                                                                 $58,700
                                                                                                    =======
</TABLE>

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

The Company has completed its plans to consolidate certain facilities and
departments and has estimated the costs of non-cancelable lease commitments and
severance at $1,539,000. This liability is reflected in the net tangible
liabilities acquired. As of December 31, 2000 this reserve had been fully
utilized. Based upon management's analysis of the fair value of the assets
acquired, the goodwill was allocated to our Acquisition Services and ChannelCare
segments as $105,848,000 and $35,282,000, respectively. The majority of the
goodwill was written off during the fourth quarter of 2000. See "Impairment of
Long-Lived Assets" caption below.

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

CRW Merger

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

Pro Forma Merger Summary

The following unaudited pro forma summary combines the consolidated results of
operations of TeleSpectrum, IDRC and CRW as if the mergers had occurred as of
the beginning of the year presented after giving effect to certain adjustments
including amortization of the purchase price in excess of net tangible
liabilities acquired, interest expense, a reduction in officer compensation
expense, consulting fees, and center fixed operating costs (rent, utilities,
phones, and call center management salaries/benefits) on centers shut down in
accordance with the merger agreement. This pro forma summary is not necessarily
indicative of the results of operations that would have occurred if
TeleSpectrum, IDRC and CRW had been combined during such periods. Moreover, the
pro forma summary is not intended to be indicative of the results of operations
to be attained in the future.

                                      F-12
<PAGE>   40
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000


<TABLE>
<CAPTION>
                                                                       Year Ended December 31
                                                                       ----------------------
                                                                      1999              1998
                                                                      ----              ----
                                                                       (in thousands, except
                                                                        per share amounts)
<S>                                                                 <C>              <C>
     Net revenues                                                   $342,579         $327,506

     Loss from continuing operations                                 (20,997)         (30,250)

     Basic and diluted net loss per common share                    $  (0.68)        $  (0.99)
</TABLE>

Customer Insites Acquisition

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

Other

During October 1996, the Company acquired its consulting business, Technical
Assistance Research Programs, Inc. ("TARP"). The agreement allowed for potential
earnouts to be paid to prior owners based upon future performance. During
October 1999 the Company signed an agreement and a non-interest bearing note to
pay $3,200,000 in installments ending July 2001 to settle these earnout
provisions. This note was discounted to $2,852,000 and is reflected as goodwill
which is being amortized on a straight-line basis over the remaining life of the
original TARP goodwill. This debt was refinanced after year end (See Note 8).
See the following discussion regarding "Impairment of Long-Lived Assets."

Impairment of Long-Lived Assets

As discussed more fully in Note 1, the Company has experienced recurring losses,
declining revenues and declining cash flows. Accordingly, the Company has
undertaken a comprehensive review of the carrying value of its goodwill, other
intangibles and other long-lived assets in order to determine if a permanent
impairment has occurred. The following table summarizes the results of that
review (in millions):

                                      F-13
<PAGE>   41
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000

<TABLE>
<CAPTION>
                               Net Book                       Remaining
                             Value Before                     Net Book
                              Impairment                      Value at
                                Charge        Impairment      12/31/00
                                ------        ----------      --------
<S>                          <C>              <C>             <C>
         Description
  Goodwill                      $157.1         $(155.5)        $ 1.6
  Customer relationships          12.7                          12.7
  Assembled workforce              0.8                           0.8
  TESS software                    6.5            (6.5)           --
  eCRM software                    9.9            (9.1)          0.8
                                ------         -------         -----
                                $187.0         $(171.1)        $15.9
                                ======         =======         =====
        Segment Impact
  Customer Acquisition          $109.0           (98.8)        $10.2
  CustomerCare                    54.4           (50.3)          4.1
  e-Satisfy.com                   23.6           (22.0)          1.6
                                ------         -------         -----
                                $187.0         $(171.1)        $15.9
                                ======         =======         =====
</TABLE>

Goodwill Impairment

The accumulated costs described in the above table as goodwill, customer
relationships, and assembled workforce relate primarily to the 1999 IDRC merger
and the 1996 acquisition of TARP. In 2000, as a result of declining revenues and
increased losses, the Company performed a comprehensive review by business
segment of the carrying value of goodwill and other intangibles. Each business
segment analysis indicated that the carrying value of goodwill was permanently
impaired resulting in a total impairment charge of $155,500,000 and an ending
goodwill balance at December 31, 2000 of $1,600,000 which related entirely to
e-Satisfy.com, the successor to TARP.

Other Intangible Assets and Software Impairment

The Company follows SFAS No. 121 in evaluating the recoverability of other
long-lived assets. Accordingly, assets to be held and used are reviewed for
impairment based on future estimated cash flows and assets which will be
disposed are reported at the lower of the carrying amount or fair value. As a
result of this review, the identifiable intangibles relating to customer
relationships and assembled workforce remain unchanged, however the Company
concluded that certain technological initiatives had been impaired.

During 1999 the Company began two significant technology initiatives. The first
initiative, referred to by the acronym "TESS," was intended to bring reporting
consistency, automation efficiencies, labor tracking, and workflow scheduling to
our Acquisition Services segment. The project has proven to be unsuccessful and
all efforts to complete it were halted during the fourth quarter of 2000 and the
project has been abandoned. Accordingly, the entire accumulated net book value
was written off at December 31, 2000.

During the second quarter of 1999 the Company announced a strategic partnership
with two technology providers to deliver integrated eBusiness call center
solutions to leading-edge, Internet-enabled call center services utilizing a
Web-based front office software solution and an Internet interaction management
solution (noted in the above table as e-CRM software). The anticipated demand
for this functionality was initially projected at very high levels and the
Company purchased licenses and built an infrastructure to accommodate those
projections. While the Company did successfully implement several installations
it did not reach the volumes originally projected nor was it able to attain a
sufficient level of revenues to sustain the program. Consequently, the software
licenses used in the eCRM software

                                      F-14
<PAGE>   42
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000


platform have been deactivated and the related maintenance has been
discontinued. As required by SFAS No. 121, the Company computed the projected
undiscounted future cash flows associated with the continuing software
investment and compared it to the carrying value as of December 31, 2000. This
analysis indicated that a permanent impairment had occurred and the investment
was written down to the estimated fair market value.

Divestitures

In December 1997, the Company committed to a plan to dispose of its Market
Research segment and Direct Mail and Fulfillment segment. As required by APB
Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of
a Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions," the Company has accounted for
the results of operations and net assets of the Market Research segment and
Direct Mail and Fulfillment segment as discontinued operations.

In January 1998, the Company sold substantially all of the assets and
liabilities of the Market Research segment for approximately $15,000,000, which
resulted in a loss of approximately $907,000, which was recorded as of December
31, 1997. The proceeds from this sale were used to repay borrowings on the
secured credit facility outstanding at that time.

