<PAGE>

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

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

(Mark One)
   [X]          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

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

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

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

Indicate by check mark whether the Registrant (1) has filed all reports to be
filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.

                            Yes  [X]    No  [ ]

The number of outstanding shares of the Registrant's Common Stock, par value
$.01 per share, on November 14, 2002 was 192,067,847.

================================================================================
<PAGE>
                                Table of Contents

<TABLE>
<CAPTION>
                                                                                          Page
                                                                                          ----
<S>         <C>                                                                           <C>
            PART I - FINANCIAL INFORMATION

Item 1.     Financial Statements:

            Condensed Consolidated Balance Sheets as of
               September 30, 2002 (unaudited) and December 31, 2001                           3

            Condensed Consolidated Statements of Operations (unaudited)
               For the Three Months Ended September 30, 2002 and 2001 and
               For the Nine Months Ended September 30, 2002 and 2001                          4

            Condensed Consolidated Statement of Stockholders' Equity (Deficit)                5
               For the Nine Months Ended September 30, 2002 (unaudited)

            Condensed Consolidated Statements of Cash Flows (unaudited)
               For the Nine Months Ended September 30, 2002 and 2001                          6

            Notes to Condensed Consolidated Unaudited Financial Statements                 7-15

Item 2.     Management's Discussion and Analysis of Results of Operations
               and Financial Condition                                                    16-25

Item 3.     Quantitative and Qualitative Disclosure about Market Risk                        26

Item 4.     Controls and Procedures                                                          26

            PART II - OTHER INFORMATION

Item 1.     Legal Proceedings                                                                27

Item 2.     Changes in Securities                                                            27

Item 3.     Defaults Upon Senior Securities                                                  27

Item 4.     Submission of Matters to a Vote of Security Holders                              27

Item 5.     Other Information                                                                27

Item 6.     Exhibits and Reports on Form 8-K                                                 27
</TABLE>

                                        2
<PAGE>
                  TeleSpectrum Worldwide Inc. and Subsidiaries
                      Condensed Consolidated Balance Sheets
                    (In Thousands - Except Per Share Amounts)

<TABLE>
<CAPTION>
                                                                                        September 30,
                                                                                            2002               December 31,
                                                                                         (unaudited)               2001
                                                                                       ---------------        ---------------
<S>                                                                                    <C>                    <C>
                              ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                                                           $        8,083         $        6,391
   Accounts receivable, net                                                                    16,194                 33,333
   Prepaid expenses and other                                                                   1,364                  2,067
                                                                                       --------------         --------------
      Total current assets                                                                     25,641                 41,791

PROPERTY AND EQUIPMENT, net                                                                     8,601                 11,478

INTANGIBLES, net                                                                                1,760                  2,347

OTHER NONCURRENT ASSETS                                                                           507                  1,043
                                                                                       --------------         --------------
     Total assets                                                                      $       36,509         $       56,659
                                                                                       ==============         ==============
            LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
   Current maturities of long-term debt                                                $        1,040         $        3,608
   Accounts payable                                                                             2,435                  5,435
   Accrued expenses and other current liabilities                                              17,790                 27,118
                                                                                       --------------         --------------
      Total current liabilities                                                                21,265                 36,161
                                                                                       --------------         --------------

NONCURRENT LIABILITIES:

   Long-Term Debt                                                                              30,475                159,063
   Capital Leases and Other                                                                     1,181                  7,525
   Other Noncurrent Liabilities                                                                   558                    615
                                                                                       --------------         --------------
      Total non-current liabilities                                                            32,214                167,203
                                                                                       --------------         --------------

STOCKHOLDERS' DEFICIT:
   Series A Preferred stock, $.01 par value, 100,000 shares authorized,
     40,000 issued and outstanding                                                                  -                      -
   Series B Convertible Preferred stock, $.01 par value, 90,000 shares authorized
     and issued and 71,097 outstanding                                                            174                      -
   Common stock, $.01 par value, 200,000,000 shares authorized,
     199,352,688 shares issued and 192,067,847 shares outstanding at
     September 30, 2002, and 40,022,656 shares issued and 32,737,815
     shares outstanding at December 31, 2001                                                    1,994                    400
Additional paid-in capital                                                                    337,565                339,113
Additional paid-in capital - Warrants                                                           7,840                  7,840
Accumulated other comprehensive loss                                                           (1,527)                (1,562)
Accumulated deficit                                                                          (314,206)              (443,686)
                                                                                       --------------         --------------
                                                                                               31,840                (97,895)
Less treasury stock, 7,284,841 shares at cost                                                 (48,810)               (48,810)
                                                                                       --------------         --------------
   Total stockholders' deficit                                                                (16,970)              (146,705)
                                                                                       --------------         --------------
   Total liabilities and stockholders' deficit                                         $       36,509         $       56,659
                                                                                       ==============         ==============
</TABLE>

                                        3
<PAGE>
                  TeleSpectrum Worldwide Inc. and Subsidiaries
                 Condensed Consolidated Statements of Operations
                                   (Unaudited)
                    (In Thousands - Except Per Share Amounts)

<TABLE>
<CAPTION>
                                                               Three Months Ended                      Nine Months Ended
                                                       ----------------------------------      ----------------------------------
                                                         September 30,      September 30,        September 30,      September 30,
                                                            2002               2001                 2002                2001
                                                       ---------------    ---------------      ---------------     --------------
<S>                                                    <C>                <C>                  <C>                 <C>
REVENUES                                               $       24,958     $       52,349       $       85,692      $     172,687
                                                       --------------     --------------       --------------      -------------

OPERATING EXPENSES:
   Cost of services                                            19,191             42,406               70,324            133,676
   Selling, general and administrative                          5,397             11,983               19,402             40,382
   Restructuring (credit)/charge and other                     (1,920)             2,493                2,258              6,531
                                                       --------------     --------------       --------------      -------------

          Total operating expenses                             22,668             56,882               91,984            180,589
                                                       --------------     --------------       --------------      -------------

          Operating income/(loss)                               2,290             (4,533)              (6,292)            (7,902)

GAIN/(LOSS) ON EXTINGUISHMENT OF DEBT                               -                  -              141,655            (20,286)

INTEREST EXPENSE, net                                              41              4,623                4,215             15,729
                                                       --------------     --------------       --------------      -------------

INCOME/(LOSS) BEFORE INCOME TAXES                               2,249             (9,156)             131,148            (43,917)

INCOME TAXES                                                        -                  -                    -                  -
                                                       --------------     --------------       --------------      -------------

NET INCOME/(LOSS)                                      $        2,249     $       (9,156)      $      131,148      $     (43,917)
                                                       ==============     ==============       ==============      =============

BASIC INCOME/(LOSS) PER SHARE                          $         0.01     $        (0.28)      $         1.07      $       (1.37)
                                                       ==============     ==============       ==============      =============
DILUTED INCOME/(LOSS) PER SHARE                        $            -     $        (0.28)      $         0.29      $       (1.37)
                                                       ==============     ==============       ==============      =============

WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC                   192,068             32,714              121,531             32,105
                                                       ==============     ==============       ==============      =============
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED                 776,682             32,714              447,332             32,105
                                                       ==============     ==============       ==============      =============
</TABLE>

            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                        4
<PAGE>
                  TeleSpectrum Worldwide Inc. and Subsidiaries
         Condensed Consolidated Statement Stockholders' Equity (Deficit)
                      Nine Months Ended September 30, 2002
                    (In Thousands - Except Per Share Amounts)

