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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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


                                   FORM 10-K/A

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
              Act of 1934 For the fiscal year ended March 31, 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 Number 000-21465

                                TALX CORPORATION
             (Exact name of registrant as specified in its charter)

                MISSOURI                                        43-0988805
    (State or other jurisdiction of                          (I.R.S. Employer
     incorporation or organization)                         Identification No.)
    1850 BORMAN COURT, ST. LOUIS, MO                               63146
(Address of principal executive offices)                        (Zip Code)

                                 (314) 214-7000
              (Registrant's telephone number, Including area code)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                          COMMON STOCK, $.01 PAR VALUE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No

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

As of June 3, 2002, the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $234,000,000. For purpose of
this calculation only, without determining whether the following are affiliates
of the registrant, the registrant has assumed that (i) its directors and
executive officers are affiliates and (ii) entities controlled by such persons
are affiliates.

As of June 3, 2002 there were 13,909,714 shares of the registrant's Common Stock
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement for the registrant's 2002 Annual
Meeting of Stockholders, which definitive proxy statement was filed on July 22,
2002, are incorporated by reference into Part III of this Annual Report on
Form 10-K.

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                                EXPLANATORY NOTE

TALX Corporation is filing this Form 10-K/A for the fiscal year ended March 31,
2002 to reflect the restatement of its audited consolidated financial statements
for the fiscal year ended March 31, 2002 and 2001. See the consolidated
financial statements and Note 2 thereto included herein for a description of the
restatement, and related restatements of Notes 1, 6, 7, 10, 13 and 19. This Form
10-K/A also includes disclosures relating to material developments in the
matters discussed in Note 17 - Commitments and Contingencies and Note 19 -
Subsequent Events (unaudited) and descriptions of certain agreements and
businesses, which had been discussed in the original filing. See additional
changes in Items 1, 6, 7, 8 and 11. This Form 10-K/A does not attempt to modify
or update any other disclosures set forth in the original filing, except as
required to reflect the effects of the restatement. Any Items included in the
original Form 10-K that are not included herein are not amended and remain in
effect as of the date of the original filing thereof. Additionally, this Form
10-K/A does not purport to provide a general update or discussion of any other
developments at the Company subsequent to the original filing. The filing of
this Form 10-K/A shall not be deemed an admission that the original filing, when
made, included any untrue statement of material fact or omitted to state a
material fact necessary to make a statement not misleading.

                                     PART I

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-K contains forward-looking statements. In some cases, you can
identify forward-looking statements by terms such as "may," "will," "should,"
"could," "would," "expect," "plan," "anticipate," "believe," "estimate,"
"project," "predict," "potential" and similar expressions intended to identify
forward-looking statements. These statements reflect our current views with
respect to future events and are based on assumptions and subject to risks and
uncertainties. These risks, uncertainties and other factors may cause our actual
results, performances or achievements to be materially different from those
expressed or implied by our forward-looking statements. Our forward-looking
statements in this Form 10-K/A include, but are not limited to, statements
relating to:

         o        our business strategy;

         o        the market opportunity for our services and products,
                  including anticipated growth of our industry and expected
                  demand for our services and products;

         o        the anticipated benefits of the recent acquisitions;

         o        our estimates regarding our capital requirements and needs for
                  additional financing; and

         o        any of our other plans, objectives, expectations and
                  intentions contained in this Form 10-K that are not historical
                  facts.

Factors that may cause our actual results to differ materially from our
forward-looking statements include, among others, changes in general economic
and business conditions and the risks and other factors set forth in "Risk
Factors."

You should read this Form 10-K/A completely and with the understanding that our
actual results may be materially different from what we expect. We will not
update these forward-looking statements, even though our situation may change in
the future. We qualify all of our forward-looking statements by these cautionary
statements.

ITEM 1. BUSINESS

OVERVIEW

We are the leading provider of automated employment and income verification and
unemployment cost management services and a leader in providing outsourced
employee self-service applications. Our services enable mortgage lenders,
pre-employment screening companies, employers and other authorized users to
obtain employee human resources and payroll information. We also allow employees
to review and modify information in human resources, benefits and payroll
management information systems without requiring employer assistance. Further,
we provide unemployment insurance claims processing and unemployment tax
planning and management to a broad range of employers.

Our services and software use interactive web and interactive voice response
software, fax and other technologies and are designed to enhance service levels,
improve productivity and reduce costs by automating historically labor
intensive, paper-based processes and enabling users to perform self-service
transactions. We typically serve large organizations, including approximately
two-thirds


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of the Fortune 500 and a number of federal, state and local government agencies.

From the early 1980s until 1993 we offered our products and services exclusively
through licensed software specifically developed for each customer, and
installed at the customer's site. We refer to this as our "customer premises
systems" business. In 1993, we began to deliver benefits enrollment and other
human resource services on an outsourced basis, allowing clients to utilize
applications and services over public or private networks without incurring the
capital expenditures and maintenance responsibilities of operating such a system
in-house. We also host many of our clients' databases at our facilities. In
1995, we introduced The Work Number, our leading service for employment and
income verification. This service is supported by a database of employment
information that we have gathered from over 800 clients and, as of March 31,
2002, contained approximately 61 million employment records.

With the market's acceptance of our outsourced delivery method, in 1998, we
began to de-emphasize sales of customer premises systems, and in 2000
discontinued sales to new clients; however, we still have a base of clients for
whom we continue to provide maintenance and technical support services as well
as software and hardware upgrades.

See "Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations - Discontinued Operations" for information regarding the
divestitures of our database and document service businesses. See note 12 to the
financial statements included in this Form 10-K for financial information about
each of our segments for the last three fiscal years, which is incorporated by
reference herein.

As used in this Form 10-K, the terms "TALX," "we," "our," and "us" and other
similar terms refer to TALX Corporation, unless we specify otherwise.

TALX(R) is our registered trademark, and The Work Number For Everyone(R) and The
Work Number(R) are our registered service marks. TALXWare is our trademark and
UC eXpress, eChoice, ePayroll and W-2 eXpress are our service marks. All other
trade names, trademarks and product names in this Form 10-K are the property of
their respective owners.

We are incorporated under the laws of the state of Missouri. Our executive
offices are located at 1850 Borman Court, St. Louis, Missouri, 63146 and our
telephone number is (314) 214-7000.

Unless otherwise stated, all share and per share information in this Form 10-K
reflects all of our stock dividends and our stock split.

RECENT DEVELOPMENTS

We recently acquired three businesses. The first acquisition was of Ti3, Inc.
("Ti3"), an application service provider based in Plano, Texas, that provides
customized outsourcing solutions primarily for the staffing industry and, more
recently, for the home health care industry. Ti3 integrates interactive voice
response, fax and Internet technologies into its application services. Ti3's
primary application service allows employees to enter timecard information and
managers to approve time sheets automatically using the telephone or Internet.
Ti3 designs and develops its application services and provides consulting,
project management, demonstrations and prototypes. We believe the technologies
utilized and services provided by Ti3 are complementary to our services and we
intend to cross-sell Ti3's application services to our existing client base.

The other two acquisitions were of companies that provide unemployment cost
management services. These services include unemployment insurance claims
processing and unemployment tax management and planning to a broad range of
employers. We believe that these purchases will permit our core human resource
and payroll services business to expand to include unemployment cost management
services. We further believe the services provided by the acquired businesses
are complementary to our services and intend to cross-sell those services to our
existing client base. Since the date of the acquisitions, we have commenced an
integration strategy to consolidate the sales and customer service delivery.
Through transition teams, we are also reviewing best practices in various
operational areas. We intend to be on a single operating computer platform
within two years.

     TI3, INC.

Pursuant to an Agreement and Plan of Merger dated July 2, 2001, we completed our
acquisition of Ti3. As consideration for the acquisition, we paid the Ti3
shareholders approximately $50,000 in cash and issued to them 341,854 shares of
our common stock, for an estimated aggregate value of $11.8 million, based on
the then recent average trading prices for our common stock.


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Additionally, we incurred $655,000 of costs related to the transaction, which
were capitalized into goodwill. Of the shares issued, 34,187 were placed in a
one-year escrow to support indemnification obligations. We may make additional
payments in cash or shares of our common stock to Ti3 shareholders depending
upon Ti3's financial performance in the 12 months immediately after the closing
and utilization of Ti3's tax-loss carry-forwards during such period. The share
amounts discussed above do not include the effect of the 10% stock dividend
declared on September 6, 2001.

     UNEMPLOYMENT COST MANAGEMENT SERVICES BUSINESS OF GATES, MCDONALD & COMPANY

Pursuant to an asset purchase agreement, dated as of March 27, 2002, our
subsidiary, Garcia Acquisition Sub, Inc. ("Garcia"), purchased certain of the
assets and assumed certain of the liabilities of the unemployment cost
management services business (the "GM Unemployment Compensation Business") of
Gates, McDonald & Company, a subsidiary of Nationwide Mutual Insurance Company.
The GM Unemployment Compensation Business provides unemployment cost management
services to a broad range of employers.

The purchase price was $44.3 million, including transaction costs, and was paid
in cash, a portion of which was financed, as discussed below in Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources. The asset purchase agreement
provides for Gates, McDonald & Company to indemnify us for certain existing
liabilities and obligations of the business, subject to certain limitations. An
escrow account, to be maintained by a bank pursuant to the terms of an escrow
agreement, is also available for a fifteen-month period following the date of
the asset purchase agreement to satisfy the indemnification obligations of
Gates, McDonald & Company under the asset purchase agreement, subject to certain
limitations contained in the asset purchase agreement. For such purposes, $4.0
million of the purchase price was paid into the escrow account. The
indemnification obligations of Gates, McDonald & Company with respect to tax and
certain employee benefit matters terminate upon the expiration of the applicable
statutes of limitation, authorization and title indemnification obligations
terminate after two years and all other indemnification obligations terminate 15
months from the date of the asset purchase agreement. The parties executed
several ancillary agreements in connection with the asset purchase agreement in
order to provide for the orderly transition of the GM Unemployment Compensation
Business and the employees of such business from Gates, McDonald & Company to
us. These ancillary documents included a transition services agreement, an
intellectual property license agreement, a lease services agreement and an
employee services agreement.

     THE FRICK COMPANY

Additionally, pursuant to an acquisition agreement dated as of March 27, 2002,
we purchased all of the 257,200 issued and outstanding shares of common stock of
James E. Frick, Inc., d/b/a The Frick Company, a Missouri corporation ("Frick")
from the James E. Frick Profit Sharing and Employee Stock Ownership Plan (the
"ESOP"), and options to acquire 190,500 shares of Frick's common stock held by
the four principal optionholders. Frick provides unemployment cost control,
unemployment claims handling, tax planning and related services and employment
information verification services to a broad range of clients. Frick is now our
wholly owned subsidiary.

The total purchase price for the Frick acquisition was $79.7 million, including
transaction costs, which includes amounts allocable to offer to purchase
remaining options to purchase 29,000 shares held by key employee optionholders.
The purchase price was based on a value of $162.60 per share of common stock,
less in the case of an option, the exercise price and withholding and other
applicable taxes, plus up to $16.78 from the escrow, as described below. The
purchase price was paid in cash, a portion of which was financed, as discussed
below in Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources.

Subsequent to the closing, we purchased from the key employee optionholders the
remaining options to purchase 29,000 shares of Frick's common stock subject to
the same terms and conditions as, and for a price per share of underlying common
stock equal to that received by, the four principal optionholders under the
acquisition agreement. The terms of the acquisition agreement required the
sellers to enter into an escrow agreement with us. For such purpose, $8.0
million of the purchase price was deposited with a bank to be disbursed in
accordance with the escrow agreement. Of the escrow funds, $3.0 million is
available to satisfy our claims relating only to the tax and intellectual
property representations, warranties and covenants, and the remainder is
available to satisfy any type of indemnifiable claim under the acquisition
agreement. The sellers' indemnification obligations terminate, and the
undisputed escrow funds will be distributed on March 27, 2003. Except for claims
related to willful misrepresentation, our only remedy for indemnified losses is
against the escrow.


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SERVICES AND PRODUCTS

We provide services and systems that enable large corporations and government
agencies to outsource operations that would otherwise be performed by their own
human resources, benefits or payroll departments. Our software uses interactive
web and interactive voice response software and other technologies to enable
mortgage lenders, pre-employment screening companies, employees and other
authorized users to obtain employee human resources and payroll information, and
allows employees and their managers to review and modify information in the
human resources benefits and payroll management information systems on a
self-service basis. Our services and products fall within four general
categories: The Work Number services, unemployment cost management services,
human resources and benefits application services and customer premises systems,
including related maintenance and support.

     THE WORK NUMBER SERVICES

Responding to inquiries to verify employment and income information, printing
and distributing pay stubs and annual W-2 forms, and updating employee personal
records are burdensome and time-consuming tasks for employers and divert
resources from managing their businesses. The Work Number employment and income
verification service and other payroll application services supported by The
Work Number's database of employee records are designed to help employers save
time and effort and reduce expenses associated with many of the administrative
tasks required to support large workforces.

The Work Number. Mortgage lenders, pre-employment screeners, social service
agencies and other information verifiers often request organizations to verify
employment and income information that has been provided by employees or former
employees. For example, the Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation, leading purchasers of residential
mortgages in the United States, usually require independent verification of
employment and income data for the past two calendar years and a current payroll
period in connection with mortgages that they will purchase. In 1995, we
developed The Work Number as an outsourced service that enables employers to
reduce the costs and resources to respond to verification requests, while
empowering employees to control the release of personal information to third
parties.

When an employer receives a request for income and employment data regarding an
employee, the employer may direct the third-party verifier to our web site or to
a telephone number. Using the Internet or a toll-free telephone number,
verifiers who subscribe to our service can confirm the employee's employment
status and income for the past three years. Non-subscribing verifiers can
receive the same information through these methods using a credit card or
through a 1-900 telephone number. The Work Number is designed to ensure that
access to an employee's income data is available only to verifiers who have been
pre-authorized by the employee.

The Work Number can provide the following benefits to employers, employees and
third-party verifiers:

<Table>
<Caption>
                 EMPLOYERS                                    EMPLOYEES                                   VERIFIERS
                 ---------                                    ---------                                   ---------
<S>                                           <C>                                         <C>
 -  reduces costs and resources otherwise     -   provides control over third-party       -   decreases the opportunity for human
    spent responding to verification              access to personal compensation             error
    inquiries                                     information

 -  eases the administrative burden of        -   provides information without            -   reduces likelihood of fraud by the
    human resources and payroll staff             requiring the cooperation or                applicant by providing independent
                                                  knowledge of co-workers                     evidence directly to the verifier

 -  lowers the risk of liability resulting    -   expedites the verification process,     -   expedites the verification process,
    from providing erroneous or                   so that transactions may occur more         so that transactions may occur more
    unauthorized information to third             quickly                                     quickly
    parties
</Table>

We generate substantially all of The Work Number revenues from transaction-based
fees charged to mortgage lenders, pre-employment screeners, credit issuers and
other information verifiers for verification of income and employment
information. Revenue is recognized on these transaction-based fees in the period
that the transactions occur and are billed. We also generate revenues from
employer data conversion and ongoing maintenance fees, and record this revenue
on a monthly basis as billed. Lastly, we derive revenues from one-time up-front
setup fees. These fees are recognized as revenue on a straight-line basis over
the initial contract period, beginning with the date the client is live on our
system.


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As of March 31, 2002, The Work Number database contained approximately 61
million employee records and had contracts to receive over 9 million additional
records. The 61 million records on-line represent approximately 22 million
current and 39 million former employees of over 800 large employers, including
federal, state and local government agencies. The Work Number database is
updated on an ongoing basis as employers electronically transmit data directly
to us each payroll period. Employers typically contract to provide this data for
specified periods, generally three years.