In March 1998, the Company sold substantially all of the assets and liabilities
of the Direct Mail and Fulfillment segment for approximately $23,000,000 in cash
and up to $4,000,000 in contingent payments based on future performance of the
segment, beginning in 1999. The sale of this segment did not result in a
significant gain or loss. The proceeds from this sale were used to repay
borrowings on the secured credit facility outstanding at that time.

The following table summarizes the operating results of the discontinued
operations (in thousands):

<TABLE>
<CAPTION>
                                                      Year Ended
                                                   December 31, 1998
                                                   -----------------
<S>                                                <C>
Revenues                                               $4,189
Operating expenses                                      3,463
                                                       ------
     Income before income taxes                           726
Income tax provision                                      247
                                                       ------
Income from discontinued operations                    $  479
                                                       ======
</TABLE>

5. SUPPLEMENTAL CASH FLOW INFORMATION:

For the three years ended December 31, 2000, the Company paid interest and
income taxes as follows (in thousands):

<TABLE>
<CAPTION>
                                                 Year Ended December 31,
                                            --------------------------------
                                            2000          1999          1998
                                            ----          ----          ----
<S>                                       <C>            <C>           <C>
       Interest paid                      $13,620        $4,569        $1,018
       Taxes paid                         $     -        $    -        $    -
</TABLE>


In March 1997, the Company settled the earn-out agreement with the seller of one
of the Initial Operating Businesses under which the Company paid $25,000,000 in
March 1997 and agreed to pay $600,000 in equal installments, of which, the
Company has paid $100,000, $300,000 and $200,000 in 1999, 1998 and 1997,
respectively.

                                      F-15
<PAGE>   43
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000


The following table displays the net non-cash assets that were acquired as a
result of the merger described in Note 4 as of December 31, 2000 (in thousands):


<TABLE>
<CAPTION>
                                                                           Year Ended
                                                                       December 31, 1999
                                                                       -----------------
<S>                                                                    <C>
Non-cash assets (liabilities):
   Current assets                                                           $ 33,719
   Property and equipment                                                     10,295
   Other assets                                                                2,006
   Goodwill and other intangibles                                            156,211
   Current liabilities                                                       (36,943)
   Debt                                                                     (109,805)
                                                                            --------
          Net non-cash assets acquired                                        55,483

Plus: Common stock issued                                                    (54,275)
   Options and warrants issued to IDRC shareholders                          (12,147)
   Value of shares and options held in escrow                                  9,164
   Cost of registering common stock                                              810
                                                                            --------
   Cash acquired from business acquisitions                                 $   (965)
                                                                            ========
</TABLE>


                                      F-16
<PAGE>   44
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000


6. PROPERTY, PLANT AND EQUIPMENT:

A summary of property, plant and equipment at December 31, 2000 and 1999 follows
(in thousands):


<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                                      -----------------
                                                                   Useful Lives       2000         1999
                                                                   ------------       ----         ----
<S>                                                                <C>              <C>          <C>
  Telemarketing and computer equipment                             3 - 7 years      $ 50,134     $ 45,752
  Furniture and fixtures                                           5 - 7 years        14,454       14,330
  Software                                                           3 years           9,955       14,600
  Building                                                           40 years          3,043        3,043
  Leasehold improvements                                           3 - 7 years        10,821       10,051
  Land                                                                                   546          546
                                                                                    --------     --------
                                                                                      88,953       88,322

  Less accumulated depreciation and amortization                                     (44,480)     (28,867)
                                                                                    --------     --------
                                                                                    $ 44,473     $ 59,455
                                                                                    ========     ========
</TABLE>

The carrying value of property and equipment under capital lease obligations
included above amounted to $3,129,000 and $3,075,000 at December 31, 2000 and
1999, respectively. Assets under capitalized leases are generally collateralized
by the equipment under lease. Depreciation and amortization was $17,190,000,
$11,541,000 and $8,532,000 for the years ended December 31, 2000, 1999 and 1998,
respectively.

As discussed in Note 3, the Company committed to a plan to close four call
centers and recorded a non-cash write-down of $4,146,000 related to certain call
center property and equipment as required by SFAS No. 121. The property and
equipment charges are included as a reduction of the carrying value of property,
plant and equipment. The impaired assets include telemarketing and computer
equipment, furniture and fixtures and leasehold improvements.

7. INCOME TAXES:

The components of income (loss) from continuing operations before income taxes
are as follows (in thousands):


<TABLE>
<CAPTION>
                                                   Year Ended December 31,
                                                   -----------------------
                                               2000         1999       1998
                                               ----         ----       ----
<S>                                           <C>          <C>       <C>
       Domestic                               $(205,515)   $6,453    $(5,435)
       Foreign                                    2,395      (571)    (1,752)
                                              ---------    ------    -------
                                              $(203,120)   $5,882    $(7,187)
                                              =========    ======    =======
</TABLE>


                                      F-17
<PAGE>   45
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000


The reconciliation of the statutory federal income tax rate to the Company's
effective income tax rate from continuing operations is as follows:

<TABLE>
<CAPTION>
                                                                                 Year Ended December 31,
                                                                         -----------------------------------
                                                                         2000            1999           1998
                                                                         ----            ----           ----
<S>                                                                     <C>            <C>           <C>
    Statutory federal income tax rate (benefit)                         (34.0)%          34.0%         (34.0)%
    State income taxes, net of federal tax benefit                          -             4.7              -
    Impact of foreign subsidiaries subject to
      higher tax rates                                                      -               -              -
    Operating loss and other items not currently
      deductible, not tax benefited                                      12.8               -           28.5
    Utilization of net operating loss carryforward                          -           (23.4)             -
    Nondeductible expenses                                               21.2           (15.3)           2.1
                                                                        -----           -----          -----
                                                                            -%              -%          (3.4)%
                                                                        =====           =====          =====
</TABLE>

Deferred taxes are determined based upon the estimated future tax effects of
differences between the financial statement and income tax basis of assets and
liabilities given the provisions of the enacted tax laws. The tax effect of
temporary differences that give rise to deferred taxes at December 31, 2000 and
1999 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                               Year Ended December 31,
                                                                               -----------------------
                                                                                 2000          1999
                                                                                 ----          ----
<S>                                                                           <C>             <C>
      Deferred tax assets:
        Net operating loss carryforward                                       $ 52,192        $ 42,536
        Goodwill impairment                                                     39,295          37,846
        Accruals and reserves not currently deductible                           2,866           4,280
        Other                                                                    4,040           3,334
                                                                              --------        --------
                                                                                98,393          87,996
                                                                              --------        --------
      Deferred tax liabilities:
        Book/tax difference of property, plant and equipment                      (986)         (2,006)
        Other.........................................................            (134)         (1,575)
                                                                              --------        --------
                                                                                (1,120)         (3,581)
                                                                              --------        --------
                                                                                97,273          84,415
        Less valuation allowance......................................         (97,273)        (84,415)
                                                                              --------        --------
      Net deferred tax asset..........................................        $      -        $      -
                                                                              ========        ========
</TABLE>


The Company has a net operating loss carryforward of approximately $128,100,000,
and $94,500,000 as of December 31, 2000 and 1999, respectively, which begin to
expire in 2012. Due to the uncertainty surrounding the potential realization of
the deferred tax assets, the Company has provided a full valuation allowance at
December 31, 2000 and 1999.