<TABLE>
<CAPTION>
                                   Series A Preferred      Series B Preferred            Common
                                         Stock                   Stock                    Stock
                                  --------------------    --------------------    -----------------------
                                   Shares      Amount      Shares      Amount       Shares       Amount
                                  --------------------    --------------------    -----------------------
<S>                               <C>          <C>        <C>          <C>        <C>            <C>
Balance @ 12/31/01                                                                  40,022,656   $   400

Issuance of Series A
  Preferred Stock                  40,000           -            -          -                -         -

Issuance of Series B
  Convertible Preferred Stock           -           -       90,000        220                -         -

Conversion of Series B
  Convertible Preferred Stock           -           -      (18,903)       (46)     155,435,035     1,555

Issuance of Common Stock                -           -            -          -        3,894,997        39

Dividends                               -           -            -          -                -         -

Net Income                              -           -            -          -                -         -

Foreign Currency Translation
  Adjustment                            -           -            -          -                -         -

Total Comprehensive Income              -           -            -          -                -         -
                                  -------------------     -------------------     ----------------------
Balance @ 9/30/02                  40,000      $    -       71,097     $  174      199,352,688   $ 1,994
                                  ======================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                                Accumulated
                                   Additional                                      Other           Total
                                   Paid - In      Treasury     Accumulated     Comprehensive    Stockholders
                                    Capital        Stock        (Deficit)         (Loss)       Equity (Deficit)
                                  ------------------------------------------------------------------------------
<S>                               <C>           <C>           <C>              <C>             <C>
Balance @ 12/31/01                 $  346,953   $  (48,810)   $   (443,686)    $     (1,562)   $      (146,705)

Issuance of Series A
  Preferred Stock                           -            -               -                -                  -

Issuance of Series B
  Convertible Preferred Stock               -            -               -                -                220

Conversion of Series B
  Convertible Preferred Stock          (1,509)           -               -                -                  -

Issuance of Common Stock                  (39)           -               -                -                  -

Dividends                                   -            -          (1,668)               -             (1,668)

Net Income                                  -            -         131,148                -            131,148

Foreign Currency Translation
  Adjustment                                -            -               -               35                 35
                                                                                               ---------------

Total Comprehensive Income                  -            -               -                -            131,183
                                                                                               ===============
                                   ---------------------------------------------------------------------------
Balance @ 9/30/02                  $  345,405   $  (48,810)   $   (314,206)    $     (1,527)   $       (16,970)
                                   ===========================================================================
</TABLE>

            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                        5
<PAGE>
                  TeleSpectrum Worldwide Inc. and Subsidiaries
                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)
                    (In Thousands - Except Per Share Amounts)

<TABLE>
<CAPTION>
                                                                                           Nine Months Ended
                                                                                  ------------------------------------
                                                                                    September 30,       September 30,
                                                                                        2002                2001
                                                                                  -----------------    ---------------
<S>                                                                               <C>                  <C>
Cash Flows From Operating Activities:
   Net Income/(Loss)                                                                  $ 131,148           $ (43,917)
   Adjustments to reconcile net income/(loss) to net cash
      flows from operating activities:
         Depreciation and amortization                                                    2,834              11,442
         Provision for bad debts                                                            206               1,433
         Restructuring charge and other                                                   1,546               5,480
         (Gain)/loss on extinguishment of debt, net of cash transfers                  (142,220)             20,286
         (Gain)/loss on sale of assets and other                                              -                (172)
         (Gain)/loss on write off of fixed assets                                           712                   -
         Changes in operating assets and liabilities net of acquisitions:
            Accounts receivable                                                          16,218              15,106
            Prepaid expenses and other                                                     (149)              2,616
            Accounts payable                                                             (1,060)             (4,222)
            Accrued and other liabilities                                                (4,866)             (4,689)
                                                                                      ---------           ---------
                     Net cash provided by operating activities                            4,369               3,363
                                                                                      ---------           ---------
Cash Flows From Investing Activities:
   Purchases of property and equipment                                                     (659)             (1,303)
   Proceeds from disposal of assets                                                           -               1,120
                                                                                      ---------           ---------
                     Net cash used in investing activities                                 (659)               (183)
                                                                                      ---------           ---------
Cash Flows From Financing Activities:
   Debt issuance costs                                                                        -              (1,538)
   Net (payments) borrowings on credit facilities                                        (1,629)              1,247
   Net payments of capital lease obligations                                               (365)               (419)
                                                                                      ---------           ---------
                     Net cash used in financing activities                               (1,994)               (710)
                                                                                      ---------           ---------
   Effect of exchange rate change on cash and cash equivalents                              (24)                  -
Net increase in cash and cash equivalents                                                 1,692               2,470
Cash and cash equivalents, beginning of period                                            6,391               5,258
                                                                                      ---------           ---------
Cash and cash equivalents, end of period                                              $   8,083           $   7,728
                                                                                      =========           =========

SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid during the period                                                       $     599           $   7,175
                                                                                      =========           =========

Income taxes paid during the period                                                   $       -           $       -
                                                                                      ---------           ---------
</TABLE>

            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                        6
<PAGE>
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
        NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (continued)

1. BASIS OF PRESENTATION:

The accompanying unaudited consolidated financial statements of Telespectrum
Worldwide Inc. and subsidiaries ("Telespectrum" or the "Company") have been
prepared on the basis of accounting principles applicable to a going concern,
which contemplate the realization of assets and the satisfaction of liabilities
in the normal course of business. All significant intercompany transactions have
been eliminated in consolidation. These interim financial statements should be
read in conjunction with the Company's Annual Report on Form 10-K for the year
ended December 31, 2001. Certain information and footnote disclosures, which are
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to SEC
rules and regulations. The information reflects all normal and recurring
adjustments, which, in the opinion of management, are necessary for a fair
presentation of the financial position of the Company, and its results of
operations for the interim periods set forth herein. The results for the nine
months ended September 30, 2002 are not necessarily indicative of the results to
be expected for the full year.

2. EXTINGUISHMENT OF DEBT AND OTHER RESTRUCTURING:

On April 29, 2002, the Company entered into an agreement with its bank lenders
that resulted in a recapitalization of its balance sheet and a reduction of its
debt. As a result of the recapitalization, the amounts due under its existing
credit facilities totaling approximately $162.2 million at the time of
recapitalization, which consisted of outstanding debt, accrued interest and
fees, were converted into (a) a three-year term facility of $25 million (face
amount) under an amended and restated credit agreement, (b) $40 million (stated
value) of the Company's Series A Preferred Stock, and (c) shares of the
Company's Series B Convertible Preferred Stock which will convert into common
stock representing 95% of the Company's common outstanding after such
conversion. The three year term facility is secured by, among other things, the
Company's assets and outstanding trade receivables, bears interest at a base
rate as defined in the agreement plus 400 basis points, and matures in May 2005.
Under the terms of the Agreement, the Company is required to meet certain
financial covenants, including a fixed charge coverage ratio and Earnings Before
Interest Taxes, Depreciation, and Amortization (EBITDA) targets. The Series A
Preferred Stock has a 10% annual dividend rate, which accrues and is payable
either in cash or in additional shares of Series A Preferred Stock.
Approximately 18,903 shares of the Series B Convertible Preferred Stock were
converted into 155,435,035 shares of the Company's common stock immediately
after the closing of the recapitalization, and the remainder will convert into
shares of common stock as soon as the Company amends its Certificate of
Incorporation to increase the authorized number of shares of common stock. Such
amendment requires approval of the Company's shareholders.