W-2 eXpress. W-2 eXpress is a suite of services relating to the printing,
distribution and correction of W-2 wage and tax statement forms that we offer to
existing clients of The Work Number and other large employers. Using data
provided by employers, we distribute original W-2 forms to employees and provide
an automated process to enable employees to request corrections to their W-2
forms and obtain additional copies via the Internet or by telephone, instead of
requiring direct interaction with the employer's payroll staff.

For employers, the primary benefits of our W-2 eXpress services include:

         o        simplifying the task of generating thousands of W-2 statements
                  within a narrow time period each year;

         o        reducing staff and other resources that must be allocated to
                  the production and distribution of W-2 statements and the
                  reissuance of corrected statements; and

         o        automating the process for collecting correction requests.

The majority of W-2 eXpress clients are billed based upon the number of
employees, generally pursuant to multi-year contracts. Revenue is recognized on
a straight-line basis from the time the service is available to be used by TALX
clients through the end of the service period. Additionally, we have some
clients that are billed on a transactional basis. For these clients, we
recognize revenue on a monthly basis, as transactions occur.

ePayroll. ePayroll is another outsourcing service that we offer to existing
clients of The Work Number and other large employers. ePayroll is a suite of
payroll self-services applications that enable employees, via the Internet or by
telephone, to:

         o        receive pay statement information;

         o        access current and historical payroll information; and

         o        review and change direct deposit account information.

Employers that send us electronic transmissions of their employees' pay stubs
and direct deposit data can reduce the amount of staff required to process
routine employee payroll requests. Prior to the end of our fiscal year 2003, we
plan to introduce additional employee self-service functions, such as the
ability to complete and revise W-4 withholding allowance forms and to manage
personal information files.

We began offering ePayroll in November 2000, and our first clients began using
the service in August 2001. We charge ePayroll clients on a per-employee
per-month basis, plus an initial set-up fee, generally pursuant to multi-year
contracts. Revenue for the initial setup fees is recognized on a straight-line
basis over the initial contract period, beginning with the date the client is
live on our system. Per-employee per-month fees are recognized as revenue in the
months billed.

FasTime. FasTime services are integrated time capture and reporting solutions
that work from any phone or the Internet. For large employers, FasTime collects
hours worked and exception time codes providing a user-friendly online approval
and reporting for managers. FasTime is customized according to a company's
business rules and processes. For the temporary staffing industry, FasTime
provides a comprehensive, paperless system for time, expenses and availability,
including manager approvals and the reporting and management tools for branch
offices.

Fastime clients are billed for initial set up fees, monthly maintenance fees and
per transaction fees, generally pursuant to multi-year contracts. Revenue is
recognized on a straight-line basis from the time the service is available to be
used by our clients through the end of the service period for setup and
maintenance fees and as services are performed for transaction-based fees.


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     UNEMPLOYMENT COST MANAGEMENT

As a result of our recent acquisitions, we provide unemployment cost management
services under the name UC eXpressSM. UC eXpress is a complete suite of services
designed to reduce the cost of processing unemployment claims by human resource
departments and better manage the tax rate that employers are assessed for
unemployment taxes. UC eXpress utilizes document imaging and web access to speed
the processing of unemployment claims with the goal of uncovering inaccuracies
in claims that have been filed with the states by separated employees. UC
eXpress services are aimed at relieving HR departments of the administrative
burden of managing unemployment claims.

Following an employee separation, UC eXpress services respond to unemployment
claims on the behalf of our clients. This includes reviewing employment records
to preserve the clients' right as an employer. If an unemployment hearing is
required, UC eXpress services include client conferences with UC eXpress hearing
consultants/attorneys and, upon client request, attendance at the hearing with
the employer's representative. In addition, the UC eXpress field-based account
management team and hearing consultants bring state-specific unemployment tax
knowledge to the client.

UC eXpress also offers comprehensive employer tax services that encompass five
service areas:

         o        Unemployment tax services

         o        Employment tax research and recovery

         o        Unemployment tax planning

         o        Tax registrations

         o        Employment tax consulting (withholding and unemployment)

Clients who choose UC eXpress for tax services collaborate with a UC eXpress tax
analyst to monitor the clients' unemployment tax accounts, verify tax rates and
contribution reports, and identify voluntary contribution opportunities. Since
UC eXpress offers a choice of employer tax services, clients can take advantage
of the services that are most effective in reducing their employment tax costs.

We charge clients fees on an annual contractual basis, generally billed monthly
or quarterly, pursuant to multi-year contracts. Most contracts allow for
additional charges if transaction activity exceeds a certain threshold. Some
unemployment tax planning contracts call for contingent fees based upon actual
tax savings realized. Revenues from UC eXpress, are recognized in the period
that they are earned, evenly over the life of the contract. Transaction fees are
recorded as the services are provided. Revenue which is contingent upon
achieving certain performance criteria is recognized when those criteria are
met.

     HUMAN RESOURCES AND BENEFITS APPLICATION SERVICES

For many human resources departments, benefits enrollment is a burdensome
administrative task. Employees are generally permitted to enroll in or make
changes to many types of benefit plans only at particular times during the year.
As a result, during such enrollment periods, a considerable amount of human
resources and benefits department efforts are directed toward plan
administration. Processing employee changes to information recorded under
multiple providers' benefits plans can require the completion, verification and
handling of numerous paper-based forms. Many companies find it necessary to hire
temporary workers to manage the increased workload during these periods.

We offer our clients outsourcing solutions designed to reduce the resources and
expenses associated with enrolling employees and administering ongoing
participation in employee benefits programs. Our services include processing
enrollments, producing personalized worksheets and confirmations, and delivering
completed enrollments to employers and insurance carriers. We support both open
and ongoing enrollments year-round. To reach the growing number of Internet
users, our applications enable employees to complete enrollments via the
Internet, corporate portals and corporate intranets. For those employees who
prefer or need to use the telephone, options are available for processing
enrollments via interactive voice response.

Historically, we offered customer premises-based software systems that were
tailored to meet the needs of a particular employer. Since 1993, we have been
providing customized benefits enrollment services using the application service
provider model. In 2000,


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we introduced eChoice, our advanced benefits enrollment service combining the
most popular features of our various customized benefits enrollment offerings
that we can configure to meet each employer's particular needs.

We market eChoice to organizations employing at least 5,000 people. Through
eChoice, employees can enroll in an employer's medical, dental and other health
and welfare benefits programs and can make changes to their personal information
and benefits elections, all by means of the Internet or by telephone. eChoice
enables employers to remove many of the time-consuming aspects of administering
their benefits programs, while providing benefits managers with an automated
means of monitoring the enrollment process and performing certain plan
management functions. Additionally, eChoice allows employees to make enrollment
decisions privately and assures that their elections will not be subject to
human transcription error.

We generate revenues from eChoice by charging clients on a per-employee basis,
generally pursuant to multi-year contracts. We generate revenues from our other
human resources and benefits application services by charging clients an initial
set-up and development fee and monthly hosting and transactions fees, generally
pursuant to multi-year contracts. Revenue is primarily recognized on a
straight-line basis from the time the service is available to be used by our
clients through the end of the service period.

     CUSTOMER PREMISES SYSTEMS AND RELATED MAINTENANCE AND SUPPORT

From the early 1980s until 1993 we offered our products and services exclusively
through licensed software specifically developed for each customer, and
installed these systems at the customer's site. In 1993 we began to deliver
benefits enrollment services as an application services provider. In 1998 we
began to de-emphasize sales of customer premises systems, and in 2000 we
discontinued sales to new customers. We provide system enhancements to these
customers and customer support 7-days per week, 24-hours per day, through a
toll-free hotline, email and our website. We sold these systems under licenses
and generate additional revenues by providing ongoing maintenance and support.

SALES AND MARKETING

We employ a direct sales force in conjunction with strategic marketing
alliances. We use our direct sales force and strategic alliances to develop
relationships with large employers, typically having over 5,000 employees. In
addition, we use our strategic alliances to help us to identify potential
clients for The Work Number services among mid-sized employers, typically having
between 1,000 and 5,000 employees. In our unemployment cost management business,
our direct sales force sells to employers typically having over 1,000 employees.

     DIRECT SALES FORCE

Our sales and marketing effort has representatives located in 36 U.S. cities.
Our sales and marketing effort relies on a team approach consisting of
approximately 143 professionals, including business development representatives,
regional sales managers, product managers, account managers, product consultants
and marketing personnel. Our business development representatives qualify
companies as viable potential clients and establish appointments for our
regional sales managers. Our regional sales managers are responsible for
presenting our service offerings to prospective clients and negotiating for the
sale of our services. Our product managers oversee product direction and provide
sales assistance. Our account managers service existing clients and product
consultants provide technical assistance to regional sales managers and
prospective clients during the sales process. Our marketing personnel support
the sales force at all levels.

     STRATEGIC MARKETING ALLIANCES

We have established alliances with leading providers of related human resources
outsourcing services to build the database of records for The Work Number
services relating to employees of mid-sized employers and to increase our
eChoice client base. These alliances include:

         o        Hewitt Associates LLC: Hewitt Associates is a global
                  management consulting firm specializing in human resource
                  services that has agreed to make The Work Number available to
                  its clients. For example, The Work Number is directly
                  accessible by employees of Hewitt's clients via a link to our
                  website. In exchange, we have agreed, among other things, to
                  share revenue with Hewitt resulting from its referrals.

         o        Unifi Network, a division of PricewaterhouseCoopers: Unifi
                  Network provides integrated consulting and human resource


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                  services and has agreed to make available The Work Number to
                  its clients in exchange for a share of the revenue generated
                  by such activities.

         o        Ceridian Corporation: Ceridian is a national human resource
                  outsourcing company that has agreed to make The Work Number
                  and unemployment cost management services available to its
                  clients in exchange for a share of the revenue generated by
                  such activities.

         o        PeopleSoft, Inc.: PeopleSoft, a leading provider of enterprise
                  application software for use throughout large and mid-sized
                  organizations, has agreed to make The Work Number accessible
                  to users of certain of its Internet-based business
                  applications in exchange for a fixed fee and transaction-based
                  royalties.

These and other strategic marketing alliances such as Towers Perrin, Convergys
Corporation and Fringe Benefits Management Company are generally reflected by
non-exclusive contractual arrangements that remain in effect for specified
periods. The success of these alliances will generally depend on the interest
and commitment of these companies to promote and coordinate product development
and marketing efforts with us, which is entirely at their discretion. Some of
these companies maintain similar relationships with some of our competitors and
compete directly with us in certain applications.

COMPETITION

We believe the principal competitive factors in our markets include:

         o        service and product quality, reliability and performance;

         o        functionality and ease of use;

         o        company reputation for integrity and confidentiality;

         o        company financial strength; and

         o        cost of the service or product.

Our primary competitors relating to The Work Number services and unemployment
cost management services are Jon-Jay Associates and The Sheakley Group of
Companies, which are unemployment cost management companies that also offer
employment and income verification services, and Employers Unity, which offers
unemployment cost management services. Our human resources and benefits
application services business competes with benefits consulting firms, including
Towers Perrin LLP and Watson Wyatt & Company, which provide comprehensive
packages including benefit plan design, administration and consulting services,
and automated enrollment services. We also compete with providers of employee
self-service applications, including Workscape, Inc., Automatic Data Processing,
Inc., PeopleSoft, Inc., and ProAct Technologies Corp. Additionally, we are aware
of a number of employers who have established similar systems for their internal
use and believe additional competitors may emerge.

We believe that we compete favorably in the key competitive factors that affect
our markets for The Work Number services, our unemployment cost management
services and our human resources and benefits application services. However, our
markets are still evolving and we may not be able to compete successfully
against current or future competitors. Many of our existing and potential
competitors have significantly greater financial, marketing, technical and other
resources than we do. In addition, many of our competitors have well-established
relationships with our current and potential clients and extensive knowledge of
our markets. It is possible that new competitors or alliances among competitors
will emerge and rapidly acquire market share. Moreover, our competitors may
consolidate with each other, or with other companies, giving them even greater
capabilities with which to compete against us.

TECHNOLOGY AND PRODUCT DEVELOPMENT

Each of our business lines is based on databases we construct and applications
we build to access and manipulate data. Our unemployment cost management
services are run on industry standard databases and applications. All of our
other services use a proprietary integrated visual development environment and
software system known as TALXWare to build our applications for


                                       9
<PAGE>

The Work Number and human resources and benefits applications services. TALXWare
is based on a Microsoft Windows NT operating system and is designed to support
the creation and management of self-service solutions.

We also license and integrate complementary technologies into our products
including:

         o        speech recognition;

         o        text-to-speech;

         o        facsimile;

         o        terminal emulation; and

         o        client/server database interfaces to be used in creating
                  self-service solutions.

We license these technologies from third-party suppliers pursuant to
non-exclusive license or resale agreements or purchase under open market
arrangements and then integrate into our products. For example, we make
quarterly royalty payments under a license agreement for various interactive
voice response technologies in our application services businesses.

We have directed our development efforts toward enhancing and developing new
offerings for The Work Number services and our human resources and benefits
application services. The most recent enhancements include extending the
features and capabilities of The Work Number database, through our W-2 eXpress
and ePayroll paystub/direct deposit services, as well as our eChoice benefits
enrollment offering.

We incurred product development costs of $1.8 million in fiscal 2000, $2.2
million in fiscal 2001 and $2.0 million in fiscal 2002. As of March 31, 2002,
our total product development staff consisted of 22 full-time employees. We
believe that significant investments in product development are required to
remain competitive.

PROPRIETARY RIGHTS

Our success and ability to compete is dependent in part upon our ability to
protect and maintain our proprietary rights to our intellectual property. We
regard our trademarks, and our other intellectual property, as having
significant value and being an important factor in the development and marketing
of our products.

We currently rely on a combination of trademark, trade secret and copyright laws
and restrictions on disclosure to establish and protect our intellectual
property. We have obtained a trademark registration for the name TALX and
service mark registrations for The Work Number For Everyone and The Work Number
with the United States Patent and Trademark Office. TALXWare is one of our
trademarks, and eChoice, UC eXpress, ePayroll and W-2 eXpress are some of our
service marks.

We generally enter into confidentiality agreements with our officers, employees
and consultants. We also generally limit access to and distribution of our
source code and the disclosure and use of other proprietary information.
However, these measures provide only limited protection of our intellectual
property rights. In addition, we may not have signed agreements containing
adequate protective provisions in every case, and the contractual provisions
that are in place may not provide us with adequate protection in all
circumstances.

Despite our efforts to protect our proprietary rights, unauthorized parties may
attempt to copy or otherwise obtain or use technology that we regard as
proprietary. We cannot assure you that the steps taken by us to protect our
proprietary rights will be adequate to prevent misappropriation of our
technology or that our competitors will not independently develop techniques
that are similar or superior to our technology. Any failure to adequately
protect our proprietary rights could result in our competitors offering similar
products, potentially resulting in loss of competitive advantage and decreased
revenues. In addition, litigation may be necessary to enforce our intellectual
property rights or to determine the validity and scope of the proprietary rights
of others. Litigation of this type could result in substantial costs and
diversion of resources and could significantly harm our business.

The interactive voice response industry is characterized by the existence of a
large number of patents and frequent litigation based on allegations of patent
infringement. Third parties have asserted in the past and, from time to time,
may assert in the future, patent, copyright, trademark and other intellectual
property rights to technologies that are important to our business. In one case,
we


                                       10
<PAGE>

entered into a license agreement to use various interactive voice response and
computer telephony integration technologies under which we made an initial
payment and will pay future royalties. Further, we have not conducted a search
to determine whether the technology included in our products infringes or
misappropriates intellectual property held by other third parties. In addition,
because patent applications in the United States are not publicly disclosed
until the patent is issued, applications may have been filed which could relate
to our products. Any claims asserting that our systems infringe or may infringe
proprietary rights of third parties, if determined adversely to us, could
significantly harm our business.