                                      F-18
<PAGE>   46
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000



8. LONG-TERM DEBT:

Long-term debt at December 31, 2000 and 1999 consisted of the following (in
thousands):

<TABLE>
<CAPTION>
                                                                                                      December 31,
                                                                                                  --------------------
                                                                                                  2000            1999
                                                                                                  ----            ----
<S>                                                                                             <C>             <C>
  Term A loan with bank, principal payable in quarterly installments of
    $2,500,000 commencing March 2001; bearing interest at prime plus 1.750% or
    Eurodollar plus 3.250% payable quarterly, through December 2001, when all
    remaining principal and interest is due and payable. At December 31, 2000,
    the weighted average interest rate was 10.23%. This debt was restructured
    after year end. See below.                                                                  $ 13,029        $ 18,000
  Term B loan with bank, principal payable in quarterly installments of $62,500
    commencing March 2001 increasing to $4,750,000 in March 2002 and increasing
    to $5,000,000 in December 2002; bearing interest at prime plus 2.250% or
    Eurodollar plus 3.750% payable quarterly, through December 2002, when all
    remaining principal and interest is due and payable. At December 31, 2000,
    the weighted average interest rate was 10.69%. This debt was restructured
    after year end. See below.                                                                    19,595          19,750
  Term C loan with bank, principal payable in quarterly installments of $100,000
    commencing March 2001 increasing to $200,000 in March 2002, increasing to
    $250,000 in September 2002, increasing to $11,000,000 in March 2003, and
    increasing to $15,000,000 in December 2003; bearing interest at prime plus
    2.750% or Eurodollar plus 4.250% payable quarterly, through December 2003,
    when all remaining principal and interest is due and payable. At December
    31, 2000, the weighted average interest rate was 11.19%. This debt was
    restructured after year end. See below.                                                       49,452          49,700
  Working capital revolver with bank, interest at prime plus 1.750% or Eurodollar
    plus 3.250% payable quarterly, due December 2001 when all remaining principal
    and interest is due and payable. At December 31, 2000, the weighted average
    interest rate was 10.14%. This debt was restructured after year end. See below.               42,596          31,096
  Note payable to an agency of the Canadian government, principal payable in monthly,
    installments of $35,000, beginning in October 1999, no interest, through December
    2001, collateralized by certain equipment                                                        410             823
  Note payable to a County Economic Development Council, payable in monthly installments
    of $4,600, including interest at 4.375%, through January 2001, when all remaining
    principal and interest is due and payable, collateralized by certain equipment                     4              59
  Note payable to stockholders, principal and interest payable in June 2000; bearing
    interest at 10%. This debt was restructured after year end. See below.                         4,873           4,873
  Note payable to former principals of TARP, noninterest-bearing, discounted to
    $2,900,000, principal and imputed interest of $1,466,000 in July 2001. This debt
    was restructured after year end. See below.                                                    2,171           2,852
  Note payable in monthly principal and interest payments of $8,500 through March
    2008, bearing interest at 8.50%, secured by equipment                                            548             601
  Notes payable to stockholders principal and interest due August 31, 2000, bearing
    interest at 8% and 12%. See below.                                                             1,200
  Other notes payable                                                                                 22              21
  Capital lease obligations (see Note 9)                                                           2,357           2,482
                                                                                                --------        --------
                                                                                                 136,257         130,257
  Less current maturities                                                                         (3,844)        (16,411)
                                                                                                --------        --------
                                                                                                $132,413        $113,846
                                                                                                ========        ========
</TABLE>


                                      F-19
<PAGE>   47
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000


The aggregate principal requirements for the five years subsequent to December
31, 2000, are as follows (in thousands):

<TABLE>
<S>                                                       <C>
             2001                                         $  3,844
             2002                                          125,880
             2003                                              455
             2004                                            5,249
             2005                                              435
             Thereafter                                        394
                                                          --------
                                                          $136,257
                                                          ========
</TABLE>

In connection with the mergers on June 30, 1999, the Company entered into $135.0
million in new credit facilities consisting of Term A, Term B, Term C and
working capital revolver facilities (the "Credit Facilities") incurring costs of
$5.0 million which are being amortized using the effective interest method over
the life of the Credit Facilities. For the year ended December 31, 2000, debt
issuance cost amortization was $1.5 million. The Company borrowed $20.0 million
under the Term A facility, $20.0 million under the Term B facility and $50.0
million under the Term C facility. In addition, the Company can borrow the
lesser of $45.0 million or 85% of eligible receivables, as defined, under its
working capital revolver facility. The working capital revolver facility also
provides for the issuance of letters of credit subject to certain borrowing
limits. There were no letters of credit outstanding as of December 31, 2000. At
December 31, 2000, the Company had $2.4 million available under the working
capital revolver facility. The unused portion of the working capital revolver
facility is subject to an annual fee of 0.50%.

Borrowings under the Credit Facilities are collateralized by substantially all
of the assets of the Company. The Credit Facilities require interest rate caps
and contain covenants, the most restrictive of which require the maintenance of
certain financial ratios, restrict future indebtedness, limit capital
expenditures and prohibit cash dividends. The proceeds received during June 1999
from the Credit Facilities were used to refinance $98.0 million in principal and
interest outstanding under the IDRC credit facilities and $10.9 million in
principal, interest and early termination fees outstanding under the Company's
April 14, 1998 Secured Credit Facility. The remaining Credit Facilities proceeds
were used in the mergers to repay certain notes including accrued interest,
redeem preferred stock and pay transaction fees aggregating $9.7 million. During
the years ended December 31, 2000 and 1999, the weighted average interest rate
on borrowings under the then existing credit facilities was 10.5% and 9.6%,
respectively.

During April 2000, the Company signed an amendment to the Credit Facilities that
modified the Company's debt covenants effective February 2000 including the
leverage ratio and the fixed charge coverage ratio and obtained additional
borrowing capacity totaling $6.0 million in the form of a Revolving Credit
Commitment raising the total capacity on revolvers to $51.0 million. In
addition, the annual limitation allowed for capital expenditures decreased for
the year 2000 from $32.5 million to $25.0 million.

The Company and its banking group entered into various amendments of the
Company's Credit Facilities commencing September 30, 2000. These amendments
included the deferral of principal and interest of $2.2 million and $3.0
million, respectively, the waiver of financial covenants, imposed additional
interest at 2% of outstanding principal beginning October 1, 2000 ("Incremental
Interest") and a restriction on certain payments through November 17, 2000. On
October 27, 2000, the Company and its bank group agreed to terminate the
Revolving Credit Commitment of $6.0 million obtained during April 2000, which
had never been utilized. On November 10, 2000, the Company paid the $3.0 million
deferred interest, which represented accrued interest for the third quarter of
2000.