In accordance with Statement of Financial Accounting Standard No. 15,
"Accounting by Debtors and Creditors for Troubled Debt Restructurings"
(SFAS No.15), the Company accounted for the effects of the restructuring
prospectively, recording the carrying amount of the new term facility at
approximately $31.6 million, which included approximately $6.6 million of future
amounts that would otherwise be designated as interest at April 29, 2002. At
September 30, 2002 the term facility approximated $30.5 million, which includes
approximately $5.5 million of future amounts that would otherwise be designated
as interest. For future financial statement purposes, the effective interest
rate of this facility is 0%. In addition, the amount of the gain, in part, was
determined based on an independent appraisal of the fair value of the Series A
and Series B Preferred Stock issued in connection with the recapitalization.

In addition to entering into the amended credit agreement and completing the
recapitalization with its bank lenders on April 29, 2002, other debt balances
outstanding to unsecured creditors were restructured from

                                        7
<PAGE>
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
        NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (continued)

$15.2 million to approximately $0.7 million, with cash payments of $1.6
million. Certain commercial liabilities, primarily accounts payable, which had a
carrying value of $3.0 million were also settled through cash payments of $1.0
million and notes payable of $0.3 million. Additional settlements were reached
on certain real estate lease obligations that will result in a reduction of $4.9
million of future lease commitments through cash payments of $0.5 million and
notes payable of $0.4 million. As part of the debt restructuring, the Company
divested itself of its ownership interest in eSatisfy.com. The Company recorded
a gain on the above for approximately $11.2 million.

As a result of these transactions, we recorded a gain on the extinguishment of
debt and restructuring of the above obligations for approximately $141.7
million.

During May 2002, J. Peter Pierce announced his resignation from the Company's
Board of Directors and as Chief Executive Officer of the Company and Christopher
Williams also announced his resignation from the Company's Board of Directors
and as Chief Operating Officer. In addition, during May 2002 Joe Nezi, Executive
Vice President of Sales announced his resignation from the Company and was later
replaced by William Pieper. In early June, Price Brannon, Executive Vice
President, Technology Services, resigned from the Company and was subsequently
replaced by James Wallace as Senior Vice President of Information Technology.

As a result of the recapitalization, the Company's Board of Directors is now
comprised of four individuals. They are: Kevin Flannery (Chairman of the Board),
Brad Scher, Eugene Davis, and Charles Sweet.

As a result of the resignations of Peter Pierce and Chris Williams, an Operating
Committee was created to run the day-to-day operations of the Company. This
Committee is comprised of five individuals of the Company's management. They
are: Kurt Dinkelacker - Executive Vice President and Chief Financial Officer,
Susan Parker - Executive Vice President of Customer Service, Glenn Smith -
Executive Vice President of Call Center Operations, William Pieper - Executive
Vice President of Sales, and James Wallace - Senior Vice President of
Information Technology. The Committee assists with developing and implementing
the strategic and tactical goals of the Company.

At September 30, 2002, the Company had a stockholders' deficit of $17.0 million,
and reported net income of approximately $131.1 million during the first nine
months of 2002. The amended agreement requires compliance with stipulated
covenants, including EBITDA, fixed charge, and capital expenditures, which was
based on the Company's updated business plan for 2002. During the second quarter
of 2002, the Company failed to meet the financial covenant terms of the Amended
and Restated Credit Agreement dated April 29, 2002. The Company obtained a
limited waiver from the bank group for the non-compliance with EBITDA and fixed
charge coverage covenant for the second quarter. The Company also obtained an
amendment from the bank group to modify future quarterly covenants. Management
believes based on the revised forecast levels that these covenants are
attainable.

Management believes that the restructuring of its bank debt and other
liabilities that occurred on April 29, 2002, together with existing working
capital and projected results for 2002, should enable the Company to generate
sufficient cash flow to meet its operating cash needs, fund required capital
expenditures, and satisfy its debt service and other financing requirements. As
a result of continuing customer losses and a declining revenue base, the Company
implemented a significant cost reduction plan in January 2002. This plan
included the reduction of corporate overhead and the closure of five additional
contact centers. As of September 30, 2002, the Company estimates that it will
save over $15 million in connection with this plan for 2002. On an annualized
basis, this plan will reduce fixed expenses by approximately $19 million.

                                        8
<PAGE>
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
        NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (continued)

Subsequent to the January plan, the Company instituted additional cost
reductions in March to include the reduction of additional corporate overhead
and the closure of one additional contact center. The Company estimates these
savings will total $1.5 million in 2002 and $2.5 million annually thereafter.
The impact of these reductions was first realized in June 2002.

The Company does not have a line of credit or other short-term borrowing
facility available. In addition, covenants in its amended credit agreement
restrict the Company's ability to pledge assets as collateral for other
borrowings.

The Company's 2002 operating plan assumes a stabilization of the Company's
revenue base and an improvement in operating profit margins from historical
levels. The Company's ability to meet its obligations in the ordinary course of
business is dependent upon successful implementation of its operating plan and
stabilization of its operations. Uncertainties exist with respect to
management's plans, because events and circumstances frequently do not occur as
expected, and those differences may be material. These uncertainties raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.

3. NEW ACCOUNTING PRONOUNCEMENTS:

In June 2001, Statement of Financial Accounting Standards No. 141, "Business
Combinations" (SFAS No. 141), and Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets" (SFAS No. 142), were issued.
These standards change the accounting principles governing business
combinations, goodwill and other intangible assets by, among other things,
requiring the use of the purchase method in accounting for business combinations
and eliminating the requirement to amortize goodwill.  Instead, SFAS No. 142
establishes a method to test for impairment of goodwill on at least an annual
basis.  These standards became effective for the Company beginning in the first
quarter of 2002.  The effect of adopting SFAS 142 was not material to the
Company's financial statements.

In August 2001, the FASB issued SFAS 143, Accounting for Asset Retirement
Obligations. SFAS 143 applies to all entities, including rate-regulated
entities, which have legal obligations associated with the retirement of a
tangible long-lived asset that result from acquisition, construction or
development and (or) normal operations of the long-lived asset. The application
of this Statement is not limited to certain specialized industries, such as the
extractive or nuclear industries. A liability for an asset retirement obligation
should be recognized if the obligation meets the definition of a liability and
can be reasonably estimated. The initial recording should be at fair value. SFAS
143 is effective for financial statements issued for fiscal years beginning
after June 15, 2002, with earlier application encouraged. The provisions of the
Statement are not expected to have a material impact on the financial condition
or results of operations of the Company.

In August 2001, the FASB issued SFAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS 144 retains the existing requirements to
recognize and measure the impairment of long-lived assets to be held and used or
to be disposed of by sale. However, SFAS 144 makes changes to the scope and
certain measurement requirements of existing accounting guidance. SFAS 144 also
changes the requirements relating to reporting the effects of a disposal or
discontinuation of a segment of a business. SFAS 144 is effective for financial
statements issued for fiscal years beginning after December 15, 2001 and

                                        9
<PAGE>
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
        NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (continued)

interim periods within those fiscal years. The adoption of this Statement did
not have a significant impact on the financial condition or results of
operations of the Company.