BACKLOG

We include in backlog executed contracts that require us to install and deliver
either human resources and benefits application services or customer premises
systems in a future period. We had a total backlog in these businesses of
approximately $7 million at March 31, 2000, $22 million at March 31, 2001 and
$18 million at March 31, 2002, with a one-year backlog of approximately $7
million at March 31, 2000, $13 million at March 31, 2001 and $12 million at
March 31, 2002. Substantially all of our backlog is attributable to human
resources and benefits application services. Generally, contracts for delivery
of human resources and benefits application services have terms ranging from one
to three years and are not cancelable without payment of a specified termination
penalty. Customer premises systems contracts are generally not cancelable at
will. Backlog is not necessarily indicative of past or future operating results.

CLIENTS

As of March 31, 2002, The Work Number database contained employee records from
over 800 clients, representing approximately 61 million present and former
employees. Additionally, as of that date, we had contracts with new clients to
provide records of over 9 million present and former employees in backlog. These
clients typically employ over 5,000 employees. Our clientele includes
approximately two-thirds of the Fortune 500 companies and a number of federal,
state and local government agencies. Our clients operate in a wide variety of
industries, including financial services, telecommunications services, retail,
consumer products, health care, temporary services and government. As of March
31, 2002, our unemployment cost management business had over 6,000 clients of
various sizes and operated in a broad range of industries. No client accounted
for more than 10% of total revenues in any of the fiscal years 2000, 2001 or
2002.

EMPLOYEES

As of March 31, 2002, we employed 878 full-time and 48 part-time employees.
Additionally, we leased 354 full-time and 18 part-time employees from Gates
McDonald. In conjunction with our acquisition of the unemployment compensation
business of Gates McDonald, we entered into an Employee Services Agreement
whereby Gates McDonald agreed to lease their employees to us for a 90 day period
beginning March 27, 2002. We anticipate at the expiration of this agreement,
substantially all employees will become employees of our company.

We have never had a work stoppage, and no employees are represented by a labor
organization. We consider our employee relations to be good.

RISK FACTORS

You should carefully consider the following factors and other information in
this Form 10-K in evaluating our company:

     WE MAY BE SUBJECT TO ADDITIONAL LITIGATION OR REGULATORY PROCEEDINGS AS A
     RESULT OF THE RESTATEMENT DISCUSSED IN THIS FORM 10-K/A.

The Company is filing herewith restated financial statements and has announced
that it would restate its financial statements for each of the quarters ended
June 30, 2000 through June 30, 2002 and for the fiscal years ended March 31,
2001 and 2002. As of the date hereof, we are not aware of any litigation having
been commenced against us related to this restatement. However, such litigation
could be commenced against us in the future and the plaintiffs who have filed
lawsuits against us previously could amend their complaints to include claims
related to this restatement, and if so, we could not predict the outcome of any
such litigation at this time. Additionally, the lenders under our March 27, 2002
Loan Agreement, which is described more fully below under Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources, could seek to exercise remedies which may be
available to them, such as acceleration of our loan, in the event they determine
that, as a result of the restatement or the SEC investigation discussed herein,
we have breached a covenant or representation and warranty in the Loan
Agreement. If an unfavorable result occurred in any such action, our business
and financial conditions could be harmed.

As of the date hereof, the SEC is investigating our accounting for two items
which are the subject of this restatement. At this time, we cannot predict
whether or not any additional regulatory investigation related to this
restatement will be commenced, or if it is, the outcome of any such
investigation. However, if any such investigation were to result in a regulatory
proceeding or action against us, our business and financial condition could be
harmed.

     OUR COMMON STOCK MAY BE DELISTED FROM THE NASDAQ STOCK MARKET.

As a result of the delay in filing our Form 10-Q for the period ending September
30, 2002, The Nasdaq Stock Market notified us that effective Tuesday, November
26, 2002, the letter "E" would be appended to our trading symbol, signifying the
delay. Similarly, The Nasdaq Stock Market informed us that we were not in
compliance with the requirements of NASD Marketplace Rule 4310(c)(14) because we
had not then filed the Form 10-Q, and then initiated proceedings to have our
common stock delisted. Our Form 10-Q for the period ending September 30, 2002
was filed on December 17, 2002.

On December 20, 2002, we participated in an appeal hearing before a Nasdaq
Listing Qualifications Panel. Our potential delisting is stayed, pending the
determination of the Panel, which may consider public interest and other
factors. There can be no assurance that the panel will grant the request for
continued listing of our common stock. If our common stock is delisted from The
Nasdaq Stock Market, the value of our stock would likely decrease significantly
and you might be unable to sell the stock in a timely manner.

     OUR FUTURE GROWTH WILL DEPEND ON OUR ABILITY TO EFFECTIVELY INTEGRATE
     ACQUIRED COMPANIES AND CAPITALIZE ON ANTICIPATED CROSS-SELLING
     OPPORTUNITIES

On March 27, 2002, we acquired Frick and the GM Unemployment Compensation
Business, in each case with the expectation that the transactions will result in
certain benefits, including, without limitation, cost savings, operating
efficiencies, cross-selling opportunities, revenue enhancements and other
synergies. Additionally, on July 2, 2001, we acquired Ti3, Inc., an application
service provider primarily for the staffing industry utilizing interactive voice
response and Internet technologies, with the expectation that the acquisition
would expand and complement our application services business, enhance our
revenues and increase market opportunities. Achieving the benefits of these
transactions will depend in part upon the integration of the business of Frick
and the GM Unemployment Compensation Business together with each other and The
Work Number line of products and services in an efficient manner, and there can
be no assurance that this will occur. Further, the acquisition of Ti3 was our
first business acquisition as a public company, and the acquisitions of The
Frick Company and the unemployment cost management


                                       11
<PAGE>

business of GatesMcDonald are significantly larger than the Ti3 acquisition. The
consolidation of operations will require substantial attention from management.
The diversion of management attention and any difficulties encountered in the
transition and integration processes could have a material adverse effect on the
revenues, levels of expenses and operating results of the combined companies.
There can be no assurance that the combined companies will realize any of the
anticipated benefits.

     OUR FUTURE PERFORMANCE WILL BE DEPENDANT ON SUCCESSFUL INTEGRATION OF
     ACQUISITIONS.

We expect a major portion of our growth to come from business acquisitions which
we have recently consummated or which we may consummate in the future. Such
acquisitions involve certain operational, legal and financial risks. Operational
risks include the possibility that an acquisition does not ultimately provide
the benefits originally anticipated by our management, while we continue to
incur operating expenses to provide the services formerly provided by the
acquired company. Legal risks involve contract and regulatory issues - that some
employers may not consent to the transfer of ownership of their contracts by
which the unemployment cost management services are provided, and that some
states' unemployment compensation commissions may require changes to powers of
attorney by which the employer authorizes processing of claims. In the event of
any loss of employer-customers or our inability to appear before state
unemployment commissions, our business and results of operations may be
materially adversely affected. Financial risks involve the incurrence of
indebtedness as a result of the acquisition and the consequent need to service
that indebtedness. In addition, the issuance of stock in connection with
acquisitions dilutes the voting power and may dilute the economic interests of
existing shareholders. In carrying out our acquisition strategy, we attempt to
minimize the risk of unexpected liabilities and contingencies associated with
acquired businesses through planning, investigation and negotiation, but there
can be no assurance that we will be successful in doing so, nor can there be any
assurance that we will be successful in identifying attractive acquisition
candidates or completing additional acquisitions on favorable terms.

     OUR FUTURE GROWTH IS SUBSTANTIALLY DEPENDENT ON OUR ABILITY TO INCREASE THE
     SIZE AND RANGE OF APPLICATIONS FOR THE WORK NUMBER DATABASE.

In order to successfully grow our business, we will have to make The Work Number
and related application services increasingly attractive to a greater number of
large organizations, their employees and third-party information verifiers. To
achieve this goal, we believe that we will need to increase the number of
employee records contained in The Work Number database, the amount and type of
information contained in those records and the number of applications that make
use of those records. Our strategy for increasing the size of The Work Number
database is based in part on strategic alliances with several providers of human
resources outsourcing services. Our success will depend on the interest and
commitment of these providers, which is entirely at their discretion. Some of
these companies compete with us in certain applications. Our strategy is also
based in part on strategic acquisitions of businesses with databases of employee
information, such as our recent acquisitions of Frick and the GM Unemployment
Compensation Business. If we are unable to attract and retain a sufficient
number of employer clients, if we cannot persuade them to include a greater
amount of information in the employee records they provide us, or if we fail to
develop additional applications to use this information, we may not achieve our
growth objectives.

     OUR REVENUES FROM THE WORK NUMBER MAY FLUCTUATE IN RESPONSE TO CHANGES IN
     THE LEVEL OF RESIDENTIAL MORTGAGE ACTIVITY AND INTEREST RATES.

A significant portion of our revenues from The Work Number depends on
residential mortgage activity and interest rates. We charge a fee for each
request from mortgage lenders to verify employment and income information.
Therefore, a decrease in residential real estate mortgage activity would reduce
the number of transactions per record, which could adversely affect our
revenues. If residential mortgage activity declines, whether due to increases in
mortgage interest rates or otherwise, our revenues and profitability could be
harmed.

     THE MARKET FOR THE WORK NUMBER DEPENDS IN PART ON THE REQUIREMENTS
     ESTABLISHED BY PURCHASERS IN THE SECONDARY MORTGAGE MARKET, AND OUR
     REVENUES AND PROFITABILITY WOULD BE SIGNIFICANTLY HARMED IF THESE
     REQUIREMENTS WERE RELAXED OR ELIMINATED.

We believe that residential mortgage lenders are among the most active users of
The Work Number. They utilize our services to verify employment, income and
related information. The demand for this verification is driven in part by the
requirements of the Federal National Mortgage Association, which is also known
as Fannie Mae, and the Federal Home Loan Mortgage Corporation, which is also
known as Freddie Mac, leading purchasers of residential mortgages in the United
States. These agencies currently require specific information, including
independent verification of employment and income data for the past two calendar
years and a current payroll period in connection with mortgages they purchase
having a loan-to-value in excess of 75%. Accordingly, most


                                       12
<PAGE>

lenders seek this information from mortgage applicants. If Fannie Mae or Freddie
Mac were to further reduce the requirement for employment and income data or
eliminate the requirement for independent verification thereof, our revenues and
profitability would be significantly harmed.

     IF WE ARE UNABLE TO MAINTAIN THE ACCURACY AND CONFIDENTIALITY OF EMPLOYEE
     INFORMATION IN THE WORK NUMBER AND OUR OTHER DATABASES, WE MAY FACE
     SIGNIFICANT CLAIMS AND OUR REPUTATION WOULD BE HARMED.

The Work Number services and our human resources and benefits application
services depend on the accuracy of highly confidential employment and income
history and other information which employers provide to us and which we convert
for use in The Work Number and our other services. Although we have a number of
protective measures in place, any inaccuracies in such information - whether in
the recording of such information, the unauthorized access to information, or
otherwise - or our inability to keep such information confidential, may give
rise to claims against us and adversely affect market acceptance of The Work
Number and our other services. Our financial condition, results of operations
and reputation may be significantly harmed if any asserted claims were
ultimately decided against us.

     IF THE FAIR CREDIT REPORTING ACT APPLIES TO THE WORK NUMBER SERVICES, OUR
     BUSINESS AND REVENUES WILL BE HARMED.

The Fair Credit Reporting Act, which we refer to as the FCRA, may apply to The
Work Number services, which would have an adverse impact on us. The FCRA applies
to "consumer reporting agencies" that engage in the practice of "assembling or
evaluating" consumer credit information. We believe The Work Number services do
not cause us to be a consumer reporting agency and that the FCRA does not apply
to The Work Number services. Unlike consumer reporting agencies, we receive all
of the information in The Work Number database regarding an employee from one
source - the employer - and we do not evaluate an employee's creditworthiness.
Further, when contracting for The Work Number services, employers name us as
their agent. The FCRA exempts from its reach communications of a party solely
related to experiences of the consumer and the person making the report, such as
an employer's report on its experience with its employee. We believe that as an
agent of employers, we are not a consumer reporting agency. Further, some
rulings on the application of FCRA have exempted businesses which, like The Work
Number services, simply pass along information gathered.

While we believe no controlling legal precedent exists, consumers or the Federal
Trade Commission, which enforces the FCRA, could take the position that the FCRA
does apply to us and seek to require us to comply with the FCRA and seek
penalties and damages. Among other provisions, the FCRA requires that a consumer
reporting agency determine that there be a "permissible purpose" before
disclosing a consumer report and furnish certain notices and information in
writing to consumers as consumer reports are used. If required, we would have
difficulty complying with these procedures; The Work Number services are
designed to operate via interactive voice response and the Internet, instead of
paper. Further, we might have to eliminate certain types of transactions,
resulting in loss of revenue. As a result, it is difficult to estimate the
ultimate impact on us in the event the FCRA were deemed to apply to The Work
Number services.

     PRIVACY LEGISLATION OR INTERPRETATIONS OF EXISTING LAWS COULD RESTRICT OUR
     BUSINESS.

Personal privacy has become a significant issue in the United States. Some
commentators, privacy advocates and government bodies have recommended
limitations on, or taken actions to limit, the use of personal information by
those collecting this information. For example, in 1999, Congress enacted the
Gramm-Leach-Bliley Act, which contains provisions protecting the privacy of
consumer non-public personal information collected by financial institutions.
This legislation may limit our ability to disclose data received from financial
institutions for The Work Number services. Additionally, federal privacy
regulations relating to the use and disclosure of individually identifiable
health information were recently issued by the Department of Health and Human
Services pursuant to the Health Insurance Portability and Accountability Act of
1996. These privacy regulations could impose additional costs and could limit
our use and disclosure of information in connection with our benefits enrollment
and similar services. Some states have also enacted consumer and health
information privacy protection laws.

Although we release income information only when authorized by the employee, if
new statutes or regulations were adopted that restricted our business, or
existing statutes or regulations were deemed to apply to us, we may be required
to change our activities and revise or eliminate our services, which could
significantly harm our revenues and operations.

     INTERRUPTIONS TO OUR COMPUTER NETWORK OR TELEPHONE OPERATIONS COULD
     SIGNIFICANTLY HARM OUR REVENUES AND INDUSTRY REPUTATION.


                                       13
<PAGE>

Significant portions of our operations depend on our ability to protect our
computer equipment and the information stored in our data processing center
against damage from fire, power loss, telecommunications failures, unauthorized
intrusion and other events. We have data processing centers located in St.
Louis, Missouri; Columbus, Ohio and Plano, Texas which areas have historically
been vulnerable to natural disasters and other risks, such as floods,
earthquakes and tornadoes. We back-up software and related data files regularly
and store the back-up files off-site nearby. We cannot assure you that these
measures will eliminate the risk of extended interruption of our operations. We
also rely on local and long-distance telephone companies to provide dial-up
access, Internet and corporate intranet access to our services. We have not
established an alternative disaster recovery facility, which would serve to
protect us from losses of employee record information due to damage to our data
storage facilities. Any damage or failure that interrupts our operations or
destroys some or all of our database of employee records could have a material
adverse effect on our revenues, profitability and industry reputation.

     OUR QUARTERLY AND ANNUAL OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY,
     WHICH COULD CAUSE OUR STOCK PRICE TO DECLINE SIGNIFICANTLY.

Our revenues, margins and operating results have fluctuated in the past, and may
continue to fluctuate in the future due to a number of factors.

For The Work Number, these factors include residential mortgage activity and
interest rate levels. We expect revenues generated from our new W-2 eXpress
service will be particularly affected by seasonality, as revenues relating to
the implementation and use of these services will primarily be earned in our
fourth fiscal quarter. Similarly, revenues from our benefits enrollment services
tend to be greater in the last quarter of each calendar year, which correspond
to our third fiscal quarter.

Other factors that can cause our operating results to fluctuate include:

         o        new product introductions or announcements by us or our
                  competitors;

         o        market acceptance of new services;

         o        the hiring and training of additional staff;

         o        the length of the sales cycle and the timing of transactions
                  with clients; and

         o        general economic conditions.