On November 17, 2000, the Company signed Amendment #7 to the Credit Facilities
which deferred principal payments of $2.2 million due September 30, and December
31, 2000, respectively, waived financial covenants, imposed a fee equal to 0.5%
per month of outstanding principal (the "Waiver Fee"), required weekly principal
payments of $150,000 and allowed a sweep of excess available funds, as defined,
under certain circumstances, through February 15, 2001. During the extension
period of Amendment #7, the Company made the required principal payments
totaling $2.1 million

                                      F-20
<PAGE>   48
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000


as well as the required interest payment of $3.2 million, which represented
accrued interest for the fourth quarter of 2000.

On February 15, 2001, the Company signed an extension to Amendment #7 which
extended the waiver period to March 31, 2001, discontinued the weekly principal
payments, limited expenditures for capital assets, and pledged the Company's
interest in e-Satisfy as collateral.

On April 16, 2001, the Company entered into a new loan agreement with its
lenders (the "New Credit Facilities") under which all amounts outstanding under
Term A, B, and C and $35.0 million of the working capital revolver plus accrued
Incremental Interest and the Waiver Fee, totaling $120.6 million were converted
into a Term Loan that bears interest at a Base Rate plus the Applicable Margin,
as defined (10.0% at April 16, 2001) and matures July 1, 2002 (the "Maturity
Date"). The remaining $10.0 million of the original working capital revolver
carries forward as a revolver and the Company can borrow the lesser of $10.0
million or 65% of eligible receivables, as defined. As of April 16, 2001, the
Company has $1.4 million available under this revolver. The unused portion of
the working capital revolver facility is subject to an annual fee of 0.50%. In
addition, an annual agency fee equal to 25 basis points of the aggregate
commitment is payable on the Maturity Date.

Borrowings under the New Credit Facilities are collateralized by substantially
all of the assets of the Company. The New Credit Facilities contain covenants,
the most restrictive of which require the maintenance of certain financial
ratios, restrict future indebtedness, limit capital expenditures and prohibit
cash dividends.

The payment of interest accrued for the first quarter of 2001 on the old credit
facility totaling $2.6 million may be deferred by 50% at the discretion of the
Company. Interest on the New Credit Facilities is payable monthly, however, at
the discretion of the Company, up to 25% of the monthly interest may be deferred
for any months through and including December 31, 2001. Any amounts so deferred
are converted into Deferred Interest Notes, as defined, and bear interest at the
same rate as the Term Loan and mature on the Maturity Date.

Under certain circumstances the Company may be required to make mandatory
principal payments, as defined ("Mandatory Prepayments"). In general
Mandatory Prepayments are required upon certain triggering events, such as the
sale of assets, issuance of debt or equity securities, receipt of insurance
proceeds or similar events or the Company generates excess cash flow, as defined
("Excess Cash Flow"). Excess Cash Flow is generally defined as quarterly EBITDA
less permitted capital expenditures, cash interest, and the sum of $1.25 million
plus certain payments. No Mandatory Prepayments are required unless the Company
has a minimum of $5.0 million in available working capital from cash on hand
plus availability under the working capital revolver after such Excess Cash Flow
payment has been made.

In connection with the New Credit Facilities the Company is being charged a fee
totaling 15% of the aggregate commitments (the "Refinancing Fee") payable at the
Maturity Date. In the event the Company pays off the New Credit Facilities in
its entirety prior to the Maturity Date, the Refinancing Fee is reduced to 5.0%,
10.0%, and 12.5% if the early payoff is prior to June 30, 2001, September 30,
2001, and December 31, 2001, respectively. The Refinancing Fee will be amortized
using the effective interest method over the life of the New Credit Facilities
and the remaining unamortized debt issuance costs related to the old credit
facility, totaling $2.5 million, will be written off during the second quarter
of 2001.

Note Payable to Stockholder

As discussed in Note 4, the majority stockholders of IDRC invested the proceeds
from the exchange of their IDRC preferred stock of $4,873,000 for a term note
with the Company. This note bears interest at 10% and was payable one year from
the closing depending upon certain covenants as defined in the agreement which
to date did not allow for payment. On April 16, 2001 this note was restructured.
The new agreement matures June 30, 2004, bears interest at 10% for the year
ending December 31, 2001, 15% for the two years ending December 31, 2003 and 20%
for the six months ending June 30, 2004. The agreement requires prepayment in
the event more than 90% of the Company's common stock is acquired or
substantially all of the assets are sold. Under certain circumstances, as
defined in the

                                      F-21
<PAGE>   49
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000


agreement, if prior to December 31, 2002, the Company issues debt or equity
securities of $10.0 million or more, the holder has the right to purchase a
pro-rata share, as defined, of the securities issued with up to one half of the
total amount due such holder under similar terms.

e-Satisfy Debt

During the second quarter of 2000, the Company renegotiated the terms of a note
payable to the former principals of TARP. The original scheduled payment of
$1,200,000 million due June 30, 2000 was changed to payments of $300,000 on the
first day of July, October, November and December plus interest at 10%. Payments
of $300,000 and $100,000 were made the first of July and October, respectively.
The Company was prohibited from paying the November installment by its senior
lender making the Company in default on this agreement at that time. On April 9,
2001, the Company entered into a new agreement which bears interest at 10% from
June 30, 2000 and requires principal payments of $50,000 per month through March
2002 and $40,000 per month through August 2002, at which time the remaining
balance of $1,466,000 is payable in full.

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

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

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

In August 2000 e-Satisfy.com entered into a factoring arrangement with a bank
(the "Factoring") which is secured by substantially all the assets of
e-Satisfy.com. Qualifying receivables up to $800,000 may be sold to the lender
in exchange for an 80% advance on the receivables purchased, creating a 20%
reserve to cover potential losses and fees. The receivables are sold with total
recourse and accordingly, the transaction was recorded as a financing. The
outstanding debt balance at December 31, 2000 was $59,000. Finance charges are
approximately 1% per month of the outstanding balance. The Factoring was
terminated during January 2001.

                                      F-22
<PAGE>   50
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000


9. COMMITMENTS AND CONTINGENCIES:

The Company leases facilities and equipment under capital and non-cancelable
operating leases through November 2007. Interest rates on the capital leases
range from 4% to 13%. Rent expense under operating leases for the years ended
December 31, 2000, 1999 and 1998 were $8,631,000, $6,652,000 and $4,078,000,
respectively.