In April 2002, Statement of Financial Accounting Standards No. 145, "Rescission
of FASB Statements No. 4, 44 and 64, Amendment of FASB No. 13, and Technical
Corrections" (SFAS No. 145) was issued. This standard changes the accounting
principles governing extraordinary items by, among other things, providing more
definitive criteria for extraordinary items by clarifying and, to some extent,
modifying the existing definition and criteria, specifying disclosure for
extraordinary items and specifying disclosure requirements for other unusual or
infrequently occurring events and transactions that are not extraordinary items.
SFAS 145 is effective for financial statements issued for fiscal years beginning
after June 15, 2002, with early adoption encouraged. The Company has chosen to
early adopt the provisions of this statement, and has classified its gain on
extinguishments of debt in accordance with SFAS 145, and has reclassified prior
period balances to comply with the new standard.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities" (SFAS 146). SFAS 146 requires companies to
recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
SFAS 146 is effective prospectively for exit and disposal activities initiated
after December 31, 2002. As the provisions of SFAS 146 are to be applied
prospectively after adoption date, the Company cannot determine the potential
effects that the adoption of SFAS 146 will have on its consolidated financial
statements.

4. INCOME PER SHARE:

Basic income per share does not assume dilution and is computed by dividing net
income/(loss) applicable to common shareholders, by the weighted average number
of shares of common stock outstanding for the period. Diluted income per share
reflects the effects of common shares issuable upon the conversion of preferred
stock and the exercise of stock options and warrants, but only if the effect is
dilutive. The following table provides a reconciliation of net income available
for common shareholders:

                                       10
<PAGE>
                 TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
       NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (continued)

<TABLE>
<CAPTION>
                                                For the Quarter Ended September 30, 2002
                                            -------------------------------------------------
                                               Income             Shares          Per share
                                            (Numerator)       (denominator)         amount
                                            -------------   -----------------   -------------
<S>                                         <C>             <C>                 <C>
Net Income                                     $  2,249               -                  -

Less: Preferred Stock Dividends                    (999)              -                  -
                                               --------         -------             ------
BASIC EPS

Net Income available to common
  shareholders                                    1,250         192,068             $ 0.01
                                                                                    ======

EFFECT OF DILUTIVE SECURITIES
Convertible preferred stock                           -         584,614
                                               --------         -------

DILUTED EPS

Income available to common stockholders
  and assumed conversions                      $  1,250         776,682             $ 0.00
                                               ========         =======             ======
</TABLE>

<TABLE>
<CAPTION>
                                                For the Nine Months Ended September 30, 2002
                                            ----------------------------------------------------
                                              Income               Shares            Per share
                                            (Numerator)         (denominator)          amount
                                            -------------    ------------------   --------------
<S>                                         <C>              <C>                  <C>
Net Income                                      131,148                     -               -

Less: Preferred Stock Dividends                  (1,665)                    -               -
                                                -------               -------          ------
BASIC EPS

Net Income available to common
  shareholders                                  129,483               121,531          $ 1.07
                                                                                       ======

EFFECT OF DILUTIVE SECURITIES
Convertible preferred stock                           -               325,800
                                                -------               -------

DILUTED EPS

Income available to common stockholders
  and assumed conversions                       129,483               447,331          $ 0.29
                                                =======               =======          ======
</TABLE>

<TABLE>
<CAPTION>
                                                   For the Quarter Ended September 30, 2001
                                            --------------------------------------------------
                                               Income             Shares          Per share
                                            (Numerator)       (denominator)         amount
                                            -------------   -----------------   --------------
<S>                                         <C>             <C>                 <C>
Net Income                                     $ (9,156)                   -                 -

Less: Preferred Stock Dividends                       -                    -                 -
                                               --------               ------           -------

BASIC EPS

Net Income available to common
  shareholders                                   (9,156)              32,714           $ (0.28)
                                                                                       =======

EFFECT OF DILUTIVE SECURITIES
Convertible preferred stock                           -                    -
                                               --------               ------

DILUTED EPS

Income available to common stockholders
  and assumed conversions                      $ (9,156)              32,714           $ (0.28)
                                               ========               ======           =======
</TABLE>

<TABLE>
<CAPTION>
                                                 For the Nine Months Ended September 30, 2001
                                            ----------------------------------------------------
                                              Income               Shares            Per share
                                            (Numerator)         (denominator)          amount
                                            -------------    ------------------   --------------
<S>                                         <C>              <C>                  <C>
Net Income                                      (43,917)                   -                 -

Less: Preferred Stock Dividends                       -                    -                 -
                                                -------               ------           -------
BASIC EPS

Net Income available to common
  shareholders                                  (43,917)              32,105           $ (1.37)
                                                                                       =======

EFFECT OF DILUTIVE SECURITIES
Convertible preferred stock                           -                    -
                                                -------               ------

DILUTED EPS

Income available to common stockholders
  and assumed conversions                       (43,917)              32,105           $ (1.37)
                                                =======               ======           =======
</TABLE>

                                       11
<PAGE>
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
        NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (continued)

5. RESTRUCTURING CHARGES AND OTHER:

As part of its continuing analysis of the Company's operational strategies, the
Board of Directors of the Company approved a restructuring plan designed to
streamline operations, enhance results of operations and improve cash flow by
closing underutilized customer contact centers and reducing overhead costs. As a
result, the Company recorded pre-tax charges totaling $17.8 million through
December 31, 2001 for costs associated with exiting certain facilities,
terminating employees and recognizing related asset impairments. During the
first nine months of 2002, the Company expanded the restructuring to include the
closure or consolidation of additional facilities and identification of
additional workforce reductions. As a result, the Company recorded a pre-tax
charge of $1.6 million during the period. The following summarizes the costs and
liabilities associated with the Company's restructuring plan through June 30,
2002 and September 30, 2002(in thousands):

<TABLE>
<CAPTION>
                                        Balance as of                                              Balance as of
                                        December 31,        Additional                               June 30,
                                            2001              Charge       a      Payments             2002
                                       ---------------    ----------------     ----------------   ----------------
<S>                                    <C>                <C>                  <C>                <C>
Obligations assumed on
    closed leased facilities, net          $    5,514          $    1,341            $    (795)        $    6,060

Severance and employee
    related costs                                 479               1,568               (1,045)             1,002

Other                                             518                 500                 (383)               635
                                           -----------         ----------            ---------         ----------

Total Restructuring Accrual                $     6,511         $    3,409            $  (2,223)        $    7,697
                                           ===========         ==========            =========         ==========
</TABLE>

<TABLE>
<CAPTION>
                                        Balance as of                                              Balance as of
                                          June 30,          Additional                             September 30,
                                            2002              Charge       a      Payments             2002
                                       ----------------   ----------------     ----------------   ----------------
<S>                                    <C>                <C>                  <C>                <C>
Obligations assumed on
    closed leased facilities, net          $     6,060         $   (3,461)           $    (103)        $    2,496

Severance and employee
    related costs                                1,002                319                 (593)               728

Other                                              635                 92                 (154)               573
                                           -----------         ----------            ---------         ----------

Total Restructuring Accrual                $     7,697         $   (3,050)           $    (850)        $    3,797
                                           ===========         ==========            =========         ==========
</TABLE>

a - The increase in obligations assumed on closed leased facilities does not
include approximately $1,899,000 of additional write-offs for abandoned
leasehold items and restructured settlements that were included in the
restructuring charge in the accompanying income statement.

