Everyone has a pile of crayons like this. Even if you don't have kids, you probably have some old broken crayons lying around your house.
Try this: Take the crayons and cut off the labels with a craft knife or exacto knife, sorting them into color groups (this is a great part for the kids to do). Trust me, you want to sort them as you cut because the brown, black, blue, purple, and dark green all start to look a LOT alike without their papers.
This is where the fun begins!
Take a few pieces of crayons in whatever combination you want and put them in a baggie together. I found that three colors was about the max you could use, and contrasting colors do great together. You can also take a handful of greens, for example, and use them together.
Once your bag has about 5-6 pieces of crayon in it, find a piece of cardboard, put it on your table and whack the crayons into pieces. I used a hammer, but you could probably use a rolling pin, meat tenderizer, or some other device, too.
When the crayons are in small pieces, but not pulverized, open the bag and use your hands to scoop out the crumbs. Pour them into silicone mini baking cups. I used hearts and circles. You can put glitter in them at this point too, which obviously does nothing for the coloring aspect, but it does look fun!
Viola! Second chance crayons!