Future minimum lease payments as of December 31, 2000 are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                                   Capital       Operating
                                                                                    Leases         Leases
                                                                                    ------         ------
<S>                                                                                <C>           <C>
2001                                                                               $  787         $ 8,056
2002                                                                                  642           6,055
2003                                                                                  509           5,028
2004                                                                                  371           4,423
2005                                                                                  371           3,452
Thereafter                                                                            188           5,377
                                                                                   ------         -------
Total minimum lease payments                                                        2,868         $32,391
  Less amount representing interest                                                  (511)        =======
                                                                                   ------
Present value of future minimum lease payments                                      2,357
  Less current maturities                                                            (664)
                                                                                   ------
                                                                                   $1,693
                                                                                   ======
</TABLE>


On March 18, 1998, the Company entered into an employment contract with its
former CEO and President which was to expire in March 2001. The contract
provided for annual compensation of $200,000 per year, plus a potential for a
bonus. The Company entered into a subscription agreement whereby this executive
acquired 227,964 shares of the Company's common stock for $500,000 and was
granted options to purchase 2,000,000 shares of common stock at $3.29 per share.
The options were to vest over three to five years with accelerated vesting for
500,000 options based on the achievement of certain performance objectives, as
defined. The Company recorded compensation expense of $327,000 during 1998 which
represented the difference between the stock purchase price and the fair market
value of the stock on the effective date of the stock subscription agreement. In
addition, the Company would have recorded compensation expense of $670,000 over
the vesting period of the options to purchase 2,000,000 shares of common stock
which represented the difference between the fair market value of the stock on
the grant date and the option exercise price of $3.29. However, this individual
left the Company in August 2000 resulting in the recognition of compensation
expense totaling $163,000 and $200,000, for the years ended December 31, 2000
and 1999, respectively. None of these options are outstanding as of December 31,
2000.

In July 1998, the Company commenced litigation in Federal court against Parcel
Consultants Incorporated d/b/a/ NTC ("NTC"). The Company filed suit as part of
its efforts to collect approximately $4,742,000 of accounts receivable for
telemarketing services performed on behalf of NTC. NTC filed a counter suit
against the Company alleging breach of contract and fraud. The Company believes
that NTC's claims against the Company are without merit. On February 26, 1999,
NTC filed for reorganization under Chapter 11 of the Federal Bankruptcy Code.
The Company has fully reserved for all amounts due from NTC.

The Company is involved in various other legal matters that have arisen in the
normal course of business. Accruals have been recorded when the outcome is
probable and can be reasonably estimated. While the ultimate results of claims
and litigation cannot be determined, the Company does not expect that the
resolution of any legal matters currently outstanding will have a material
adverse effect on its consolidated results of operations, financial position or
cash flow.

                                      F-23
<PAGE>   51
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000


10. OPTIONS AND WARRANTS:

On May 17, 1996, the Company adopted, the 1996 Equity Compensation Plan, (the
"Plan"). The Plan was subsequently amended on May 28, 1997 and May 12, 1999 to
increase the number of shares available for grant. A committee of the Board of
Directors administers and awards grants under the Plan at its sole discretion.
The Plan reserves up to 10,000,000 shares of common stock for issuance in
connection with the exercise and/or grant of incentive stock options, and
nonqualified stock options, restricted stock, stock appreciation rights and
performance units to key employees, officers, directors, independent contractors
and consultants, which generally vest over three years.

The following table summarizes option activity under the Plan:


<TABLE>
<CAPTION>
                                                                                                     Weighted
                                                                                  Exercise           Average
                                                                                   Price          Exercise Price
                                                                 Shares          Per Share          Per Share
                                                                 ------          ---------          ---------
<S>                                                            <C>              <C>                 <C>
  Balance outstanding, December 31, 1997                        3,187,833       $4.25- 6.25           $5.55
    Granted at fair market value                                  723,500        3.31- 9.81            4.53
    Granted above fair market value                                75,000        6.25                  6.25
    Granted below fair market value                             2,000,000        3.29                  3.29
    Exercised                                                    (330,411)       3.29- 6.25            4.54
    Cancelled                                                    (432,816)       3.31- 8.94            4.89
                                                               ----------       -----------           -----
  Balance outstanding, December 31, 1998                        5,223,106        3.29- 9.81            4.67
    Granted at fair market value                                1,333,250        4.13-11.50            7.07
    Granted in the IDRC merger (see Note 4)                       930,903        1.45-14.46            2.54
    Granted in the CRW merger (see Note 4)                        820,669        1.37-14.10            3.75
    Exercised                                                    (345,010)       1.45- 6.25            4.26
    Cancelled                                                    (111,040)       3.31- 7.75            5.35
                                                               ----------       -----------           -----
  Balance outstanding, December 31, 1999                        7,851,878        1.37-14.46            4.74
    Granted at fair market value                                4,183,000        0.41- 4.56            2.57
    Exercised                                                    (463,910)       1.45- 6.25            3.12
    Cancelled                                                  (3,434,701)       1.45-11.50            4.26
                                                               ----------       -----------           -----
  Balance outstanding, December 31, 2000                        8,136,267       $0.41-14.46           $3.92
                                                               ==========       ===========           =====
</TABLE>


                                      F-24
<PAGE>   52
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000


Summary information about the Company's stock options outstanding at December
31, 2000 is as follows:


<TABLE>
<CAPTION>
                                   Balance         Weighted       Weighted
                               Outstanding at      Average        Average        Exercisable at        Weighted
          Range of              December 31,       Exercise     Contractual        December 31,        Average
       Exercise Price                2000           Price       Life in years          2000         Exercise Price
       --------------                ----           -----       -------------          ----         --------------
<S>                            <C>                 <C>          <C>              <C>                <C>
         $.41 - .41                   7,000        $ 0.41           9.8                   --                --
         $.66 - .94                 602,500          0.80           9.7                   --                --
        $1.37 - 1.37                319,050          1.37           8.5              319,050              1.37
        $1.45 - 1.69              1,924,212          1.52           9.4              545,462              1.52
        $2.74 - 2.74                319,050          2.74           8.5              319,050              2.74
        $3.31 - 4.81              2,793,023          4.21           8.4            1,050,833              4.06
        $5.25 - 7.75              1,915,343          6.48           6.3            1,697,005              6.33
        $8.68 - 11.50               130,895          9.59           6.1              122,561              9.57
       $14.10 - 14.10                69,128         14.10           8.5               69,128             14.10
       $14.46 - 14.46                56,066         14.46           5.5               56,066             14.46
       --------------             ---------        ------           ---            ---------            ------

        $.41 - 14.46              8,136,267        $ 3.92           8.2            4,179,155            $ 4.81
       ==============             =========        ======           ===            =========            ======
</TABLE>


During September 2000, the Company granted its former Chairman of the Board
options to purchase 500,000 shares of common stock issued at fair market value
of $1.50 per share, outside of the Plan. The options will vest over three years.

During April 2000, the Company granted options to purchase 500,000 shares of
common stock issued at fair market value of $4.38 per share, outside of the Plan
to its former CEO. The options became 100% vested upon the former CEO's
departure from the Company during January 2001. The options will expire in
April 2010.