We cannot assure you that we will be able to sustain our level of total revenue
or our historical rate of revenue growth on a quarterly or annual basis. It is
likely that, in some future quarters, our operating results will fall below our
targets and the expectations of stock market analysts and investors. In such
event, the price of our common stock could decline significantly.

     OUR FUTURE GROWTH ALSO DEPENDS ON OUR ABILITY TO SUCCESSFULLY DEVELOP AND
     MARKET CURRENT AND FUTURE HUMAN RESOURCES AND BENEFITS APPLICATION
     SERVICES.

The market for human resources and benefits application services is still
evolving. Our success will depend upon our ability to develop applications that
provide attractive outsourcing opportunities and to successfully market these
products to large employers. There are numerous other companies, including
traditional consulting firms and other application service providers, that
provide outsourcing services in these areas. Prior to contracting for services,
employers typically consider several types of human resources and benefits
services, as well as whether to outsource at all.

Additionally, general and company-specific economic conditions, internal
policy-making procedures and other factors can delay and add uncertainty to the
process of marketing to potential clients. If we are unable to develop and sell
human resources and benefits application services on an ongoing basis, our
revenues and results of operations may suffer.

     IF WE ARE UNABLE TO SUCCESSFULLY INTRODUCE NEW APPLICATION SERVICES AND
     ENHANCED FUNCTIONALITY TO KEEP PACE WITH RAPID TECHNOLOGICAL CHANGES THAT
     CHARACTERIZE OUR MARKETS, OUR RESULTS OF OPERATIONS WOULD BE SIGNIFICANTLY
     HARMED.


                                       14
<PAGE>

The application services industry is characterized by rapidly changing
technology and our future success will depend upon our ability to keep pace with
technological developments. In particular, the market for self-service
applications through the Internet and corporate intranets using browser software
is rapidly evolving.

To remain competitive, we must continually change and improve our services and
products in response to changes in operating systems, application software,
computer and telephony hardware, communications, database and networking
systems, programming tools and computer language technology. Additionally, we
must also introduce new application services and add functionality to existing
services in response to changing market conditions and client demand,
particularly as benefit plan designs change and new types of plans are
introduced.

The development of new, technologically advanced services and products is a
complex and uncertain process requiring high levels of innovation and highly
skilled engineering and development personnel, as well as the accurate
anticipation of technology and market trends.

If we are unable, for technical or other reasons, to develop and market new
application services or enhancements to existing services in a timely and
cost-effective manner, or if new application services do not achieve market
acceptance, we could lose revenues and our competitive position could suffer.

     WE DEPEND ON THIRD-PARTY SOFTWARE AND HARDWARE, WHICH EXPOSES US TO
     DISRUPTION IF THOSE PRODUCTS ARE NO LONGER SUPPORTED OR DEVELOP DEFECTS.

Our services and products involve integration with both operating systems and
products developed by others. If any third-party software or hardware, such as
Microsoft Windows NT or Oracle database software, becomes unavailable for any
reason, fails to integrate with our products or fails to be supported by their
respective vendors or to operate properly, we would have to redesign our
products. We cannot assure you that we could accomplish any redesign in a
cost-effective or timely manner. Further, if third parties release new versions
of these systems or products before we develop products compatible with such new
releases, demand for our services and products might decline, thereby harming
our revenues and profitability.

We believe that if any supplier agreement expires or is canceled or otherwise
terminated, or if a third-party supplier refuses to sell to us, we could locate
any number of different suppliers. However, it would require a significant
amount of time to integrate the relevant technology from the new supplier, which
would result in a significant delay in our ability to offer the particular
enhancement. We could also experience difficulties integrating the new
supplier's technology with our products. We cannot assure you we could
accomplish any such integration in a cost-effective manner. Significant delays
in the offering of service or produce enhancements due to integration of
technology from new suppliers could significantly harm our revenues and
profitability.

     OUR SERVICES AND PRODUCTS MAY CONTAIN DEFECTS OR LACK ADEQUATE SECURITY
     WHICH MAY CAUSE US TO INCUR SIGNIFICANT COSTS, DIVERT OUR ATTENTION FROM
     PRODUCT DEVELOPMENT EFFORTS AND RESULT IN A LOSS OF CUSTOMERS.

As a result of their complexity, application services and hardware and software
products may contain undetected errors or failures when first introduced or as
new versions are released. We cannot assure you that, despite testing by us and
our clients, errors will not occur in services and systems after implementation.
The occurrence of such errors could result in loss or delay in market acceptance
of our services or products, which could significantly harm our revenues and our
reputation.

Internet or other users could access without authorization or otherwise disrupt
our Internet and corporate intranet applications. Such unauthorized access and
other disruptions could jeopardize the security of information stored in and
transmitted through the computer systems of our clients, which could result in
significant liability to us, could cause the loss of existing clients and could
discourage potential new clients.

     BECAUSE OF INTENSE COMPETITION FOR TECHNICAL PERSONNEL, WE MAY NOT BE ABLE
     TO RECRUIT OR RETAIN NECESSARY PERSONNEL ON A COST-EFFECTIVE BASIS.

Our success depends in large part upon our ability to identify, hire, retain and
motivate highly-skilled employees. Competition for highly-skilled employees in
our industry is intense, particularly in our geographic area. In addition,
employees may leave our company and subsequently compete against us. Our failure
to attract and retain these qualified employees could significantly harm our
ability to develop new products and maintain customer relationships.


                                       15
<PAGE>

Moreover, companies in our industry whose employees accept positions with
competitors frequently claim that those competitors have engaged in unfair
hiring practices. We may be subject to such claims as we seek to retain or hire
qualified personnel, some of whom may currently be working for our competitors.
Some of these claims may result in material litigation. We could incur
substantial costs in defending ourselves against these claims, regardless of
their merits. Such claims could also discourage potential employees who
currently work for our competitors from joining us.

     CLAIMS THAT WE INFRINGE THIRD-PARTY INTELLECTUAL PROPERTY RIGHTS COULD
     RESULT IN SIGNIFICANT EXPENSES OR RESTRICTIONS ON OUR ABILITY TO SELL OUR
     PRODUCTS.

Other parties have asserted in the past, and may assert in the future, patent,
copyright, trademark and other intellectual property rights to technologies that
are important to our business. For example, we recently entered into a license
to use various interactive voice response and computer telephony technologies
that required us to make an initial payment and pay future royalties. Further,
we have not conducted a search to determine whether the technology we have in
our products infringes or misappropriates intellectual property held by other
third parties. We cannot provide assurance that others will not claim that we
are infringing their intellectual property rights or that we do not in fact
infringe those intellectual property rights.

Any claims asserting that our products infringe or may infringe proprietary
rights of third parties, if determined adversely to us, could significantly harm
our results of operations. Any claims, with or without merit, could:

         o        be time-consuming;

         o        result in costly litigation;

         o        divert the efforts of our technical and management personnel;

         o        require us to develop alternative technology, thereby
                  resulting in delays and the loss or deferral of revenues;

         o        require us to cease marketing application services containing
                  the infringing intellectual property;

         o        require us to pay substantial damage awards;

         o        damage our reputation; or

         o        require us to enter into royalty or licensing agreements which
                  may not be available on acceptable terms, if at all.

In the event a claim against us were successful and we could not obtain a
license to the relevant technology on acceptable terms or license a substitute
technology or redesign our products to avoid infringement, our revenues, results
of operations and competitive position would be harmed.

     OUR FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY MAY SIGNIFICANTLY HARM OUR
     RESULTS OF OPERATIONS AND REPUTATION.

Our success and ability to compete is dependent in part on our ability to
protect and maintain our proprietary rights to our intellectual property. We
currently rely on a combination of trade secret, trademark and copyright laws to
establish and protect our intellectual property. To date, we have relied
primarily on trade secret laws to protect our proprietary processes and
know-how.

We generally enter into confidentiality agreements with our officers, employees
and consultants. We also generally limit access to and distribution of our
source code and the disclosure and use of our other proprietary information.
However, these measures provide only limited protection of our intellectual
property rights. In addition, we may not have signed agreements containing
adequate protective provisions in every case, and the contractual provisions
that are in place may not provide us with adequate protection in all
circumstances. Further, we have not included copyright notices on all of our
copyrightable intellectual property. Any infringement of our proprietary rights
could result in significant litigation costs, and any failure to adequately
protect our proprietary rights could result in our competitors offering similar
products, potentially resulting in the loss of one or more competitive
advantages and decreased revenues.


                                       16
<PAGE>

Despite our efforts to protect our proprietary rights, existing trade secret,
copyright, patent and trademark laws afford us only limited protection. Others
may attempt to copy or reverse engineer aspects of our products or to obtain and
use information that we regard as proprietary. Accordingly, we may not be able
to prevent misappropriation of our technologies or to deter others from
developing similar technologies. Further, monitoring the unauthorized use of our
products and other proprietary rights is difficult. Litigation may be necessary
to enforce our intellectual property rights or to determine the validity and
scope of the proprietary rights of others. Litigation of this type could result
in substantial costs and diversion of resources and could significantly harm our
results of operations and reputation.

     WE FACE COMPETITION FROM A BROAD RANGE OF COMPANIES, INCLUDING LARGE AND
     WELL-ESTABLISHED FIRMS.

The markets for our services and products are extremely competitive and subject
to rapid technological change.

We consider the primary competitors to The Work Number and the unemployment cost
management business to be Jon-Jay Associates and The Sheakley Group of
Companies, which are unemployment cost management providers offering employment
and income verification services, and Employers Unity, which offers unemployment
cost management services. Additionally, we are aware of a number of employers
who have established similar systems for their internal use and believe
additional competitors may emerge. Our human resources and benefits application
services business competes with benefits consulting firms, including Towers
Perrin LLP and Watson Wyatt & Company, which provide comprehensive packages
including benefit plan design, administration and consulting services and
automated enrollment services, and with providers of employee self-service
applications, including Workscape, Inc., Automatic Data Processing, Inc.,
PeopleSoft, Inc. and ProAct Technologies Corp.

Many of these companies and other potential competitors have greater name
recognition, larger installed client bases and significantly greater financial,
technical, marketing and other resources than us. Any such competitor could use
those resources to compete effectively against us.


Increased competition could result in price reductions, reduced gross margins
and loss of market share, any of which could significantly harm our results of
operations. Additionally, we may be required to increase spending in response to
competition in order to pursue new market opportunities or to invest in research
and development efforts, and, as a result, our operating results in the future
may be adversely affected. We cannot assure you that we will be able to compete
successfully against current and future competitors or that competitive
pressures we face will not significantly harm our results of operations.


     PROVISIONS OF OUR ARTICLES OF INCORPORATION AND BYLAWS AND MISSOURI LAW MAY
     MAKE IT DIFFICULT FOR A THIRD PARTY TO ACQUIRE US, DESPITE THE POSSIBLE
     BENEFITS TO OUR SHAREHOLDERS.


A number of provisions of our articles of incorporation and bylaws and Missouri
law could make it difficult for a third party to acquire, or discourage a third
party from attempting to acquire, control of us. These provisions:

         o        provide for a classified board of directors;

         o        limit the right of shareholders to remove directors or change
                  the size of the board of directors;

         o        limit the right of shareholders to fill vacancies on the board
                  of directors;

         o        limit the right of shareholders to act by written consent and
                  to call a special meeting of shareholders or propose other
                  actions;

         o        provide that the bylaws may be amended only by the majority
                  vote of the board of directors and shareholders will not be
                  able to amend the bylaws without first amending the articles
                  of incorporation;

         o        require a higher percentage of shareholders than would
                  otherwise be required to amend, alter, change or repeal
                  certain provisions of our articles of incorporation and
                  bylaws;

         o        authorize the issuance of preferred stock with any voting
                  rights, dividend rights, conversion privileges, redemption
                  rights and liquidation rights, and other rights, preferences,
                  privileges, powers, qualifications, limitations or
                  restrictions as may be specified by our board of directors,
                  without shareholder approval; and


                                       17
<PAGE>

         o        restrict specified types of "business combinations" and
                  "control share acquisitions," as well as regulate some tender
                  offers.


These provisions may:


         o        have the effect of delaying, deferring or preventing a change
                  in our control despite possible benefits to our shareholders;

         o        discourage bids at a premium over the market price of our
                  common stock; and

         o        harm the market price of our common stock and the voting and
                  other rights of our shareholders.


     OUR STOCK PRICE IS HIGHLY VOLATILE AND COULD DROP UNEXPECTEDLY.


The market price of our common stock has been highly volatile, ranging from a
high of $35.14 per share to a low of $14.11 during the 12 months ended June 13,
2002. The price could continue to be subject to wide fluctuations due to factors
including:

         o        actual or anticipated variations in our operating results;

         o        announcements of technological innovations or new services or
                  contracts by us or our competitors;

         o        developments with respect to patents, copyrights or
                  proprietary rights;

         o        changes in financial estimates by securities analysts;

         o        conditions and trends in outsourcing of unemployment cost
                  management, human resources, benefits and payroll services;
                  and

         o        general economic and market conditions.


The stock market has experienced extreme price and volume fluctuations that have
particularly affected the market prices of equity securities of many technology
companies. Often these fluctuations have been unrelated or disproportionate to
the operating performances of those companies.


Broad market and industry factors may significantly affect the market price of
our common stock, regardless of our actual operating performance. Declines in
the market price of our common stock could also harm employee morale and
retention, our access to capital and other aspects of our business.


     BECAUSE OUR SHARE PRICE IS VOLATILE, WE MAY BE THE TARGET OF SECURITIES
     LITIGATION, WHICH IS COSTLY AND TIME-CONSUMING TO DEFEND.


In the past, following periods of volatility in the market price of a company's
securities, shareholders have often instituted class action securities
litigation against those companies. We are currently defending against such a
claim. See "Item 3 - Legal Proceedings." Such litigation could result in
substantial costs and a diversion of management attention and resources, which
would significantly harm our profitability and reputation. These market
fluctuations, as well as general economic, political and market conditions such
as recessions or international currency fluctuations, may adversely affect the
market price of our common stock.


                                       18
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

We are a defendant from time to time in routine lawsuits incidental to our
business. Except to the extent described below, based on information currently
available, we believe that no current proceedings, individually or in the
aggregate, will have a material adverse effect upon us.

On December 26, 2001, a purported class action lawsuit was filed in the United
States District Court for the Eastern District of Missouri (Civil Action No.
4:01CV02014DJS) by Matt L. Brody, an alleged shareholder of the Company, against
the Company, certain of its executive officers and directors (William W.
Canfield, Craig N. Cohen and Richard F. Ford) (collectively, the "Individual
Defendants"), and two underwriters (Stifel, Nicolaus & Company, Incorporated and
A.G. Edwards & Sons, Inc.) in the Company's August 2001 secondary common stock
offering ("Secondary Offering"). The case purportedly is brought on behalf of
all persons who purchased or otherwise acquired shares of the Company's common
stock between July 18, 2001 and October 1, 2001 ("Putative Class Period"),
including as part of the Secondary Offering. The complaint alleges, among other
things, that certain statements in the registration statement and prospectus for
the Secondary Offering, as well as other statements made by the Company and/or
the Individual Defendants during the Putative Class Period, were materially
false and misleading because they allegedly did not properly account for certain
software and inventory, did not reflect certain write-offs, and did not
accurately disclose certain business prospects. The complaint alleges violations
of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule
10b-5 promulgated thereunder against the Company and the Individual Defendants,
violations of Section 11 of the Securities Act of 1933 against the Company, the
Individual Defendants and the underwriters, and violation of Section 15 of the
Securities Act of 1933 against Mr. Canfield.