                                       12
<PAGE>
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
        NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (continued)

Accrued liabilities for closed facilities of $2.5 million as of September 30,
2002 relate to leased customer contact center locations that have been closed in
connection with the Company's restructuring plans. The amount is computed as the
remaining contractual obligation and associated restructuring charges in each
closed center, net of estimated income from subletting. On April 29, 2002 and as
part of the restructuring of the debt, the Company reduced the remaining
contractual obligation by $4.1 million through negotiated settlements with
certain real estate leases. Further, during August 2002 the Company successfully
negotiated a settlement on a closed center lease obligation. This settlement
reduces future restructuring liabilities by approximately $3.6 million, with a
settlement payment of $0.2 million.

Employee separation costs relate to both administrative personnel at the closed
customer contact centers and corporate personnel, affecting all functional
areas. Approximately 282 employees have been separated in 2002. The accrual of
$0.7 million as of September 30, 2002 relates to ongoing severance payments in
accordance with the severance obligations for these employees.

6. SEGMENTS:

As part of the debt restructuring, the Company divested itself of its ownership
interest in eSatisfy.com and accordingly is only reporting the segment for
comparative purposes.

During 2001 and for the first three months of 2002, the Company classified its
operations into two segments: Teleservices and eSatisfy. These two operating
segments were managed separately because each operating segment represented a
strategic business unit that offered different services. The business segments
are described in further detail below. Segment assets include amounts
specifically with the Teleservices and eSatisfy segments. Corporate assets
consist primarily of property and equipment.

The Teleservices segment provides business-to-consumer and business-to-business
telemarketing services, which are primarily direct sales initiated by the
Company on behalf of its clients, as well as customer service expertise to
clients. The Company's customer service expertise includes the more traditional
inbound services of customer care support, typically through toll-free numbers,
for activities such as responses to clients' customer service inquires,
catalogue sales and electronic order processing and consulting services to a
wide range of clients.

The eSatisfy segment performed baseline and tracking customer satisfaction
surveys for both Internet and traditional companies.

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

                                       13
<PAGE>
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
        NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (continued)

  Business segment information is as follows (in thousands):

<TABLE>
<CAPTION>
                                                  Three Months Ended                     Nine Months Ended
                                                    September 30,                          September 30,
                                         -----------------------------------    -----------------------------------
                                               2002               2001               2002                2001
                                         ----------------    ---------------    ----------------    ---------------
<S>                                      <C>                 <C>                <C>                 <C>
Revenues:
   Teleservices                           $     24,958        $     51,193       $     85,692        $     168,618
   e-Satisfy                                         -               1,156                  -                4,069
                                          ------------        ------------       ------------        -------------

          Total                               $ 24,958        $     52,349       $     85,692        $     172,687
                                          ============        ============       ============        =============

Operating income/(loss):
   Teleservices                           $      5,767        $      8,316       $     15,368        $      32,062
   e-Satisfy                                         -                (139)                 -                 (230)
   Corporate                                    (3,477)            (12,710)           (21,660)             (39,734)
                                          ------------        ------------       ------------        -------------

          Total                           $      2,290        $     (4,533)     $      (6,292)      $       (7,902)
                                          ============        ============      =============       ==============
</TABLE>

<TABLE>
<CAPTION>
                                                               September           December
                                                                30, 2002           31, 2001
                                                             ---------------    ----------------
<S>                                                          <C>                <C>
Total assets:
   Teleservices                                                $     24,472       $      38,086
   e-Satisfy                                                              -               1,913
   Corporate                                                         12,037              16,660
                                                               ------------       -------------

          Total                                                $     36,509       $      56,659
                                                               ------------       -------------
</TABLE>

Information About Major Customers

The following table summarizes those customers with revenues in excess of 10% of
total revenue for the three months ended September 30, 2002 and 2001 and the
nine months ended September 30, 2002 and 2001:

<TABLE>
<CAPTION>
                     Three Months Ended              Nine Months Ended
                       September 30,                   September 30,
               ---------------------------------------------------------------
                   2002            2001              2002           2001
                   ----            ----              ----           ----
<S>               <C>             <C>               <C>            <C>
Customer 1        18.45%          16.4%             22.55%         14.3%
Customer 2            -%          14.7%                 -%         12.2%
Customer 3        16.62%             -%                 -%            -%
Customer 4        13.77%             -%             12.54%            -%
Customer 5        12.32%             -%             11.59%            -%
</TABLE>

                                       14
<PAGE>
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
        NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (continued)

7. SUBSEQUENT EVENT:

None


                                       15
<PAGE>
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
        FINANCIAL CONDITION

We have made forward-looking statements in this Form 10-Q including the
information concerning possible or assumed future results of our operations, and
such statements include those preceded by, followed by or that include words
such as "anticipates," "believes," "expects," "intends" or similar expressions.
For those forward-looking statements, we claim the protection of the safe harbor
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, could affect our future results and could cause
those results to differ materially from those expressed in our forward-looking
statements:

-    our overall financial condition, which has made it difficult for us to
     retain clients;

-    the effects of the change of control as a result of the recapitalization
     described herein;

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

-    our results of operations being 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 business 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 business causing our stock
     price to be volatile.

CRITICAL ACCOUNTING POLICIES

Our condensed consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
that require 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 net revenues and expenses during the reporting period. Actual results could
differ from those estimates.

Our significant accounting policies are described in Note 3 to our consolidated
financial statements in Form 10-K for the fiscal year ended December 31, 2001.
We believe that the following discussion addresses our critical accounting
policies, which are those that are most important to the portrayal of our
financial condition and results and require management's most difficult,
subjective and complex judgments, often as a result of the need to make
estimates about the effect of matters that are inherently uncertain.

Revenue recognition

Our revenue recognition policy is significant because our revenue is a key
component of our results of operations. Our revenue recognition policies are in
accordance with the SEC's Staff Accounting Bulletin No. 101 (SAB 101). The
Company recognizes revenues on Outbound Teleservices programs as services are
performed, generally based on hours incurred. For certain of these programs,
revenues are reduced for estimated customer cancellations. In addition, the
Company defers certain up-front fees that are received from its customers and
related costs and recognizes the up-front fees, net of costs, over the term of
the applicable contract.

                                       16
<PAGE>
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Restructuring Charges

As discussed in note 5, we have recorded significant restructuring charges in
connection with the closure of underutilized customer contact centers and the
reduction of overhead costs which were initiated in prior years and continued
through the end of this quarter. For the three months ended September 30, 2002,
we revised our estimates and expectations based on successfully restructuring
some of these obligations. Each reporting period we review these estimates and,
to the extent our assumptions change, the restructuring expenses could vary
significantly from current estimates.