The Company accounts for its stock-based compensation plans under Accounting
Principles Board Opinion No. 25, ("APB 25") which does not require a charge to
the statement of operations for the estimated fair value of stock options issued
with an exercise price equal to the fair value of the common stock on the date
of grant. Statement of Financial Accounting Standards No. 123 ("SFAS 123"),
"Accounting for Stock-based Compensation" requires that companies, which do not
elect to account for stock-based compensation as prescribed by this statement,
disclose the pro forma effects on earnings and earnings per share as if SFAS No.
123 had been adopted. Additionally, certain other disclosures with respect to
stock compensation and the related assumptions are used to determine the pro
forma effects of SFAS No. 123.

Pro forma information regarding net income and earnings per share required by
SFAS No. 123 has been determined as if the Company had accounted for its
employee stock options under the fair value method of that statement. The
determination of the fair value of the options noted above was estimated at the
date of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for the years ended December 31, 2000, 1999, and
1998: risk free interest rate of 6.2%, 6.0%, and 5.7%, respectively, dividend
yield of 0% for all years, volatility factor of the expected market price of the
Company's common stock of 180%, 75%, and 75%, respectively and an expected life
of the options of six years.

The weighted average fair value of employee stock options granted during the
periods presented is as follows:

<TABLE>
<CAPTION>
                                                                Weighted Average Fair Value
                                                                  Year Ended December 31,
                                                             -------------------------------
                                                             2000         1999          1998
                                                             ----         ----          ----
<S>                                                         <C>          <C>           <C>
      Granted at fair market value                          $2.57        $4.98         $3.14
      Granted above fair market value                       $  --        $  --         $1.95
      Granted below fair market value                       $  --        $  --         $2.60
</TABLE>


                                      F-25
<PAGE>   53
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000


For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the option's vesting period. The Company's pro
forma information is as follows (in thousands - except for earnings per share):

<TABLE>
<CAPTION>
                                                                         Weighted Average Fair Value
                                                                           Year Ended December 31,
                                                                     --------------------------------
                                                                     2000         1999           1998
                                                                     ----         ----           ----
<S>                                                               <C>            <C>          <C>
      Pro forma net (loss) income                                 $(207,238)     $4,208       $(11,455)
      Pro forma basic (loss) earnings per share                   $   (6.55)     $0.15        $  (0.45)
      Pro forma diluted (loss) earnings per share                 $   (6.55)     $0.13        $  (0.45)
</TABLE>


On June 30, 1999, the Company granted warrants to purchase 2,500,000 shares of
the Company's common stock at $6.50 per share in connection with the IDRC merger
(see Note 4). These warrants were valued at their estimated fair value of
$7,840,000 and were included in the total purchase price of IDRC. The warrants
are exercisable for ten years. No warrants were exercised as of December 31,
2000.

On June 30, 1999, the Company granted warrants to purchase 678,410 shares of the
Company's common stock at $1.50 per share in connection with the CRW merger (see
Note 4). These warrants were valued at their estimated fair value of $4,638,000
and were included in the cost of treasury stock acquired in the CRW merger. The
warrants are exercisable for ten years. No warrants were exercised as of
December 31, 2000.

11. EMPLOYEE RETIREMENT SAVINGS PLAN:

On January 1, 1997, the Company adopted a defined contribution 401(k) Savings
Plan (the "Savings Plan"). Employees who have met certain eligibility
requirements, as defined, may contribute up to 15% of their pre-tax gross wages,
subject to certain restrictions. The Savings Plan provides for Company matching
contributions of 25% of the first 6% of employee contributions to the Savings
Plan, which vest 25% per year over a four-year period. The expense for the years
ended December 31, 2000, 1999, and 1998 under the Savings Plan was $184,000,
$189,000 and $171,000, respectively.

IDRC had an existing defined contribution 40l(k) Savings Plan (the "IDRC Plan")
at the time of its merger with the Company. This plan has been maintained for
existing IDRC employees. Employees who have met certain eligibility
requirements, as defined, may contribute up to 15% of their pre-tax gross wages,
subject to certain restrictions. The IDRC Plan provided for matching
contributions of 50% of the first 3% of employee contributions to the IDRC Plan,
which vests 25% per year over a four-year period. This plan ended on June 30,
2000 and was combined with the Savings Plan. The expense for the six months
ended June 30, 2000 was $60,000.

12. RELATED-PARTY TRANSACTIONS:

Note Payable to Stockholder

As more fully discussed in Note 8, the Company has a note payable to a
stockholder of the Company stemming from the original IDRC acquisition.

CRW Financial, Inc.

The Company subleases a 21,000 square foot office building in King of Prussia,
Pennsylvania, from CRW which was a former shareholder of the Company and as
discussed in Note 4, was merged with the Company on June 30, 1999. The sublease
commenced on May 9, 1996, and requires monthly base rent payments through
September 30, 2004, of approximately $46,000. Total rent expense for the six
months ended December 31, 1999 and year ended December 31, 1998 was
approximately $252,000 and $430,000, respectively.

AffiniCorp USA, Inc.

                                      F-26
<PAGE>   54
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000


On September 25, 1998, the Company purchased 19.4% of the outstanding common
stock of AffiniCorp USA, Inc. ("AffiniCorp") for $500,000. AffiniCorp develops
and manages enhancement products for credit card issuers. As of December 31,
1999, the Company has a $3,347,000 receivable from AffiniCorp recorded in
current assets. During 1999, the Company recorded a reserve for all amounts
invested in or due from AffiniCorp.

As of December 31, 1999, the Company had a $475,000 note receivable due July
2004, bearing interest at 3% and collateralized by a residence from one of its
senior officers. This note was paid in full in January 2000.

13. CONCENTRATIONS OF CREDIT:

Financial instruments, which potentially subject the Company to concentrations
of credit risk, consist principally of accounts receivable. Concentrations of
credit risk with respect to accounts receivable are limited due to the number of
customers comprising the Company's customer base and their dispersion across
different industries and geographies. The Company does not require collateral or
other securities to support customer receivables. The Company performs periodic
reviews of its clients' financial condition to reduce collection risk. The
Company does not believe significant credit risk exists at December 31, 2000.