Three additional purported class action lawsuits were filed in the same court,
against the same defendants and making substantially the same allegations: on
January 8, 2002 by Donald Metzger (Civil Action No. 4:02CV00031DJS); on January
9, 2002 by Anna Goodman (Civil Action No. 4:02CV00033DJS); and on January 30,
2002 by Al Hinton (Civil Action No. 4:02CV00168DJS) each of whom allegedly were
shareholders of the Company during the Putative Class Period. On February 15,
2002, these three lawsuits were consolidated with and into the Brody lawsuit
(Civil Action No. 4:01CV02014DJS) for all purposes. In October 2002, the case
was transferred from the Honorable Donald J. Stohr, United States District
Judge, to the Honorable Henry E. Audrey, United States District Judge.

The consolidated lawsuit seeks, among other things, an award of unspecified
money damages, including interest, for all losses and injuries allegedly
suffered by the putative class members as a result of the defendants' alleged
conduct and unspecified equitable/injunctive relief as the Court deems proper.


                                       19
<PAGE>
On May 20, 2002, the Company and the Individual Defendants filed a motion to
dismiss the lawsuits, and the underwriter defendants filed a separate motion to
dismiss. The plaintiffs filed their opposition to the motions to dismiss on June
19, 2002. The defendants' reply memoranda in support of the motions to dismiss
were filed on July 9, 2002. The parties are awaiting the Court's ruling on the
motions.

The Company believes the plaintiffs' claims are without merit and intends to
defend vigorously against them. However, due to the inherent uncertainties of
litigation, the Company cannot accurately predict the ultimate outcome of the
litigation. An unfavorable outcome could have a material adverse impact on the
Company's business, financial condition and results of operations.

As previously disclosed, the Securities and Exchange Commission is conducting an
investigation into our August 2001 secondary offering of common stock and second
fiscal quarter 2001 financial results. We are cooperating fully with the
investigation, and have voluntarily produced documents requested by the
Commission and have made our employees available for interviews or testimony
upon request. On November 12, 2002, the staff of the Central Regional Office of
the Commission sent us a "Wells letter" indicating the staff's plans to
recommend to the Commission that it institute an enforcement action against us
and two of our executive officers, William Canfield and Craig Cohen, related to
two matters. The Wells letter states that the SEC staff will allege, among other
things, that our financial statements were misleading as a result of
capitalizing instead of expensing $1.6 million related to a patent technology
license agreement executed in March 2001 and expensing approximately $158,000 in
bonus payments to executive officers in the first quarter of fiscal 2002 instead
of the fourth fiscal quarter of 2001. Those items are among those that are the
subject of our restatement discussed herein. The remedies the Commission may
consider include an injunction against us and the individuals and, if
appropriate, an officer and director bar and disgorgement and civil money
penalties against the individuals. We and the individuals have been given the
opportunity to file a written response to the Wells letter setting forth the
reasons why an enforcement action should not be instituted by the Commission.

As described above, the Company is filing herewith restated financial statements
for each of the quarters ended June 30, 2000 through June 30, 2002 and for the
fiscal years ended March 31, 2001 and 2002. As a result of the restatement, we
could become subject to additional litigation or regulatory proceedings or both.
As of the date hereof, we are not aware of any litigation having been commenced
against us related to this restatement. However, such litigation could be
commenced against us in the future and the plaintiffs who have filed lawsuits
against us previously could amend their complaints to include claims related to
this restatement, and if so, we could not predict the outcome of any such
litigation at this time. Additionally, the lenders under our March 27, 2002 Loan
Agreement, which is described more fully below under Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources, could seek to exercise remedies which may be available to
them, such as acceleration of our loan, in the event they determine that, as a
result of the restatement discussed above or the SEC investigation discussed
below, we have breached a covenant or representation and warranty in the Loan
Agreement. If an unfavorable result occurred in any such action, our business
and financial conditions could be harmed.

As of the date hereof, the SEC is investigating our accounting for two items
which are the subject of this restatement. At this time, we cannot predict
whether or not any additional regulatory investigation related to this
restatement will be commenced, or if it is, the outcome of any such
investigation. However, if any such investigation were to result in a regulatory
proceeding or action against us, our business and financial condition could be
harmed.

Additionally, the Company is required to indemnify each of the Individual
Defendants, as officers and/or directors of the Company, in connection with the
above matters, provided they acted in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of the Company. Stifel,
Nicolaus & Company and A.G. Edwards & Sons, Inc. have made demands on the
Company to indemnify them in connection with these matters.

The Company's directors and officers liability insurance carriers have received
notice of the consolidated litigation and SEC investigation.

                                       20
<PAGE>


Regardless of the outcome of any litigation or regulatory proceeding, litigation
and regulatory proceedings of this type are expensive and will require that we
devote substantial resources and executive time to defend these proceedings.

As a result of the delay in filing our Form 10-Q for the period ending September
30, 2002, The Nasdaq Stock Market notified us that effective Tuesday, November
26, 2002, the letter "E" would be appended to our trading symbol, signifying the
delay. Similarly, The Nasdaq Stock Market informed us that we were not in
compliance with the requirements of NASD Marketplace Rule 4310(c)(14) because we
had not then filed the Form 10-Q. Our Form 10-Q for the period ending September
30, 2002 was filed December 17, 2002.

On December 20, 2002, we participated in an appeal hearing before a Nasdaq
Listing Qualifications Panel. Our potential delisting is stayed, pending the
determination of the Panel, which may consider public interest and other
factors. There can be no assurance that the panel will grant the request for
continued listing of our common stock.





                                       21
<PAGE>

                                     PART II

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

This section presents our selected historical financial data and certain
additional information. You should read carefully the financial statements
included in this Form 10-K, including the notes to the financial statements, in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations." The selected data in this section is not intended to
replace the financial statements.

We derived the financial data presented below for, and as of the end of, each of
the years in the five-year period ended March 31, 2002 from our consolidated
financial statements and the related notes, as restated, which have been audited
by KPMG LLP, independent accountants. The financial information set forth below
reflects the classification of the database and document services businesses as
discontinued operations.

<Table>
<Caption>
                                                                                          YEARS ENDED MARCH 31,
                                                                     --------------------------------------------------------------
                                                                       1998          1999         2000         2001          2002
                                                                     --------     ----------   ----------   ----------    ----------
                                                                                                            (RESTATED)    (RESTATED)
                                                                            (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                                                  <C>           <C>          <C>          <C>           <C>
  STATEMENT OF OPERATIONS DATA:
  Revenues:
      The Work Number services .................................     $  4,270      $  9,109     $ 12,328     $ 19,149      $ 27,184
      Unemployment cost management services ....................           --            --           --           --           848
      Human resources and benefits application services ........        2,925         5,126        7,993        8,565         9,757
      Customer premises systems ................................        9,886        10,948       10,835        6,882         2,870
      Maintenance and support ..................................        4,192         4,920        4,876        4,417         3,893
                                                                     --------      --------     --------     --------      --------
          Total revenues .......................................       21,273        30,103       36,032       39,013        44,552
                                                                     --------      --------     --------     --------      --------
  Cost of revenues:
      The Work Number services .................................        1,807         3,138        3,973        6,179         9,320
      Unemployment cost management services ....................           --            --           --           --           450
      Human resources and benefits application services ........        2,010         3,225        4,460        6,956         7,530
      Customer premises systems ................................        5,967         7,874        8,388        5,790         2,652
      Maintenance and support ..................................        1,325         1,545        1,367        1,275         1,028
      Inventory write-down .....................................           --            --           --           --           307
                                                                     --------      --------     --------     --------      --------
          Total cost of revenues ...............................       11,109        15,782       18,188       20,200        21,287
                                                                     --------      --------     --------     --------      --------
  Gross margin .................................................       10,164        14,321       17,844       18,813        23,265
                                                                     --------      --------     --------     --------      --------
  Operating expenses:
      Selling and marketing ....................................        7,952         8,339        7,820        8,374         8,516
      General and administrative ...............................        3,496         4,853        5,477        5,767         7,454
      Intellectual property settlement .........................           --            --           --        1,612            --
      Restructuring charges ....................................           --           496           --           --         2,627
                                                                     --------      --------     --------     --------      --------
          Total operating expenses .............................       11,448        13,688       13,297       15,753        18,597
                                                                     --------      --------     --------     --------      --------
  Operating income (loss) ......................................       (1,284)          633        4,547        3,060         4,668
  Other income, net ............................................          158             8           82          562         1,567
  Income tax expense (benefit) .................................         (416)          239        1,862        1,481         2,302
                                                                     --------      --------     --------     --------      --------
  Earnings (loss) from continuing operations before
      cumulative effect of change in accounting principle ......         (710)          402        2,767        2,141         3,933
  Discontinued operations:
      Gain (loss) on operations and disposal of discontinued
          operations, net ......................................         (374)           --          117           36            --
                                                                     --------      --------     --------     --------      --------
  Earnings (loss) before cumulative effect of change
      in accounting principle ..................................       (1,084)          402        2,884        2,177         3,933
  Cumulative effect of change in accounting principle,
      net of income taxes ......................................           --            --           --       (1,655)           --
                                                                     --------      --------     --------     --------      --------
          Net earnings (loss) ..................................     $ (1,084)     $    402     $  2,884     $    522      $  3,933
                                                                     ========      ========     ========     ========      ========
</Table>


                                       22
<PAGE>

<Table>
<Caption>
                                                                                 YEARS ENDED MARCH 31,
                                                          ----------------------------------------------------------------------
                                                             1998          1999          2000            2001           2002
                                                          ----------    -----------   -----------     -----------    -----------
                                                                         (RESTATED)   (RESTATED)      (RESTATED)      (RESTATED)
                                                                    (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                                       <C>           <C>           <C>             <C>            <C>
Net earnings (loss) per common share(1):
   Basic:
     Continuing operations ..........................     $    (0.07)   $      0.04   $      0.28     $      0.21    $      0.31
     Discontinued operations, net ...................          (0.04)            --          0.01              --             --
     Cumulative effect of change in accounting
        principle ...................................             --             --            --           (0.16)            --
                                                          ----------    -----------   -----------     -----------    -----------
       Net earnings (loss) ..........................     $    (0.11)   $      0.04   $      0.29     $      0.05    $      0.31
                                                          ==========    ===========   ===========     ===========    ===========
   Diluted:
     Continuing operations ..........................     $    (0.07)   $      0.04   $      0.26     $      0.19    $      0.29
     Discontinued operations, net ...................          (0.04)            --          0.01              --             --
     Cumulative effect of change in accounting
        principle ...................................             --             --            --           (0.15)            --
                                                          ----------    -----------   -----------     -----------    -----------
       Net earnings (loss) ..........................     $    (0.11)   $      0.04   $      0.27     $      0.05    $      0.29
                                                          ==========    ===========   ===========     ===========    ===========
Cash dividends declared per common share ............     $       --    $        --   $        --     $      0.08    $      0.12
                                                          ==========    ===========   ===========     ===========    ===========
Weighted average number of common shares
  outstanding:
   Basic(1) .........................................      9,603,857      9,803,440    10,091,349      10,255,928     12,622,689
   Diluted(1) .......................................      9,603,857     10,014,152    10,527,236      11,068,583     13,481,683
</Table>

<Table>
<Caption>
                                                                                         MARCH 31,
                                                           -------------------------------------------------------------------
                                                             1998           1999          2000          2001           2002
                                                           --------       --------      --------      ----------    ----------
                                                                                                      (RESTATED)    (RESTATED)
                                                                                     (IN THOUSANDS)
<S>                                                        <C>            <C>           <C>            <C>          <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments.....     $  2,879       $    267      $  6,291       $ 9,725      $ 21,431
Working capital.......................................        9,079          8,316        15,158        14,176         2,999
Net assets of business held for sale..................        1,157            859            --            --            --
Total assets..........................................       24,121         24,564        30,133        33,434       179,738
Long-term debt plus capital leases....................           --             --            --            --        30,152
Shareholders' equity..................................       19,508         20,095        23,308        22,322       116,128

ADDITIONAL INFORMATION:
Employment records in The Work Number database........       13,115         18,285        30,298        43,005        60,700
Employment records under contract(2)..................       17,134         25,831        36,089        52,000        70,200
</Table>

----------

(1)      Basic and diluted earnings (loss) per share have been computed using
         the number of shares of common stock and common stock options and
         warrants outstanding. The weighted average number of shares was based
         on common stock outstanding for basic earnings (loss) per share and
         common stock outstanding and common stock options and warrants for
         diluted earnings (loss) per share in periods when such common stock
         options and warrants are not antidilutive.

(2)      Represents aggregate employment records included in The Work Number
         database and employment records under contract that have not yet been
         converted to the database.


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

You should read this discussion together with the financial statements and other
financial information included in this Form 10-K/A for the year ended March 31,
2002. However, as described below in Note 2 to the Audited Consolidated
Financial Statements, which is incorporated by reference herein, we have decided
to restate certain of our previously issued financial statements. As a result,
certain information in the accompanying financial statements and notes was
restated from the original presentation in our Annual Report on Form 10-K for
the fiscal year ended March 31, 2002.

Throughout the following Management's Discussion and Analysis, all amounts
reflect the restatements indicated in the Notes to Audited Consolidated
Financial Statements


                                       23
<PAGE>

OVERVIEW

Our software and services consist of The Work Number services, unemployment cost
management services, human resources and benefits application services, the sale
of customer premises systems, and maintenance and support services related to
those systems. The technologies we use include both interactive web and
interactive voice response.

The Work Number services include:

         o        The Work Number, our leading employment and income
                  verification service;

         o        W-2 eXpress, our suite of W-2 payroll services;

         o        ePayroll, our suite of payroll self-service applications; and

         o        FasTime, our automated timesheet collection and approval
                  services.

We derive substantially all our revenues from The Work Number from fees charged
to mortgage lenders and other verifiers for verification of employment history,
including the past three years of income history of participating employers'
current and former employees. We derive additional revenues from ongoing
maintenance fees charged to employers and one-time conversion fees from new
employers. Our revenues from W-2 eXpress and ePayroll represent fees charged to
clients on a monthly fee basis which is based upon the number of employees. We
first introduced W-2 eXpress in fiscal 2000, with no meaningful revenues
generated until the fourth quarter of fiscal 2001. Our first clients began using
ePayroll in our second fiscal quarter of 2002. Our revenues from FasTime include
fees from establishment of the service and fees based on the number of
transactions. Costs of revenues related to The Work Number services consist of
telecommunications services, personnel, equipment and capitalized software
amortization.

As a result of our recent acquisitions, we provide unemployment cost management
services under the name UC eXpress. These services include unemployment
insurance claims processing and unemployment tax planning and management to a
broad range of employers. We charge clients fees on an annual contractual basis,
generally billed monthly or quarterly, pursuant to multi-year contracts. Certain
contracts allow for additional charges if transaction activity exceeds a
specified threshold. Certain unemployment tax planning contracts call for
contingent fees based upon actual tax savings realized. Costs of revenues
related to UC eXpress consist primarily of personnel and equipment.

Our human resources and benefits application services business consists
principally of benefits enrollment services that offer employers and employees a
broad range of automated features. In 2000, we began offering eChoice, our
advanced benefits enrollment service that provides these features in a
standardized package. We maintain a system on our premises that contains a
customer database and receives incoming requests for access to the information.
Revenues from human resources and benefits application services include fees
derived from establishment of the service and fees based on the number of
employees or transactions. Costs of revenues related to our human resources and
benefits application services consist of personnel, equipment,
telecommunications services and capitalized software amortization.

Our customer premises systems business provides interactive web, interactive
voice response and computer telephony integration software and services that
enable an organization's users to access, input and update information without
human assistance. We recognize revenue from hardware sales and software licenses
upon shipment. Revenues from implementation services relating to our customer
premises systems are recognized by the contract method of accounting using
percentage of completion for larger, more complex systems and the completed
contract method for smaller systems. With the market's acceptance of our
application services delivery method, in fiscal 1998 we began to de-emphasize
sales of customer premises systems and in fiscal 2000 discontinued sales to new
clients. However, we continue to provide maintenance and support services with
respect to installed customer premises systems. Revenues from maintenance and
support are recognized ratably over the term of the maintenance agreement. Costs
of revenues related to our customer premises systems consist of personnel,
capitalized software amortization and hardware costs of goods sold. Costs of
revenues related to maintenance and support consist primarily of personnel
costs.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of consolidated financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenue and expenses, and related disclosure of contingent assets and
liabilities. On a periodic basis, we evaluate our estimates, including those
related to revenue recognition, intangible assets, capitalized software and
income taxes. We base our estimates on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are


                                       24
<PAGE>

not readily apparent from other sources. Actual results may differ materially
from these estimates under different assumptions or conditions.