EXTINGUISHMENT OF DEBT AND OTHER RESTRUCTURING

On April 29, 2002, the Company entered into an agreement with its bank lenders
that resulted in a recapitalization of its balance sheet and a reduction of its
debt. As a result of the recapitalization, the amounts due under its existing
credit facilities totaling approximately $162.2 million at the time of
recapitalization, which consisted of outstanding debt, accrued interest and
fees, were converted into (a) a three-year term facility of $25 million (face
amount) under an amended and restated credit agreement, (b) $40 million (stated
value) of the Company's Series A Preferred Stock, and (c) shares of the
Company's Series B Convertible Preferred Stock which will convert into common
stock representing 95% of the Company's common outstanding after such
conversion. The three year term facility is secured by, among other things, the
Company's assets and outstanding trade receivables, bears interest at a base
rate as defined in the agreement plus 400 basis points, and matures in May 2005.
Under the terms of the Agreement, the Company is required to meet certain
financial covenants, including a fixed charge coverage ratio and Earnings Before
Interest Taxes, Depreciation, and Amortization (EBITDA) targets. The Series A
Preferred Stock has a 10% annual dividend rate, which accrues and is payable
either in cash or in additional shares of Series A Preferred Stock.
Approximately 18,903 shares of the Series B Convertible Preferred Stock were
converted into 155,435,035 shares of the Company's common stock immediately
after the closing of the recapitalization, and the remainder will convert into
shares of common stock as soon as the Company amends its Certificate of
Incorporation to increase the authorized number of shares of common stock. Such
amendment requires approval of the Company's shareholders.

In accordance with Statement of Financial Accounting Standard No. 15,
"Accounting by Debtors and Creditors for Troubled Debt Restructurings" (SFAS No.
15), the Company accounted for the effects of the restructuring prospectively,
recording the carrying amount of the new term facility at approximately $31.6
million, which included approximately $6.6 million of future amounts that would
otherwise be designated as interest at April 29, 2002. At September 30, 2002 the
term facility approximated $30.5 million, which includes approximately $5.5
million of future amounts that would otherwise be designated as interest. For
future financial statement purposes, the effective interest rate of this
facility is 0%. In addition, the amount of the gain, in part, was determined
based on an independent appraisal of the fair value of the Series A and Series B
Preferred Stock issued in connection with the recapitalization.

In addition to entering into the amended credit agreement and completing the
recapitalization with its bank lenders on April 29, 2002, other debt balances
outstanding to unsecured creditors were restructured from $15.2 million to
approximately $0.7 million, with cash payments of $1.6 million. Certain
commercial liabilities, primarily accounts payable, which had a carrying value
of $3.0 million were also settled through cash payments of $1.0 million and
notes payable of $0.3 million. Additional settlements were reached on certain
real estate lease obligations that will result in a reduction of $4.9 million of
future lease commitments through cash payments of $0.5 million and notes payable
of $0.4 million. As part of the debt restructuring, the Company divested itself
of its ownership interest in eSatisfy.com. The Company recorded a gain on the
above for approximately $11.2 million.

                                       17
<PAGE>
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

As a result of these transactions, we recorded a gain on the extinguishment of
debt and restructuring of the above obligations for approximately $141.7
million.

During May 2002, J. Peter Pierce announced his resignation from the Company's
Board of Directors and as Chief Executive Officer of the Company and Christopher
Williams also announced his resignation from the Company's Board of Directors
and as Chief Operating Officer. In addition, during May 2002 Joe Nezi, Executive
Vice President of Sales announced his resignation from the Company and was later
replaced by William Pieper. In early June, Price Brannon, Executive Vice
President, Technology Services, resigned from the Company and was subsequently
replaced by James Wallace as Senior Vice President of Information Technology.

As a result of the recapitalization, the Company's Board of Directors is now
comprised of four individuals. They are: Kevin Flannery (Chairman of the Board),
Brad Scher, Eugene Davis, and Charles Sweet.

As a result of the resignations of Peter Pierce and Chris Williams, an Operating
Committee was created to run the day-to-day operations of the Company. This
Committee is comprised of five individuals of the Company's management. They
are: Kurt Dinkelacker - Executive Vice President and Chief Financial Officer,
Susan Parker - Executive Vice President of Customer Service, Glenn Smith -
Executive Vice President of Call Center Operations, William Pieper - Executive
Vice President of Sales, and James Wallace - Senior Vice President of
Information Technology. The Committee assists with developing and implementing
the strategic and tactical goals of the Company.

At September 30, 2002, the Company had a stockholders' deficit of $17.0 million,
and reported net income of approximately $131.1 million during the first nine
months of 2002. The amended agreement requires compliance with stipulated
covenants, including EBITDA, fixed charge, and capital expenditures, which was
based on the Company's updated business plan for 2002. During the second quarter
of 2002, the Company failed to meet the financial covenant terms of the Amended
and Restated Credit Agreement dated April 29, 2002. The Company obtained a
limited waiver from the bank group for the non-compliance with EBITDA and fixed
charge coverage covenant for the second quarter. The Company also obtained an
amendment from the bank group to modify future quarterly covenants. Management
believes based on the revised forecast levels that these covenants are
attainable.

Management believes that the restructuring of its bank debt and other
liabilities that occurred on April 29, 2002, together with existing working
capital and projected results for 2002, should enable the Company to generate
sufficient cash flow to meet its operating cash needs, fund required capital
expenditures, and satisfy its debt service and other financing requirements. As
a result of continuing customer losses and a declining revenue base, the Company
implemented a significant cost reduction plan in January 2002. This plan
included the reduction of corporate overhead and the closure of five additional
contact centers. As of September 30, 2002, the Company estimates that it will
save over $15 million in connection with this plan for 2002. On an annualized
basis, this plan will reduce fixed expenses by approximately $19 million.
Subsequent to the January plan, the Company instituted additional cost
reductions in March to include the reduction of additional corporate overhead
and the closure of one additional contact center. The Company estimates these
savings will total $1.5 million in 2002 and $2.5 million annually thereafter.
The impact of these reductions was first realized in June 2002.

                                       18
<PAGE>
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Company does not have a line of credit or other short-term borrowing
facility available. In addition, covenants in its amended credit agreement
restrict the Company's ability to pledge assets as collateral for other
borrowings.

The Company's 2002 operating plan assumes a stabilization of the Company's
revenue base and an improvement in operating profit margins from historical
levels. The Company's ability to meet its obligations in the ordinary course of
business is dependent upon successful implementation of its operating plan and
stabilization of its operations. Uncertainties exist with respect to
management's plans, because events and circumstances frequently do not occur as
expected, and those differences may be material. These uncertainties raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.

                                       19
<PAGE>
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

RESULTS OF OPERATIONS

The following discussions should be read in connection with the Condensed
Consolidated Financial Statements contained elsewhere within this report. A
comparison of the results of operations follows:

For the three months ended September 30, 2002 and 2001

<TABLE>
<CAPTION>
                                                                   Results of Operations
                                                                   (Dollars in Millions)
                                          ----------------------------------------------------------------------------
                                           Three Months            As a             Three Months             As a
                                               Ended            Percentage             Ended              Percentage
                                           September 30,            of             September 30,              of
                                               2002              Revenues               2001               Revenues
                                          ----------------    ---------------    -------------------   ---------------
<S>                                       <C>                 <C>                <C>                   <C>
Revenues:
   Teleservices                                $     25.0              100.0 %          $ 51.2                97.7 %
   e-Satisfy.com                                        -                  - %             1.2                 2.3 %
                                               ----------         ----------        ----------          ----------
Total revenue                                        25.0              100.0 %            52.4               100.0 %

Cost of services:
   Teleservices                                      19.2               76.8 %            41.9                81.8 %
   e-Satisfy.com                                        -                  - %             0.5                41.7 %
                                               ----------         ----------        ----------          ----------
Total cost of services                               19.2               76.8 %            42.4                80.9 %

Selling, general and administrative                   5.4               21.6 %            12.0                22.9 %
Restructuring charge (credit)                        (1.9)              (7.6)%             2.5                 4.8 %
                                               ----------         ----------        ----------          ----------
Total operating expenses                             22.7               90.8 %            56.9               105.7 %
                                               ----------         ----------        ----------          ----------

Operating income                                      2.3                9.2 %            (4.5)               (8.6)%

Gain/(loss) on extinguishment of debt                   -                  - %               -                   - %

Interest expense, net                                 0.1                0.4 %             4.6                 8.8 %
                                               ----------         ----------        ----------          ----------

Income/(loss) before taxes                            2.2                8.8 %            (9.1)              (17.4)%

Income taxes                                            -                  - %               -                   - %
                                               ----------         ----------        ----------          ----------

Net income/(loss)                              $      2.2                8.8 %      $     (9.1)              (17.4)%
                                               ==========         ==========        ==========          ==========
</TABLE>

Revenues

Total revenues for the three months ended September 30, 2002 were $25.0 million,
representing a $27.4 million or 52.3% decrease in comparison to the prior year
total of $52.4 million. The decrease in revenue resulted from a decrease in
production volumes, the economic environment in 2001 and 2002 and customer
revenue erosion as a result of the Company's financial condition.