The following table summarizes those customers with revenue or accounts
receivable in excess of 10% of total revenue for the years ended December 31,
2000, 1999 and 1998, or total receivables as of December 31, 2000 and 1999,
respectively:


<TABLE>
<CAPTION>
                                            Revenues                        Accounts Receivable
                                ---------------------------------           -------------------
                                           Year Ended                             As of
                                          December 31,                        December 31,
                                ---------------------------------           -----------------
                                2000           1999          1998           2000         1999
                                ----           ----          ----           ----         ----
<S>                             <C>            <C>           <C>            <C>          <C>
        Customer 1                -%            11%           10%             -%           -%
        Customer 2               11%             -%            -%            14%          17%
        Customer 3                -%             -%            -%            13%           -%
        Customer 4                -%             -%            -%            11%           -%
</TABLE>


The following table summarizes those industries with revenue in excess of 10% of
total revenue for the years ended December 31, 2000, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                        Revenues
                                                          -----------------------------------
                                                                 Year Ended December 31,
                                                          -----------------------------------
                                                          2000            1999           1998
                                                          ----            ----           ----
<S>                                                       <C>             <C>            <C>
     Telecommunications                                    38%             32%            27%

     Financial Services                                    27%             28%            23%

     Insurance                                              9%             10%            10%
</TABLE>


14. SEGMENTS:

The Company classifies its continuing operations into three segments:
Acquisition Services, ChannelCare and e-Satisfy.com. The operating segments are
managed separately because each operating segment represents a strategic
business unit that offers different services. The accounting policies of the
operating segments are the same as described in the summary of significant
accounting policies (see Note 2). The business segments are described in further
detail below. Segment assets include amounts specifically identified with
Acquisition Services, ChannelCare and e-Satisfy.com. Corporate assets consist
primarily of property and equipment.


                                      F-27
<PAGE>   55
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000


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

The ChannelCare segment provides customer service expertise to its clients. The
Company's customer service expertise includes the more traditional inbound
services of customer care support, typically through toll-free telephone
numbers, for activities such as responses to clients' customer service
inquiries, catalogue sales and electronic order processing and consulting
services to a wide range of clients.

The e-Satisfy.com segment, performs baseline and tracking customer satisfaction
surveys for click and mortar companies.

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

Prior to 2000, the results of operations of the e-Satisfy.com segment were
included in the results of operations of the ChannelCare segment.



                                      F-28
<PAGE>   56
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000


Business segment information is as follows (in thousands):

<TABLE>
<CAPTION>
                                                   Year Ended December 31,
                                          ----------------------------------------
                                          2000              1999              1998
                                          ----              ----              ----
<S>                                    <C>                <C>               <C>
REVENUES:
   Acquisition Services                $ 192,408          $177,835          $115,776
   ChannelCare                           104,814            79,004            43,009
   e-Satisfy.com                           6,346             9,971             8,643
                                       ---------          --------          --------
        Total                          $ 303,568          $266,810          $167,428
                                       =========          ========          ========
OPERATING INCOME (LOSS):
   Acquisition Services                $ (64,337)         $ 42,179          $  7,251
   ChannelCare                           (35,614)           19,384             5,985
   e-Satisfy.com                         (21,789)            5,244            (1,303)
   Corporate                             (71,937)          (53,899)          (17,874)
                                       ---------          --------          --------
        Total                          $(193,677)         $ 12,908          $ (5,941)
                                       =========          ========          ========
TOTAL ASSETS:
   Acquisition Services                $  71,875          $ 81,298          $ 45,995
   ChannelCare                            40,952            54,387            47,499
   e-Satisfy.com                           5,216            23,632                 -(1)
   Corporate                              11,330           159,090            10,195
                                       ---------          --------          --------
        Total                          $ 129,373          $318,407          $103,689
                                       =========          ========          ========
DEPRECIATION AND AMORTIZATION:
   Acquisition Services                $  13,077          $  5,361          $  4,995
   ChannelCare                             7,227             3,180             2,794
   e-Satisfy.com                           1,770               944               840
   Corporate                               5,211             7,231             1,081
                                       ---------          --------          --------
        Total                          $  27,285          $ 16,716          $  9,710
                                       =========          ========          ========
CAPITAL EXPENDITURES:
   Acquisition Services                $   8,673          $ 12,197          $  2,401
   ChannelCare                             8,317            11,167             2,040
   e-Satisfy.com                           2,007             1,198             1,053
   Corporate                               2,640             1,852             3,605
                                       ---------          --------          --------
        Total                          $  21,637          $ 26,414          $  9,099
                                       =========          ========          ========
</TABLE>


(1) During 1998, total assets related to TARP were included in ChannelCare total
    assets.


                                      F-29
<PAGE>   57
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                DECEMBER 31, 2000


15. QUARTERLY FINANCIAL DATA (UNAUDITED):


<TABLE>
<CAPTION>
                                                                     Year Ended December 31, 2000
                                                     ------------------------------------------------------
                                                      First         Second           Third          Fourth
                                                     Quarter        Quarter         Quarter         Quarter
                                                     -------        -------         -------         -------
                                                                 (in thousands, except per share amounts)
<S>                                                  <C>         <C>                <C>            <C>
  Revenues                                           $78,680        $79,259         $73,119        $  72,511
  Gross profit                                        17,140         19,210          15,579           14,468
  Operating loss                                        (732)          (739)         (5,515)        (186,688)(1)
  Net loss                                           $(3,909)       $(3,935)        $(8,692)(2)    $(186,584)
  Basic loss per common share                        $ (0.12)       $ (0.12)        $ (0.27)       $   (5.87)
  Diluted loss per common share                      $ (0.12)       $ (0.12)        $ (0.27)       $   (5.87)
</TABLE>

<TABLE>
<CAPTION>
                                                                     Year Ended December 31, 1999
                                                     -----------------------------------------------------
                                                      First         Second           Third         Fourth
                                                     Quarter        Quarter         Quarter        Quarter
                                                     -------        -------         -------        -------
                                                                 (in thousands, except per share amounts)
<S>                                                  <C>         <C>                <C>            <C>
  Revenues                                           $47,925        $46,615         $86,471        $85,799
  Gross profit                                        14,699         13,751          22,460         20,327
  Operating income (loss)                              4,914           (196)          4,538          3,652
  Net income (loss)                                  $ 4,742        $  (940)(3)     $ 1,746        $   334
  Basic earnings (loss) per
    common share                                      $ 0.18         $(0.04)         $ 0.06         $ 0.01
  Diluted earnings (loss) per
    common share                                      $ 0.17         $(0.04)         $ 0.05         $ 0.01
</TABLE>

(1)  Includes costs which are non-recurring in nature totaling $179.0 million
     consisting primarily of charges for impairment of long-lived assets
     ($171.1 million) and restructuring charges ($10.3 million) offset by
     minority interest.

(2)  Includes costs which are non-recurring in nature totaling $2.3 million
     consisting primarily of charges for bad debts and the write-off of certain
     software.

(3)  Includes costs which are non-recurring in nature totaling $5.8 million
     consisting primarily of charges for bad debts, severance and fees expensed
     upon the early extinguishment of debt.


16. SUBSEQUENT EVENTS:

As discussed more fully in Note 8 the Company refinanced the majority of its
outstanding debt after December 31, 2000.

During the first quarter of 2001, the Company continued to implement its
operational plan to streamline operations and improve profitability.
Accordingly, the Company will reflect an additional restructuring charge in the
first quarter, comprised of costs related to the closure of certain call
centers, further reductions in overhead costs and costs associated with the
restructuring of our old credit facilities currently estimated at a minimum of
$6,000,000.