We believe that the following critical accounting policies include our more
significant judgments and estimates used in the preparation of our consolidated
financial statements.

REVENUE RECOGNITION: Revenues from The Work Number are recognized in the period
that they are earned, from transaction fees charged to users for verifications
of employment history and income. Additionally, revenue for set up fees, monthly
maintenance and employer conversion fees are recognized on a straight-line basis
from the time the service is available to be used by our clients through the end
of the service period. Revenues from our unemployment cost management services,
called UC eXpress, are recognized in the period that they are earned, evenly
over the life of the contract. Transaction fees are recorded as the services are
provided. Revenue which is contingent upon achieving certain performance
criteria is recognized when those criteria are met. Human resources and benefits
application services revenue is primarily recognized on a straight-line basis
from the time the service is available to be used by our clients through the end
of the service period. Because of seasonal variations of our service offerings,
a greater number of clients have services available to them from October through
December than during any other period during the year. As a result, revenues in
our third fiscal quarter are substantially higher than in the other three
quarters of the year. In prior fiscal years, over fifty percent of annual
revenues in this revenue line have been recorded in the third fiscal quarter. We
recognize hardware and software license revenue upon shipment based on
vendor-specific objective evidence. Revenues for customization services of
customer premises systems are recognized by the contract method of accounting
using percentage of completion for larger, more complex systems and the
completed contract method for smaller systems. Revenue from maintenance
contracts is deferred and recognized ratably over the maintenance period.
Deferred revenue represents the unearned portion of The Work Number setup fees,
as well as, Human Resources and Benefits Application Services, UC eXpress and
maintenance fees.

INTANGIBLE ASSET VALUATIONS: In connection with the acquisitions of Ti3, Frick
and the GM Unemployment Compensation Business, TALX acquired certain
identifiable intangible assets. These assets were recorded in accordance with
the Financial Accounting Standards Board SFAS No. 141, "Business Combinations".
See "Recently Issued Accounting Pronouncements" for more information about SFAS
No. 141. We have adopted the provisions of SFAS No. 141 related to all three of
our acquisitions during fiscal 2002.

Effective April 2, 2002, we will adopt the Financial Accounting Standards Board
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 addresses the
initial recognition and measurement of intangible assets acquired outside of a
business combination and the accounting for goodwill and other intangible assets
subsequent to their acquisition. SFAS No. 142 provides that intangible assets
with finite useful lives be amortized and that goodwill and intangible assets
with indefinite lives will not be amortized, but will rather be tested at least
annually for impairment. Under the provisions of SFAS No. 142, any impairment
loss identified upon adoption of this standard will be recognized as a
cumulative effect of a change in accounting principle. Goodwill and intangible
assets determined to have an indefinite useful life that are acquired in
purchase business combinations will not be amortized, but instead tested for
impairment on an annual basis.

The acquired identifiable intangible assets of approximately $19.3 million
include software, customer base and covenant not to compete. Software of
$153,000 has an estimated useful life of three years. Customer base acquired in
the Ti3 acquisition of $417,000 has an estimated useful life of ten years and
customer base of $16,487,000 acquired in the Frick and GM Unemployment
Compensation Business acquisitions have an estimated useful life of 15 years.
Customer records of $2,200,000 have an estimated useful life of 15 years. We are
currently in the process of obtaining third-party valuations of identifiable
intangible assets; thus the values ascribed to these assets are subject to
refinement.

CAPITALIZED SOFTWARE: Software development costs are expensed as incurred until
technological feasibility is achieved, after which they are capitalized on a
product-by-product basis. Amortization of capitalized software development costs
is computed using the straight-line method over the remaining estimated economic
life of the product, generally three years. Amortization of capitalized software
development costs starts when the product is available for general release to
clients. All capitalized software assets are reviewed as of each balance sheet
date for impairment. Upon determination of any impairment, the asset is
written-down to the appropriate value in the period that the impairment is
determined.

INCOME TAXES: We record income taxes under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. In assessing the
realization of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be


                                       25
<PAGE>

realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income and tax planning
strategies in making this assessment. Based upon the level of historical taxable
income and projections for future taxable income over the periods in which the
deferred tax assets are deductible, management believes it is more likely than
not we will realize the benefits of these deductible differences. If management
were to determine that we would not be able to realize all or part of our net
deferred tax asset in the future, an adjustment to the deferred tax asset would
be charged to income in the period such determination was made.

The above listing is not intended to be a comprehensive list of all of our
accounting policies. In many cases, the accounting treatment of a particular
transaction is specifically dictated by generally accepted accounting
principles, with no need for management's judgment in their application. There
are also areas in which management's judgment in selecting any available
alternative would not produce a materially different result. See our
consolidated financial statements and notes thereto contained in this Annual
Report on Form 10-K which contain accounting policies and other disclosures
required by generally accepted accounting principles.

RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 requires that all business combinations initiated after
June 30, 2001 be accounted for under the purchase method and addresses the
initial recognition and measurement of goodwill and other intangible assets
acquired in a business combination. SFAS No. 142 addresses the initial
recognition and measurement of intangible assets acquired outside of a business
combination and the accounting for goodwill and other intangible assets
subsequent to their acquisition. SFAS No. 142 provides that intangible assets
with finite useful lives be amortized and that goodwill and intangible assets
with indefinite lives will not be amortized, but will rather be tested at least
annually for impairment. Under the provisions of SFAS No. 142, any impairment
loss identified upon adoption of this standard is recognized as a cumulative
effect of a change in accounting principle. Any impairment loss incurred
subsequent to initial adoption of SFAS No. 142 is recorded as a charge to
current period earnings. We have adopted the provisions of SFAS No. 141 related
to all three of our acquisitions during fiscal 2002, and will have adopted SFAS
No. 142 effective April 1, 2002. Goodwill and intangible assets determined to
have an indefinite useful life that are acquired in a purchase business
combinations will not be amortized, but instead tested for impairment on an
annual basis. Because we did not have goodwill prior to the Ti3 acquisition, the
impact of implementing SFAS No. 142 will not be significant to the Company.

In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations". SFAS No. 143 requires businesses to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred. When the liability is initially recorded, the entity capitalizes a
cost by increasing the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its present value each period, and the
capitalized cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, an entity either settles the obligation for its
recorded amount or incurs a gain or loss upon settlement. We are required to
adopt SFAS No. 143 for our fiscal year beginning April 1, 2003. We are currently
assessing the impact, if any, of SFAS No. 143 on our financial position and
results of operations.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets", which supercedes SFAS No. 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." SFAS No. 144 addresses the accounting and reporting for the impairment or
disposal of long-lived assets, including discontinued operations. SFAS No. 144
is effective April 1, 2002 for the Company. We are reviewing the provisions of
SFAS No. 144 and do not anticipate that the adoption will have a material impact
on our financial condition or results of operations.


                                       26
<PAGE>

RESULTS OF OPERATIONS

The following tables set forth (1) revenues and gross margin, (2) the gross
margin percentage by revenue category, and (3) certain items from our statement
of operations as a percentage of revenues for the periods indicated:

<Table>
<Caption>
                                                                                      YEARS ENDED MARCH 31,
                                                                          ------------------------------------------
                                                                              2000            2001           2002
                                                                          ----------      ----------     -----------
                                                                                           (RESTATED)     (RESTATED)
                                                                                         (IN THOUSANDS)
<S>                                                                       <C>             <C>            <C>
Revenues:
   The Work Number services............................................     $ 12,328        $ 19,149     $   27,184
   Unemployment cost management services...............................           --              --            848
   Human resources and benefits application services...................        7,993           8,565          9,757
   Customer premises systems...........................................       10,835           6,882          2,870
   Maintenance and support                                                     4,876           4,417          3,893
                                                                            --------        --------     ----------
     Total revenues....................................................     $ 36,032        $ 39,013     $   44,552
                                                                            --------        --------     ----------
Gross margin:
   The Work Number services............................................     $  8,355        $ 12,970     $   17,864
   Unemployment cost management services...............................           --              --            398
   Human resources and benefits application services...................        3,533           1,609          2,227
   Customer premises systems...........................................        2,447           1,092            218
   Maintenance and support                                                     3,509           3,142          2,865
   Inventory write-down   .............................................           --              --           (307)
                                                                            --------        --------     ----------
     Total gross margin................................................     $ 17,844        $ 18,813     $   23,265
                                                                            --------        --------     ----------
</Table>

<Table>
<Caption>
                                                                                       YEARS ENDED MARCH 31,
                                                                              ---------------------------------------
                                                                                2000            2001           2002
                                                                              --------       ----------    ----------
                                                                                             (RESTATED)    (RESTATED)
<S>                                                                            <C>           <C>           <C>
Gross margin percentage by revenue category:
   The Work Number services............................................         67.8%           67.7%          65.7%
   Unemployment cost management services...............................           --              --           46.9
   Human resources and benefits application services...................         44.2            18.8           22.8
   Customer premises systems...........................................         22.6            15.9            7.6
   Maintenance and support.............................................         72.0            71.1           73.6
</Table>


                                       27
<PAGE>


<Table>
<Caption>
                                                                                     YEARS ENDED MARCH 31,
                                                                               ----------------------------------
                                                                                2000         2001         2002
                                                                               -------    ----------   ----------
                                                                                          (RESTATED)   (RESTATED)
<S>                                                                            <C>        <C>          <C>
PERCENTAGE OF TOTAL REVENUES
Revenues:
   The Work Number services ...............................................       34.2%       49.1%        61.0%
   Unemployment cost management services ..................................         --          --          1.9
   Human resources and benefits application services ......................       22.2        22.0         21.9
   Customer premises systems ..............................................       30.1        17.6          6.4
   Maintenance and support ................................................       13.5        11.3          8.8
                                                                                ------      ------       ------
     Total revenues .......................................................      100.0       100.0        100.0
Cost of revenues ..........................................................       50.5        51.8         47.8
                                                                                ------      ------       ------
Gross margin ..............................................................       49.5        48.2         52.2
                                                                                ------      ------       ------
Operating expenses:
   Selling and marketing ..................................................       21.7        21.5         19.1
   General and administrative .............................................       15.2        14.8         16.7
   Intellectual property settlement .......................................         --         4.1           --
   Restructuring charge ...................................................         --          --          5.9
                                                                                ------      ------       ------
     Total operating expenses .............................................       36.9        40.4         41.7
                                                                                ------      ------       ------
Operating income ..........................................................       12.6         7.8         10.5
Other income, net .........................................................        0.2         1.4          3.5
                                                                                ------      ------       ------
Earnings from continuing operations before income tax expense
   (benefit) and cumulative effect of change in accounting principle ......       12.8         9.2         14.0
Income tax expense (benefit) ..............................................        5.1         3.8          5.2
                                                                                ------      ------       ------
Earnings from continuing operations before cumulative .....................        7.7         5.4          8.8
   effect of change in accounting principle
Discontinued operations, net ..............................................        0.3         0.1           --
Cumulative effect of change in accounting principle .......................         --        (4.2)          --
Net earnings ..............................................................        8.0%        1.3%         8.8%
                                                                                ======      ======       ======
</Table>

FISCAL YEAR ENDED MARCH 31, 2002 COMPARED TO FISCAL YEAR ENDED MARCH 31, 2001

Revenues. Total revenues increased 14.2% to $44.6 million in fiscal 2002 from
$39.0 million in fiscal 2001. Revenues from The Work Number services increased
42.0% to $27.2 million in fiscal 2002 from $19.1 million in fiscal 2001, due to
an increase in the number of employment records in the database and related
transaction volume, new clients gained from continued marketing to employers and
verifiers, the inclusion of revenues from our acquisition of Ti3 in the second
quarter of fiscal 2002 and, to a lesser extent, an increase in pricing during
the year. Revenues from unemployment cost management services for fiscal 2002
include five days of revenue from our March 27, 2002 acquisitions of The Frick
Company and the unemployment cost management business of GatesMcDonald. Revenues
from human resources and benefits application services increased 13.9% to $9.8
million in fiscal 2002 from $8.6 million in fiscal 2001, due to the addition of
new clients seeking to outsource their non-core functions, offset by client
attrition. This growth was less than planned, due the poor economic conditions
experienced during the second and third quarters of fiscal 2002. Revenues from
customer premises systems decreased 58.3% to $2.9 million in fiscal 2002 from
$6.9 million in fiscal 2001. This decrease is due to a shift in our focus away
from selling in-house systems to our human resources and benefits application
services. Revenues from maintenance and support related to the customer premises
systems decreased 11.9% to $3.9 million in fiscal 2002 from $4.4 million in
fiscal 2001, reflecting the support provided to a shrinking installed base as we
shifted our strategy toward providing similar solutions through application
services. We anticipate revenues from customer premises systems and maintenance
and support will continue to decrease from current year results as we
discontinue sales to new clients and continue to emphasize The Work Number
services, unemployment cost management services and human resources and benefits
application services.

Gross Margin. Gross margin increased 23.7% to $23.3 million in fiscal 2002 from
$18.8 million in fiscal 2001. As a percentage of total revenues, gross margin
increased to 52.2% in fiscal 2002 from 48.2% in fiscal 2001. The Work Number
services gross margin increased 37.7% to $17.9 million in fiscal 2002 from $13.0
million in fiscal 2001, but as a percentage of corresponding revenue, decreased
to 65.7% in fiscal 2002 from 67.7% in fiscal 2001. The increase in gross margin
is due primarily to revenue increases. The gross margin percentage decreased
slightly due to the addition of Ti3, which has a slightly lower gross margin
than our traditional The Work Number services. Also, costs related to personnel
and infrastructure increased slightly to accommodate possible future electronic
payroll services clients. Human resources and benefits application services
gross margin increased


                                       28
<PAGE>

38.4% to $2.2 million, or 22.8% of corresponding revenue, in fiscal 2002 from
$1.6 million, or 18.8% of corresponding revenue, in fiscal 2001. This increase
in gross margin and gross margin percentage is principally due to a higher level
of revenues and better leveraging of fixed infrastructure costs as services were
available to a greater number of clients. Customer premises systems gross margin
decreased 80.0% to $218,000, or 7.6% of corresponding revenue, in fiscal 2002
from $1.1 million, or 15.9% of corresponding revenue, in fiscal 2001, as
revenues declined. The decrease in gross margin percentage is due to certain
fixed costs that remained as we shifted our business focus to The Work Number
services and human resources and benefits application services. Maintenance and
support gross margin decreased 8.8% to $2.9 million, or 73.6% of corresponding
revenue, in fiscal 2002, from $3.1 million, or 71.1% of corresponding revenue,
in fiscal 2001 due to lower revenues caused by a shrinking client base. The
gross margin percentage increased due to a lower level of third-party hardware
support costs and improved leveraging of personnel costs.

Selling and Marketing Expenses. Selling and marketing expenses increased 1.7% to
$8.5 million in fiscal 2002 from $8.4 million in fiscal 2001. As a percentage of
revenues, such expenses decreased to 19.1% in fiscal 2002 from 21.5% in fiscal
2001. The decrease in percentage of revenues is due to the greater rate of
increase in our revenues as compared to personnel and related costs.
Additionally, we anticipate these costs will generally decrease as a percentage
of revenues as our revenue mix shifts more to The Work Number Services which
have lower sales maintenance costs.