                                       20
<PAGE>
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Cost of Services

Cost of services for the three months ended September 30, 2002 was $19.2
million, representing a $23.2 million or 54.7% decrease in comparison to the
prior year total of $42.4 million. As a percentage of total revenues, cost of
services decreased to 76.8% during the third quarter of 2002 from 80.9% during
the third quarter of 2001. The decrease in cost of services as a percentage of
revenue can be attributed to better efficiency in staff capacity utilization and
the company's cost reduction plans.

Selling, General and Administrative

Selling, general and administrative expenses were $5.4 million for the three
months ended September 30, 2002, representing a $6.6 million or 55.0% decrease
from the $12.0 million total recorded during the same period last year. The
decrease in expense is a result of several cost reductions aimed at lowering the
Company's overhead structure.

Restructuring Charge

During the three months ended September 30, 2002, the Company expanded the
restructuring program initiated during 2001 to include the closure or
consolidation of additional facilities and identification of additional
employees for separation. In addition, the Company recorded reductions in
amounts previously accrued in prior quarters for restructured settlements on
leased facilities. This reversal approximated $3.6 million for the three months.
As a result, the Company recorded a pre-tax credit of $1.9 million during the
third quarter. (See Note 5 to the Condensed Consolidated Financial Statements
included elsewhere in this report.)

Interest Expense, net

The Company incurred net interest expense of $0.1 million for the three months
ended September 30, 2002, a decrease of $4.5 million in comparison to interest
expense during the same period last year. Interest in the prior period was
significantly higher due to increased debt levels and fees incurred as a result
of the Company's default on its credit agreement.

                                       21
<PAGE>
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

For the Nine months ended September 30, 2002 and 2001

<TABLE>
<CAPTION>
                                                                   Results of Operations
                                                                   (Dollars in Millions)
                                          -----------------------------------------------------------------------------
                                            Nine Months            As a             Nine Months              As a
                                               Ended            Percentage             Ended              Percentage
                                           September 30,            of             September 30,              of
                                               2002              Revenues               2001               Revenues
                                          ----------------    ---------------    -------------------   ----------------
<S>                                       <C>                 <C>                <C>                   <C>
Revenues:
   Teleservices                                $     85.7              100.0 %           $    168.6                97.6 %
   e-Satisfy.com                                        -                  - %                  4.1                 2.4 %
                                               ----------         ----------             ----------          ----------
Total revenue                                        85.7              100.0 %                172.7               100.0 %

Cost of services:
   Teleservices                                      70.3               82.0 %                132.3                78.5 %
   e-Satisfy.com                                        -                  - %                  1.4                34.1 %
                                               ----------         ----------             ----------          ----------
Total cost of services                               70.3               82.0 %                133.7                77.4 %

Selling, general and administrative                  19.4               22.6 %                 40.4                23.4 %
Restructuring charge                                  2.3                2.7 %                  6.5                 3.8 %
                                               ----------         ----------             ----------          ----------
Total operating expenses                             92.0              107.4 %                180.6               105.7 %
                                               ----------         ----------             ----------          ----------

Operating income/(loss)                              (6.3)              (7.4)%                 (7.9)               (4.6)%

Gain/(loss) on extinguishment of debt               141.6              165.2 %                (20.6)              (11.9)%

Interest expense, net                                 4.2                4.9 %                 15.4                 8.9 %
                                               ----------         ----------             ----------          ----------
Income/(loss) before taxes                          131.1              153.0 %                (43.9)              (25.4)%

Income taxes                                            -                  - %                    -                   - %
                                               ----------         ----------             ----------          ----------

Net income/(loss)                              $    131.1              153.0 %           $    (43.9)              (25.4)%
                                               ==========         ==========             ==========          ==========
</TABLE>

Revenues

Total revenues for the nine months ended September 30, 2002 were $85.7 million,
representing a $87.0 million or 50.4% decrease in comparison to the prior year
total of $172.7 million. The decrease in revenue resulted from a decrease in
production volumes, the economic environment in 2001 and 2002 and customer
revenue erosion as a result of the Company's financial condition.

Cost of Services

Cost of services for the nine months ended September 30, 2002 were $70.3
million, representing a $63.4 million or 47.4% decrease in comparison to the
prior year total of $133.7 million. As a percentage of total revenues, cost of
services increased to 82.0% during the third quarter of 2002 from 77.4% during
the third quarter of 2001. The increase in cost of services as a percentage of
revenue can be attributed to lower revenue per hour due to competitive pricing
pressures and lower utilization of call center capacity during early 2002.

                                       22
<PAGE>
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Selling, General and Administrative

Selling, general and administrative expenses was $19.4 million for the nine
months ended September 30, 2002, representing a $21.0 million or 52.0% decrease
from the $40.4 million total recorded during the same period last year. The
decrease in expense is a result of several cost reductions aimed at lowering the
Company's overhead structure.

Restructuring Charge

During the nine months ended September 30, 2002, the Company expanded the
restructuring program initiated during 2001 to include the closure or
consolidation of additional facilities and identification of additional
employees for separation. In addition, the Company recorded reductions in
amounts previously accrued in prior quarters for restructured settlements on
leased facilities. This reversal approximated $7.7 million for the nine months.
As a result, the Company recorded a pre-tax charge of $2.3 million through
September 30, 2002. (See Note 5 to the Condensed Consolidated Financial
Statements included elsewhere in this report.)

Interest Expense, net

The Company incurred net interest expense of $4.2 million for the nine months
ended September 30, 2002, a decrease of $11.2 million in comparison to interest
expense during the same period last year. Interest in the prior period was
significantly higher to due increased debt levels and fees incurred as a result
of the Company's prior default on its credit agreement.

Gain/(Loss) on Extinguishment of Debt

In connection with the April 29, 2002 Credit Agreement the Company entered into
with its bank lenders, the company recorded a gain on extinguishments of debt
and restructuring of $141.6 million. The restructuring also resulted in the
divestiture of its ownership interest in eSatisfy.com.

                                       23
<PAGE>
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

LIQUIDITY AND CAPITAL RESOURCES

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

<TABLE>
<CAPTION>
                            Nine Months Ended
                              September 30,
                         -----------------------
                           2002           2001
                         --------       --------
<S>                      <C>            <C>
Operating activities     $  4,369       $  3,363
Investing activities     $   (659)      $   (183)
Financing activities     $ (1,994)      $   (710)
</TABLE>

Nine Months Ended September 30, 2002

The Company's cash flows from operations resulted in a $4.4 million source of
cash, reflecting $131.1 million income for the period before $136.9 million in
non-cash charges and income items for depreciation, amortization, restructuring
charge, gain on extinguishment of debt and accrued interest.