                                      F-30
<PAGE>   58
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To TeleSpectrum Worldwide Inc.:

We have audited in accordance with auditing standards generally accepted in the
United States, the consolidated financial statements of TeleSpectrum Worldwide
Inc. and subsidiaries included in this Form 10-K and have issued our report
thereon dated February 23, 2001 (except with respect to the matter described in
Note 8, as to which the date is April 16, 2001). Our audit was made for the
purpose of forming an opinion on the basic financial statements taken as a
whole. Our report on the financial statements includes an explanatory paragraph
with respect to the ability of the Company to continue as a going concern as
discussed in Note 1 to the Consolidated Financial Statements. The accompanying
financial statement schedule is the responsibility of the Company's management
and is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.


                                                       ARTHUR ANDERSEN LLP



Philadelphia, Pa.,
   February 23, 2001


                                      S-1
<PAGE>   59
                                                                     Schedule II


                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES


                        VALUATION AND QUALIFYING ACCOUNTS

              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998


<TABLE>
<CAPTION>
                                         Balance at        Charged to       Charged to                             Balance at
                                        December 31,        Cost and          Other                               December 31,
          Description                       1999            Expenses         Accounts          Deductions             2000
          -----------                       ----            --------         --------          ----------             ----
<S>                                     <C>                <C>              <C>                <C>                <C>
Allowance for doubtful
   accounts                                $5,117           $ 2,833           $   --           $(4,493)/1/           $ 3,457
Closed call center minimum lease
   commitment reserve                      $2,703           $10,366           $  400           $(3,179)/2/           $10,290

Severance reserve                          $1,919           $ 1,231           $1,459           $(2,939)/2/           $ 1,670
</TABLE>

<TABLE>
<CAPTION>
                                         Balance at       Charged to       Charged to                               Balance at
                                        December 31,       Cost and          Other                                 December 31,
          Description                       1998           Expenses         Accounts           Deductions             1999
          -----------                       ----           --------         --------           ----------             ----
<S>                                     <C>               <C>              <C>                 <C>                 <C>
Allowance for doubtful
   accounts                                $2,851           $6,800           $16,398           $(20,932)/1/           $5,117
Closed call center minimum lease
   commitment reserve                      $  809           $   --           $ 3,014           $ (1,120)/2/           $2,703

Severance reserve                          $   --           $  401           $ 2,400           $   (882)/2/           $1,919
</TABLE>

<TABLE>
<CAPTION>
                                         Balance at       Charged to        Charged to                              Balance at
                                         January 1,        Cost and           Other                                December 31,
          Description                       1998           Expenses          Accounts          Deductions             1998
          -----------                       ----           --------          --------          ----------             ----
<S>                                      <C>              <C>               <C>                <C>                  <C>
Allowance for doubtful
   accounts                                $  969           $2,325           $   -             $  (443)/1/           $2,851
Closed call center minimum lease
   commitment reserve                      $1,939           $  360           $   -             $(1,490)/2/           $  809

Closed call center severance
   reserve                                 $  263           $  994           $   -             $(1,257)/2/           $   --
</TABLE>


/1/ Write-off of amounts previously reserved.
/2/ Cash payments related to minimum lease commitments and employee severance
    for closed call centers.


                                      S-2
<PAGE>   60
                                 Exhibit Index

 Exhibit
 Number                    Description
 -------                   -----------
   3.01     Restated Certificate of Incorporation of TeleSpectrum Worldwide Inc.
            is incorporated by reference to exhibit 3.01 of our Registration
            Statement on Form S-1 (File No., 333-04349).

   3.02     Bylaws of TeleSpectrum Worldwide Inc. are incorporated by reference
            to exhibit 3.02 of our Registration Statement on Form S-1 (File No.,
            333-004349).

**10.01     TeleSpectrum Worldwide Inc. Amended and Restated 1996 Equity
            Compensation Plan is incorporated by reference to exhibit 10.04 of
            our Annual Report on Form 10-K for the fiscal year ended December
            31, 1999.

  10.02     Agreement and Plan of Merger dated as of January 14, 1999 by and
            among TeleSpectrum Worldwide Inc., International Data Response
            Corporation, McCown De Leeuw & Co. III, L.P., McCown De Leeuw & Co.
            Offshore (Europe) III, L.P., McCown De Leeuw & Co. III, (Asia), and
            The Gamma Fund LLC is incorporated by reference to Exhibit 2.1 of
            our current Report on Form 8-K filed on January 26, 1999.

  10.03     Amendment No. 1 to Agreement and Plan of Merger dated as of February
            26, 1999 by and among TeleSpectrum Worldwide Inc., International
            Data Response Corporation, McCown De Leeuw & Co. III, L.P., McCown
            De Leeuw & Co. Offshore (Europe) III, L.P., McCown De Leeuw & Co.
            III, (Asia), and The Gamma Fund LLC is incorporated by reference to
            Exhibit 10.10 of our Registration Statement on Form S-4 (File No.
            333-80251).

  10.04     Amendment No. 2 to Agreement and Plan of Merger dated as of May 13,
            1999 by and among TeleSpectrum Worldwide Inc., International Data
            Response Corporation, McCown De Leeuw & Co. III, L.P., McCown De
            Leeuw & Co. III, (Asia), and The Gamma Fund LLC is incorporated by
            reference to Exhibit 10.15 of our Registration Statement on Form S-4
            (File No. 333-80251).

  10.05     Agreement and Plan of Merger and Reorganization, dated as of
            September 3, 1998 by and among CRW Financial, Inc., TeleSpectrum
            Worldwide Inc., and CRW Acquisition Corp. is incorporated by
            reference to Exhibit 10.13 of our Registration Statement on Form S-4
            (File No. 333-80251).

  10.06     Amended and Restated Credit Agreement dated as of April 16, 2001,
            between TeleSpectrum Worldwide Inc. Lenders named therein, and BNP
            Paribas.*

**10.07     Employment Agreement dated as of January 1, 2000, between
            TeleSpectrum Worldwide Inc. and Francis J. Pennella is incorporated
            by reference to exhibit 11.14 of our Annual Report for the fiscal
            year ended December 31, 1999 on Form 10-K.

**10.08     Employment Agreement dated as of January 1, 2001, between
            TeleSpectrum Worldwide Inc. and J. Peter Pierce.*

**10.09     Employment Agreement dated as of January 2, 2001, between
            TeleSpectrum Worldwide Inc. and Christopher Williams.*

**10.10     Employment Agreement dated as of September 29, 2000, between
            TeleSpectrum Worldwide Inc. and Kurt Dinkelacker.*

**10.11     Employment Agreement dated as of January 2, 2001, between
            TeleSpectrum Worldwide Inc. and Joseph Nezi.*

   21.0     Subsidiaries of the Registrant.*

  23.01     Consent of Arthur Andersen LLP.*


-----------------

* Filed herewith

** Constitutes a management contract or a compensatory plan or arrangement.