General and Administrative Expenses. General and administrative expenses
increased 29.3% to $7.5 million in fiscal 2002 from $5.8 million in fiscal 2001.
The increase in such expenses reflected the increased infrastructure costs of a
growing business and workforce, including the inclusion of costs related to our
acquisitions during fiscal 2002. As a percentage of revenues, such expenses
increased to 16.7% in fiscal 2002 from 14.8% in fiscal 2001. The increase in
general and administrative expenses as a percentage of revenues is due to
revenue growth rates, particularly in human resources and benefits application
services, that were lower than anticipated.

Restructuring and Inventory Write-Down. During the second quarter of fiscal
2002, we reorganized our sales and delivery operations and refocused our product
lines related to our human resources and benefit applications and customer
premises systems businesses. In conjunction with the reorganization, we reduced
our workforce by approximately 17%, closed certain regional sales offices and
wrote-down hardware inventory and capitalized software. As a result of these
actions, we incurred restructuring charges of $1.9 million associated with the
write-off of capitalized software, $349,000 related to employee severance costs
and $337,000 related to office closing costs. These items are reflected in the
line item "restructuring charge" on the statement of earnings and $240,000 is
reflected in accrued expenses on the balance sheet. Additionally, we incurred a
charge of $307,000 related to the write-down of certain hardware inventory
items. This charge is reflected as a separate component of cost of goods sold on
the statement of earnings.

Other Income, Net. Other income increased to $1.6 million in fiscal 2002 from
$562,000 in fiscal 2001, due to interest income earned on a higher level of
invested funds. Invested funds increased due to the receipt of the proceeds from
our secondary common stock offering during the second quarter of fiscal 2002 and
cash flow from operations.

Income Tax Expense. Our effective income tax rate was 36.9% in fiscal 2002 and
40.9% in fiscal 2001. The decrease is due to tax-exempt interest earned on state
and federal tax free municipal securities during the last eight months of fiscal
2002, and to a lesser extent, a lower effective state income tax rate. As we
continue to move our business to an application services model, we have reduced
the amount of taxes paid on hardware and software sales in states with higher
income tax rates.

FISCAL YEAR ENDED MARCH 31, 2001 COMPARED TO FISCAL YEAR ENDED MARCH 31, 2000

Revenues. Total revenues increased 8.3% to $39.0 million in fiscal 2001 from
$36.0 million in fiscal 2000. Revenues from The Work Number services increased
55.3% to $19.1 million in fiscal 2001 from $12.3 million in fiscal 2000, due to
an increase in the number of employment records in the database and related
transaction volume, new clients gained from continued marketing to employers and
verifiers and, to a lesser extent, an increase in pricing during the year.
Revenues from human resources and benefits application services increased 7.2%
to $8.6 million in fiscal 2001 from $8.0 million in fiscal 2000, due to the
addition of new clients seeking to outsource their non-core functions and to
some extent our introduction in April 2000 of eChoice, our advanced benefits
enrollment service. Revenues from customer premises systems decreased 36.5% to
$6.9 million in fiscal 2001 from $10.8 million in fiscal 2000. This decrease was
due to a shift in both our focus and the market from purchasing in-house systems
to utilizing our human resources and benefits application services. Revenues
from maintenance and support related to the customer premises systems decreased
9.4% to $4.4 million in fiscal 2001 from $4.9 million in fiscal 2000, reflecting
the support provided to a shrinking installed base as we shifted our strategy
toward providing similar solutions through application services. We anticipated


                                       29
<PAGE>

revenues from customer premises systems and maintenance and support would
continue to decrease from current year results as we discontinue sales to new
clients and continue to emphasize The Work Number services and human resources
and benefits application services.

Gross Margin. Gross margin increased 5.4% to $18.8 million in fiscal 2001 from
$17.8 million in fiscal 2000. As a percentage of total revenues, gross margin
decreased to 48.2% in fiscal 2001 from 49.5% in fiscal 2000. The Work Number
services gross margin increased 55.2% to $13.0 million, or 67.7% of
corresponding revenue, in fiscal 2001 from $8.4 million, or 67.8% of
corresponding revenue in fiscal 2000. The increase in gross margin was due
primarily to revenue increases. The gross margin percentage was maintained as
costs related to personnel and infrastructure increased in conjunction with
increased revenue during fiscal 2001. Human resources and benefits application
services gross margin decreased 54.5% to $1.6 million in fiscal 2001 from $3.5
million in fiscal 2000, and as a percentage of corresponding revenue, decreased
to 18.8% in fiscal 2001 from 44.2% in fiscal 2000. This decrease in gross margin
and gross margin percentage is principally due to decreased revenues as a result
of the change in accounting principles for revenue recognition for service
transactions, effective April 1, 2000. Customer premises systems gross margin
decreased 55.4% to $1.1 million, or 15.9% of corresponding revenue, in fiscal
2001 from $2.4 million, or 22.6% of corresponding revenue, in fiscal 2000, as
revenues declined. The decrease in gross margin percentage is due to certain
fixed costs that remained as we shifted our business focus to The Work Number
services and human resources and benefits application services. Maintenance and
support gross margin decreased 10.5% to $3.1 million, or 71.1% of corresponding
revenue, in fiscal 2001, from $3.5 million, or 72.0% of corresponding revenue,
in fiscal 2000 due to lower revenues caused by a shrinking client base and
slightly higher personnel costs.

Selling and Marketing Expenses. Selling and marketing expenses increased 7.1% to
$8.4 million in fiscal 2001 from $7.8 million in fiscal 2000. The increase in
expense reflected the expansion of our sales and marketing efforts. As a
percentage of revenues, such expenses decreased to 21.5% in fiscal 2001 from
21.7% in fiscal 2000. The decrease in percentage of revenues was due to the
greater rate of increase in our revenues as compared to personnel and related
costs.

General and Administrative Expenses. General and administrative expenses
increased 5.3% to $5.8 million in fiscal 2001 from $5.5 million in fiscal 2000.
The increase in such expenses reflected the increased infrastructure costs of a
growing business and workforce. As a percentage of revenues, such expenses
decreased to 14.8% in fiscal 2001 from 15.2% in fiscal 2000. The decrease in
general and administrative expenses as a percentage of revenues was due to the
greater operating efficiencies resulting from higher revenues.

Intellectual Property Settlement. In March 2001, we entered into a patent
technology license agreement with Ronald A. Katz Technology Licensing, L.P. and
A2D, L.P. which we recorded as an intangible asset that was being amortized over
a 10-year period. This agreement required us to make a payment of $1.5 million.
Included in the restatements we are making as part of this 10-K/A, we have
expensed this entire amount, plus legal costs of approximately $100,000, in
March 2001.

Other Income, Net. Other income increased to $562,000 in fiscal 2001 from
$82,000 in fiscal 2000, due to interest income earned on a higher level of
invested funds.

Income Tax Expense. Our effective income tax rate was 40.9% in fiscal 2001 and
40.2% in fiscal 2000. The increase in effective tax rate was due to higher state
tax rates and the expiration of certain tax credit carryforwards.

Cumulative Effect of Change in Accounting Principle, net. During 2001, the
Company changed its method of accounting for certain service transactions to be
in accordance with Staff Accounting Bulletin (SAB) No. 101. The Company has
retroactively adopted SAB 101 as of April 1, 2000, and recorded a cumulative
effect adjustment of $1.7 million, net of tax of $1.1 million, in 2001 to
reflect the application of the new accounting. The cumulative effect adjustment
was computed based on revenue of $2.9 million, and related commission expense of
$175,000, initially recognized in 2000 and prior years that was delayed to 2001
and future periods under SAB 101.

DISCONTINUED OPERATIONS

In August 1996, we determined to divest our database and document services
businesses and, accordingly, reflected the results of operations of such
businesses as discontinued operations. A provision of $350,000 was made as of
June 30, 1996, to reflect the anticipated loss from operations until the time of
disposal. On January 31, 1997, we sold substantially all of the assets of the
document services business to Sterling Direct, Inc., the largest customer of the
division. The sales price, after giving effect to the post-closing adjustments,
was $1,241,000. The net assets sold totaled approximately $566,000. As of March
31, 1997 and 1998, we provided additional provisions for loss, net of tax, in
the amount of $550,000 and $374,000, respectively.

Effective March 31, 2000, we sold substantially all of the assets, net of
liabilities, of the database services business to WPZ Holdings, Inc., the parent
company of one of the division's largest customers. The sales price was
$1,273,000. We realized pre-tax and after-tax gains of $187,000 and $117,000,
respectively.

During the quarter ended September 30, 2000, we concluded all transition-related
activity for the database services business. Completing this transition ahead of
schedule resulted in a savings of $61,000 of the transition reserve. Therefore,
we realized pre-tax and after-tax gains of $61,000 and $37,000, respectively.


                                       30
<PAGE>

QUARTERLY RESULTS OF OPERATIONS

The following tables set forth (1) specified unaudited statement of operations
data for each of the four quarters in fiscal 2001 and 2002, (2) the gross margin
percentage for each of our revenue categories, and (3) operating data expressed
as a percentage of our total revenues. The unaudited financial statements have
been prepared on the same basis as the audited financial statements contained
herein and include all adjustments, consisting only of normal recurring
adjustments, that we consider necessary for a fair presentation of such
information when read in conjunction with our financial statements and related
notes included elsewhere in this Form 10-K. We believe that quarter-to-quarter
comparisons of our financial results should not necessarily be relied upon as an
indication of future performance.


<Table>
<Caption>
                                                                               QUARTERS ENDED
                                            ---------------------------------------------------------------------------------------
                                             JUNE 30,  SEPT. 30,  DEC. 31,   MARCH 31,   JUNE 30,    SEPT. 30,  DEC. 31,  MARCH 31,
                                              2000       2000       2000       2001        2001        2001       2001      2002
                                            --------   ---------  --------   ---------   --------    ---------  --------  ---------
                                                                  (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                (RESTATED)
<S>                                         <C>        <C>        <C>        <C>         <C>         <C>        <C>       <C>
Revenues:
    The Work Number services .............  $  4,145   $  4,568   $  4,580   $  5,856    $  6,103    $  6,659   $  6,856  $  7,566
    Unemployment cost management
        services .........................        --         --         --         --          --          --         --       848
    Human resources and benefits
        application services .............       856      1,031      5,158      1,520       1,380       1,281      5,543     1,553
    Customer premises systems ............     2,127      2,347      1,558        849       1,030         978        604       257
    Maintenance and support ..............     1,142      1,113      1,070      1,091         988         978        978       949
                                            --------   --------   --------   --------    --------    --------   --------  --------
        Total revenues ...................     8,270      9,059     12,366      9,316       9,501       9,896     13,981    11,173
                                            --------   --------   --------   --------    --------    --------   --------  --------
Gross margin:
    The Work Number services .............     2,854      3,028      3,128      3,960       4,239       4,212      4,521     4,892
    Unemployment cost management
        services .........................        --         --         --         --          --          --         --       398
    Human resources and benefits
        application services .............      (449)      (890)     3,148       (200)       (452)       (687)     3,278        88
    Customer premises systems ............       177        906        489       (482)        (63)        415        179      (313)
    Maintenance and support ..............       802        778        751        810         677         705        751       732
    Inventory write-down .................        --         --         --         --          --        (307)        --        --
                                            --------   --------   --------   --------    --------    --------   --------  --------
        Total gross margin ...............     3,384      3,822      7,516      4,088       4,401       4,338      8,729     5,797
                                            --------   --------   --------   --------    --------    --------   --------  --------
Operating expenses:
    Selling and marketing ................     1,959      2,003      2,381      2,031       2,190       2,347      2,113     1,866
    General and administrative ...........     1,368      1,500      1,566      1,333       1,335       2,029      1,992     2,098
    Intellectual property settlement .....        --         --         --      1,612          --          --         --        --
    Restructuring charge .................        --         --         --         --          --       2,627         --        --
                                            --------   --------   --------   --------    --------    --------   --------  --------
        Total operating expenses .........     3,327      3,503      3,947      4,976       3,525       7,003      4,105     3,964
                                            --------   --------   --------   --------    --------    --------   --------  --------
Operating income (expense) ...............        57        319      3,569       (888)        876      (2,665)     4,624     1,833
                                            ========   ========   ========   ========    ========    ========   ========  ========
Gain from discontinued operations, net ...        --         36         --         --          --          --         --        --
                                            ========   ========   ========   ========    ========    ========   ========  ========
Cumulative effect of change in
    accounting principle, net of tax .....    (1,655)        --         --         --          --          --         --        --
                                            ========   ========   ========   ========    ========    ========   ========  ========
Net earnings (loss) ......................  $ (1,560)  $    306   $  2,195   $   (419)   $    575    $ (1,376)  $  3,303  $  1,431
                                            ========   ========   ========   ========    ========    ========   ========  ========
Diluted earnings (loss) per share:
    Continuing operations ................  $   0.01   $   0.02   $   0.20   $  (0.04)   $   0.05    $  (0.11)  $   0.23  $   0.10
    Discontinued operations, net .........        --       0.01         --         --          --          --         --        --
    Cumulative effect of change in
        accounting principle .............     (0.16)        --         --         --          --          --         --        --
                                            --------   --------   --------   --------    --------    --------   --------  --------
        Net earnings (loss) ..............  $  (0.15)  $   0.03   $   0.20   $  (0.04)   $   0.05    $  (0.11)  $   0.23  $   0.10
                                            ========   ========   ========   ========    ========    ========   ========  ========
</Table>

<Table>
<Caption>
                                                                                 QUARTERS ENDED
                                                -----------------------------------------------------------------------------------
                                                JUNE 30,   SEPT. 30,  DEC. 31,  MARCH 31,  JUNE 30,  SEPT. 30,  DEC. 31,  MARCH 31,
                                                  2000       2000       2000      2001       2001       2001       2001      2002
                                                --------   ---------  --------  ---------  --------  ---------  --------  ---------
                                                                                   (RESTATED)
<S>                                             <C>        <C>        <C>       <C>        <C>       <C>        <C>       <C>
Gross margin percentage by revenue category:
    The Work Number services .................    68.9%      66.3%      68.3%     67.6%      69.5%      63.3%      65.9%     64.7%
     Unemployment cost management
        services .............................      --         --         --        --         --         --         --      46.9
    Human resources and benefits
        application services .................   (52.5)     (86.3)      61.0     (13.2)     (32.8)     (53.6)      59.1       5.7
    Customer premises systems ................     8.3       38.6       31.4     (56.8)      (6.1)      42.4       29.6    (121.8)
    Maintenance and support ..................    70.2       69.9       70.2      74.2       68.5       72.1       76.8      77.1
</Table>


                                       31
<PAGE>

<Table>
<Caption>
                                                                                 QUARTERS ENDED
                                                 ----------------------------------------------------------------------------------
                                                 JUNE 30,  SEPT. 30,  DEC. 31,  MARCH 31,  JUNE 30,  SEPT. 30,  DEC. 31,  MARCH 31,
                                                   2000       2000      2000      2001       2001      2001       2001      2002
                                                 --------  ---------  --------  ---------  --------  ---------  --------  ---------
                                                                                    (RESTATED)
<S>                                              <C>       <C>        <C>       <C>        <C>       <C>        <C>       <C>
PERCENTAGE OF TOTAL REVENUES:
Revenues:
    The Work Number services ..................    50.1%      50.4%     37.0%     62.9%      64.2%     67.3%      49.0%     67.7%
    Unemployment cost management services .....      --         --        --        --         --        --         --       7.6
    Human resources and benefits application
        services ..............................    10.4       11.4      41.7      16.3       14.5      12.9       39.6      13.9
    Customer premises systems .................    25.7       25.9      12.6       9.1       10.8       9.9        4.3       2.3
    Maintenance and support ...................    13.8       12.3       8.7      11.7       10.4       9.9        7.0       8.5
                                                 ------     ------    ------    ------     ------    ------     ------    ------
        Total revenues ........................   100.0      100.0     100.0     100.0      100.0     100.0      100.0     100.0
Cost of revenues ..............................    59.1       57.8      39.2      56.1       53.7      56.2       37.6      48.1
                                                 ------     ------    ------    ------     ------    ------     ------    ------
Gross margin ..................................    40.9       42.2      60.8      43.9       46.3      43.8       62.4      51.9
                                                 ------     ------    ------    ------     ------    ------     ------    ------
Operating expenses:
    Selling and marketing .....................    23.7       22.1      19.3      21.8       23.1      23.7       15.1      16.7
    General and administrative ................    16.5       16.6      12.6      14.3       14.0      20.5       14.2      18.8
    Intellectual property settlement ..........      --         --        --      17.3         --        --         --        --
    Restructuring charge ......................      --         --        --        --         --      26.5         --        --
                                                 ------     ------    ------    ------     ------    ------     ------    ------
        Total operating expenses ..............    40.2       38.7      31.9      53.4       37.1      70.7       29.3      35.5
                                                 ------     ------    ------    ------     ------    ------     ------    ------
Operating income ..............................     0.7        3.5      28.9      (9.5)       9.2     (26.9)      33.1      16.4
                                                 ======     ======    ======    ======     ======    ======     ======    ======
Gain from discontinued operations, net ........      --        0.4        --        --         --        --         --        --
                                                 ======     ======    ======    ======     ======    ======     ======    ======
Cumulative effect of change in accounting
    principle, net of tax .....................   (20.0)        --        --        --         --        --         --        --
                                                 ======     ======    ======    ======     ======    ======     ======    ======
Net earnings ..................................   (18.9)%      3.4%     17.8%     (4.5)%      6.1%    (13.9)%     23.6%     12.8%
                                                 ======     ======    ======    ======     ======    ======     ======    ======
</Table>

Our revenues, margins and operating results have fluctuated in the past, and are
likely to continue to fluctuate in the future, on an annual and quarterly basis,
as a result of a number of factors, most of which are outside of our control, as
discussed in "Risk Factors--Our quarterly and annual operating results may
fluctuate significantly, which could cause our stock price to decline
significantly."