The Company's cash flows from investing activities resulted from $0.7 million of
capital expenditures for property and equipment, primarily technology related.

The Company's cash flow from financing activities resulted in a use of $2.0
million payment of capital leases and other debt.

Nine Months Ended September 30, 2001

The Company's cash flows from operations provided $3.4 million of cash. The net
loss of $43.9 million for the period was impacted by $38.9 million in non-cash
charges for depreciation and amortization, the restructuring charge, the
provision for bad debts, and the extraordinary loss. Working capital during the
period resulted in an $8.4 million increase representing the net effect of the
changes in current assets and liabilities, primarily the reduction in accounts
receivable.

Cash used in investing activities reflects capital expenditures for property and
equipment, primarily technology related, net of proceeds from disposals.

Cash used in financing activities reflects the Company's net borrowing under its
credit facilities, net of repayments, and the third party costs associated with
the modifications to the Credit Agreement.

NEW DEVELOPMENTS

In addition to completing the restructuring and recapitalization transactions
described above, management has also developed and has begun to implement a plan
to improve the Company's operating margins, cash flows from operations and
liquidity position. Management's plan includes the following steps, among
others:

     -    Develop account management and business development initiatives in
          order to improve retention rates for existing customers and generate
          new revenue sources;

     -    Develop incentive compensation plans to provide incentives to key
          employees;

                                       24
<PAGE>
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

     -    Increase emphasis on winning and retaining higher-margin inbound
          contracts;

     -    Reduce the number of the Company's call centers; and

     -    Reduce expenses through employee attrition, planned headcount
          reductions and other non-salary cost reduction programs.

The Company believes that all of the above changes, together with existing
working capital and projected results for 2002, should enable it to generate
sufficient cash flow to meet its operating cash needs, fund required capital
expenditures and satisfy its debt service and other financing requirements.
However, the Company does not have a line of credit or other short-term
borrowing facility available. In addition, covenants in its amended credit
agreement restrict its ability to pledge assets as collateral for other
borrowings. The Company's 2002 operating plan assumes a stabilization of its
revenue base and an improvement in operating profit margins from historical
levels. The Company's ability to meet its obligations in the ordinary course of
business is dependent upon successful implementation of its operating plan and
stabilization of its operations. Uncertainties exist with respect to
management's plans because events and circumstances frequently do not occur as
expected, and those differences may be material. These uncertainties raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.

                                       25
<PAGE>
                  TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

As of September 30, 2002, the Company had approximately $25 million (face value)
outstanding under the term loan with our senior bank group. Interest on those
facilities was based on a floating interest rate, either the prime rate or
LIBOR. Based on the outstanding balance under the facilities at September 30,
2002, we would be required to pay an additional $0.3 million in interest
annually for every 1.0% increase in the average prime rate or LIBOR. To reduce
the risk associated with a large increase in interest rates, we placed two
derivative financial instruments known as interest rate caps each with notional
amounts of $29.5 million as of September 30, 2002. 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. Due to the current low interest rate environment, the
interest rate cap agreements currently have no recorded value. The interest rate
cap agreements expired on September 30, 2002. The three-month LIBOR interest
rate was approximately 1.806% at September 30, 2002.

Foreign Currency Risk

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

Approximately $13.5 million has been loaned to our Canadian subsidiary. The loan
proceeds have been converted to Canadian dollars. Under the terms of our credit
agreement, large principal payments due in 2002 may require conversion of all or
a portion of our Canadian dollar loan to U.S. dollars. An unfavorable change in
the Canadian dollar exchange rate at the time of the conversion could cause a
foreign currency exchange loss. At this time, we do not believe that such a
conversion would be required. The other foreign subsidiaries are limited in
their operations and the level of investment by the parent company so that risk
of foreign currency fluctuations is not expected to be material.

ITEM 4. CONTROLS AND PROCEDURES

Within the 90 days prior to the filing date of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's management, including the Company's Chairman of the Board and Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures pursuant to Rule 13a-15 of the Securities
Exchange Act of 1934. Based upon that evaluation, the Company's Chairman of the
Board and Chief Financial Officer concluded that the Company's disclosure
controls and procedures are effective. Disclosure controls and procedures are
controls and procedures that are designed to ensure that information required to
be disclosed in the Company reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms.

                                       26
<PAGE>
PART II - OTHER INFORMATION

  ITEM 1.   LEGAL PROCEEDINGS

            Telespectrum is involved in litigation from time to time in the
            ordinary course of its business. No material legal proceedings are
            pending to which TeleSpectrum is subject.

  ITEM 2.   CHANGES IN SECURITIES

            None

  ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

            See Management's Discussion and Analysis of the Condensed
            Consolidated Financial Statements included elsewhere in this report.

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

            None

  ITEM 5.   OTHER INFORMATION

            None

  ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

            (a)  EXHIBITS

<TABLE>
<CAPTION>
Exhibit No.      Description
-----------      -----------
<S>              <C>
10               Amended and Limited Waiver to Credit Agreement
                 dated as of September 19, 2002 (incorporated by
                 reference to Exhibit 10 of our Quarterly Report
                 on Form 10-Q for the quarter ended June 30,
                 2002).

99.1             Certification pursuant to 18 U.S.C Section
                 1350, as adopted Pursuant to Section 906 of the
                 Sarbanes-Oxley Act of 2002.

99.2             Certification pursuant to 18 U.S.C Section
                 1350, as adopted Pursuant to Section 906 of the
                 Sarbanes-Oxley Act of 2002.
</TABLE>

            (b)  FORM  8-K

                 On September 10, 2002, Telespectrum filed a Current Report on
                 Form 8-K under Item 4 announcing the termination of its
                 engagement of Arthur Andersen, LLP and the appointment of Grant
                 Thornton, LLP as its auditors.

                                       27
<PAGE>
                                   SIGNATURES

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

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

   Date: November 14, 2002        /s/  Kevin Flannery
                                 --------------------------------------------
                                                Kevin Flannery
                                           TeleSpectrum Worldwide Inc.
                                     Chairman of the Board & Acting Chief
                                               Executive Officer

   Date: November 14, 2002        /s/  Kurt Dinkelacker
                                 --------------------------------------------
                                                Kurt Dinkelacker
                                           TeleSpectrum Worldwide Inc.
                                             Chief Financial Officer

                                       28
<PAGE>
                                 CERTIFICATIONS

I, Kevin Flannery, certify that:

1. I have reviewed this quarterly report on Form 10-Q of TeleSpectrum Worldwide
Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

   a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

   b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

   c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

   a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

   b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 14, 2002         /s/ Kevin Flannery
                                --------------------------
                                Kevin Flannery
                                Chairman of the Board and Acting Chief Executive
                                Officer

                                       29
<PAGE>
I, Kurt Dinkelacker, certify that:

1. I have reviewed this quarterly report on Form 10-Q of TeleSpectrum Worldwide
Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

   a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

   b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

   c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

   a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

   b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 14, 2002         /s/ Kurt Dinkelacker
                                --------------------------
                                Kurt Dinkelacker
                                Chief Financial Officer

                                       30