Because of the seasonal variations of our human resources and benefits
application services offerings, a greater number of clients have services
available to them from October through December than during any other period
during the year. As a result, revenues in our third fiscal quarter are
substantially higher than in the other three quarters of the year. In fiscal
2001 and 2002, over fifty percent of annual revenues in this revenue line have
been recorded in the third fiscal quarter. Revenues generated from our W-2
eXpress service are particularly affected by seasonality and are principally
earned in our fourth fiscal quarter. Our revenues have increased on a
quarter-by-quarter comparison in fiscal 2002 over fiscal 2001 due to the
addition of new clients seeking to outsource non-core functions.

Revenues from our Ti3 subsidiary have historically been reported within our
human resources and benefits application services revenue line since their
acquisition date of July, 2002. We have reclassified this revenue into The Work
Number Services revenue line retroactively to July, 2002 in the above table, and
in our consolidated statement of earnings included in this Annual Report on Form
10-K.

LIQUIDITY AND CAPITAL RESOURCES

In recent years, we have financed our operations through cash flows from
operations.

On August 8, 2001 we completed a secondary stock offering of 2,950,000 shares of
our common stock, including 200,000 shares of a selling shareholder, resulting
in gross proceeds to the Company of $83.1 million. Additionally, we incurred
$644,000 of costs related to the transaction which were offset against the
proceeds. The share amounts discussed above do not include the effect of the 10%
stock dividend declared on September 6, 2001.

Our working capital was $14.2 million at March 31, 2001 and $3.0 million at
March 31, 2002. Total working capital decreased in fiscal 2002 due principally
to utilizing cash for our March 27, 2002 acquisitions.

Our accounts receivable increased from $7.4 million at March 31, 2001 to $12.5
million at March 31, 2002. The increase was due to the addition of accounts
receivable related to our March 27, 2002 acquisitions.

Our capital expenditures, principally purchases of computer equipment, were $1.6
million in fiscal 2002. At March 31, 2002, we had no significant capital
spending or purchase commitments other than normal purchase commitments and
commitments under


                                       32
<PAGE>

facilities and operating leases, but would expect capital expenditures to
increase during the next two fiscal years, as we integrate the operations of our
acquisitions.

In November 2000, our board of directors authorized us to repurchase up to
400,000 shares of our stock in the open market, or through privately negotiated
transactions over the following two-year period. In November 2001, this plan was
extended to November 2004, and the number of shares was increased to one
million. We repurchased 287,500 shares for $5.5 million during fiscal 2002.
Cumulative shares repurchased amount to 297,500. Share amounts are reported on a
pre-dividend basis. Except for the 120,951 shares remaining in the treasury at
March 31, 2002, all shares repurchased have been reissued in connection with
employee stock option exercises and employee stock purchase plan purchases.

During fiscal 2002, we paid quarterly dividends on our common stock, declaring a
total of $0.03 in dividends during each quarter of fiscal 2002.

We believe that our working capital, together with our anticipated cash flows
from operations should be sufficient to meet our working capital and capital
expenditure requirements for at least the next 12 months.

In connection with the acquisitions of the GM Unemployment Compensation Business
and Frick, on March 27, 2002, pursuant to a loan agreement dated as of March 27,
2002, (the "Loan Agreement"), we obtained secured financing consisting of a
$30,000,000 term loan (the "Term Loan") and a $10,000,000 revolving credit
facility (the "Revolving Credit Facility") from LaSalle Bank National
Association, as administrative agent and lender, and Southwest Bank of St.
Louis, as lender, and any other lenders that may become party to the Loan
Agreement (collectively, the "Lenders"). We used the proceeds of the Term Loan
to pay a portion of the purchase price for the acquisitions; however, we have
not borrowed under the Revolving Credit Facility. We must repay principal of the
Term Loan in quarterly installments, with the final installment due on February
27, 2005. In addition, principal payments are required out of excess cash flow.
The Revolving Credit Facility also matures on February 27, 2005.

The Term Loan and advances under the Revolving Credit Facility bear interest at
rates we select under the terms of the Loan Agreement, including a base rate or
eurodollar rate, plus an applicable margin. Until March 27, 2003, eurodollar
rate loans will bear interest at the applicable eurodollar rate plus 2.25% and
base rate loans will bear interest at the applicable base rate plus 0.00%. After
that, the applicable margin for eurodollar rate loans will vary from 2.00% to
2.25%, and the applicable margin for base rate loans will remain at 0.00%, in
each case based upon our ratio of total indebtedness to EBITDA. We may make
prepayments under the Term Loan during the first twelve months after the closing
date without penalty, except that we will be obligated to pay a $600,000
prepayment premium under certain limited circumstances. In addition, if William
W. Canfield ceases serving as our chief executive officer during the first 24
months after closing, and we do not retain a substitute satisfactory to the
Lenders within 120 days, then we are required to repay all outstanding loans,
including both the Term Loan and Revolving Credit Facility.

The Loan Agreement is secured by security interests in substantially all our
assets and the assets of our three subsidiaries (Ti3, Garcia and Frick), the
guarantees of our three subsidiaries, and a pledge of the stock of each of those
subsidiaries.

The Loan Agreement includes certain covenants, including, without limitation,
restrictions on the use of proceeds of the Term Loan and loans made under the
Revolving Credit Facility. The Term Loan was to be used solely to pay a portion
of the purchase price for the acquisitions of the GM Unemployment Compensation
Business and Frick. The proceeds of loans made under the Revolving Credit
Facility may be used solely for working capital, permitted capital expenditures,
as the source for payment of our obligations with respect to certain existing
letters of credit, to pay the transaction cost of the Loan Agreement, and to
finance certain permitted acquisitions. The Loan Agreement also requires
compliance with certain financial covenants based on our minimum net worth,
minimum EBITDA, our ratio of total indebtedness to EBITDA and our ratio of
EBITDA to fixed charges. The Loan Agreement further requires compliance with
certain operating and other covenants which limit, among other things, the
incurrence of additional indebtedness by us and our subsidiaries, the amount of
capital expenditures to be made by us and our subsidiaries, sales of assets and
mergers and dissolutions, and impose restrictions on distributions to
shareholders, change of control of TALX, investments, acquisitions and liens,
and which require compliance, in all material respects, with material laws. The
Loan Agreement also contains various representations and warranties, including
among other things, the accuracy of financial statements and other information
delivered to the Lenders, the absence of changes which would have or would
reasonably be likely to have a material adverse effect (as such term is defined
in the Loan Agreement), and other representations and warranties customarily
included in secured credit facilities of this nature.


                                       33
<PAGE>

OTHER MATTERS

The Company is cooperating with a pending SEC investigation and is a defendant
in pending lawsuits which are described in note 8 of our Notes to Unaudited
Consolidated Financial Statements, which is incorporated by reference herein.

As described above, the Company is filing herewith restated financial statements
for each of the quarters ended June 30, 2000 through June 30, 2002 and for the
fiscal years ended March 31, 2001 and 2002. As a result of the restatement, we
could become subject to additional litigation or regulatory proceedings or both.
As of the date hereof, we are not aware of any litigation having been commenced
against us related to this restatement. However, such litigation could be
commenced against us in the future and the plaintiffs who have filed lawsuits
against us previously could amend their complaints to include claims related to
this restatement, and if so, we could not predict the outcome of any such
litigation at this time. Additionally, the lenders under our March 27, 2002 Loan
Agreement, which is described more fully above under Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources, could seek to exercise remedies which may be available to
them, such as acceleration of our loan, in the event they determine that, as a
result of the restatement discussed above or the SEC investigation discussed
above, we have breached a covenant or representation and warranty in the Loan
Agreement. If an unfavorable result occurred in any such action, our business
and financial conditions could be harmed.

As of the date hereof, the SEC is investigating our accounting for two items
which are the subject of this restatement. At this time, we cannot predict
whether or not any additional regulatory investigation related to this
restatement will be commenced, or if it is, the outcome of any such
investigation. However, if any such investigation were to result in a regulatory
proceeding or action against us, our business and financial condition could be
harmed.

Regardless of the outcome of any litigation or regulatory proceeding, litigation
and regulatory proceedings of this type are expensive and will require that we
devote substantial resources and executive time to defend these proceedings.

As a result of the delay in filing our Form 10-Q for the period ending September
30, 2002, The Nasdaq Stock Market notified us that effective Tuesday, November
26, 2002, the letter "E" would be appended to our trading symbol, signifying the
delay. Similarly, The Nasdaq Stock Market informed us that we were not in
compliance with the requirements of NASD Marketplace Rule 4310(c)(14) because we
had not then filed the Form 10-Q. Our Form 10-Q for the period ending September
30, 2002 was filed on December 17, 2002.

On December 20, 2002, we participated in an appeal hearing before a Nasdaq
Listing Qualifications Panel. Our potential delisting is stayed, pending the
determination of the Panel, which may consider public interest and other
factors. There can be no assurance that the panel will grant the request for
continued listing of our common stock.

                                       34
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS


<Table>
<Caption>
                                                                                                          PAGE
                                                                                                          ----
<S>                                                                                                       <C>
    TALX CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS:

    Report of KPMG LLP, Independent Auditors........................................................       36

    Consolidated Balance Sheets as of March 31, 2001 and 2002.......................................       37

    Consolidated Statements of Earnings for the years ended March 31, 2000, 2001 and 2002...........       38

    Consolidated Statements of Shareholders' Equity and Comprehensive Income for the years
    ended March 31, 2000, 2001 and 2002.............................................................       39

    Consolidated Statements of Cash Flows for the years ended March 31, 2000, 2001 and 2002.........       41

    Notes to Consolidated Financial Statements......................................................       42
</Table>


                                       35
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders of
TALX Corporation:

We have audited the accompanying consolidated balance sheets of TALX Corporation
and subsidiaries as of March 31, 2001 and 2002, and the related consolidated
statements of earnings, shareholders' equity and comprehensive income, and cash
flows for each of the years in the three-year period ended March 31, 2002. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of TALX Corporation and
subsidiaries as of March 31, 2001 and 2002, and the results of their operations
and their cash flows for each of the years in the three-year period ended March
31, 2002, in conformity with accounting principles generally accepted in the
United States of America.

As discussed in Note 2 to the consolidated financial statements, the Company has
restated the accompanying consolidated balance sheets as of March 31, 2001 and
2002, the related consolidated statements of earnings for each of the years in
the three year period ended March 31, 2002, and the related consolidated
statements of shareholders' equity and comprehensive income, and cash flows for
each of the years in the two year period ended March 31, 2002.

As also discussed in Note 2 to the consolidated financial statements, effective
April 1, 2000, the Company changed its method of accounting for revenue
recognition.


/s/ KPMG LLP


St. Louis, Missouri
April 24, 2002, except as to Note 2, which
is as of December 20, 2002


                                       36
<PAGE>

                        TALX CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
             (IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
                                   (RESTATED)

<Table>
<Caption>
                                                                                                      MARCH 31,
                                                                                               ------------------------
                                                                                                  2001           2002
                                                                                               ---------      ---------
<S>                                                                                            <C>            <C>
ASSETS
Current assets:
   Cash and cash equivalents .............................................................     $   5,167      $  21,431
   Short-term investments ................................................................         4,558             --
   Accounts receivable, net ..............................................................         7,407         12,469
   Inventories ...........................................................................           627            104
   Work in progress, less progress billings ..............................................         1,043          1,377
   Prepaid expenses and other current assets .............................................         2,658          3,340
   Deferred tax assets, net ..............................................................         2,727          2,948
                                                                                               ---------      ---------
     Total current assets ................................................................        24,187         41,669
Property and equipment, net ..............................................................         5,160         11,357
Capitalized software development costs, net of amortization
   of $5,620 in 2001 and $966 in 2002 ....................................................         4,007          3,262
Goodwill .................................................................................            --        102,564
Other intangibles, net ...................................................................            --         19,175
Other assets .............................................................................            80          1,711
                                                                                               ---------      ---------
                                                                                               $  33,434      $ 179,738
                                                                                               =========      =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Current portion of capitalized lease obligations ......................................     $      --      $     156
   Current portion of long term debt .....................................................            --          8,000
   Accounts payable ......................................................................           495          1,200
   Accrued expenses and other liabilities ................................................         4,829         20,455
   Dividends payable .....................................................................           282            413
   Income taxes payable ..................................................................            24            814
   Deferred revenue ......................................................................         4,381          7,632
                                                                                               ---------      ---------
     Total current liabilities ...........................................................        10,011         38,670
Deferred tax liabilities, net ............................................................         1,101            371
Capitalized lease obligations, less current portion ......................................            --            152
Long term debt, less current portion .....................................................            --         22,000
Other long term liabilities ..............................................................            --          2,417
                                                                                               ---------      ---------
     Total liabilities ...................................................................        11,112         63,610
                                                                                               ---------      ---------
Commitments and contingencies
Shareholders' equity:
   Preferred stock, $0.01 par value; authorized 5,000,000 shares and
     no shares issued or outstanding at March 31, 2001 and 2002 ..........................            --             --
   Common stock, $0.01 par value; authorized 30,000,000 shares, issued and outstanding
     9,404,439 shares at March 31, 2001 and 13,909,714 shares at March 31, 2002 ..........            94            139
   Additional paid-in capital ............................................................        34,288        162,058
   Accumulated deficit ...................................................................       (12,028)       (44,007)
   Accumulated other comprehensive income:
     Unrealized gain on securities classified as available for sale, net of tax of $22 ...            35             --
   Treasury stock, at cost, 3,251 shares at March 31, 2001 and 120,951
     shares at March 31, 2002 ............................................................           (67)        (2,062)
                                                                                               ---------      ---------
     Total shareholders' equity ..........................................................        22,322        116,128
                                                                                               ---------      ---------
                                                                                               $  33,434      $ 179,738
                                                                                               =========      =========
</Table>

          See accompanying notes to consolidated financial statements.


                                       37
<PAGE>

                        TALX CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
             (IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
                                   (RESTATED)

<Table>
<Caption>
                                                                                                YEARS ENDED MARCH 31,
                                                                                   ------------------------------------------------
                                                                                       2000              2001              2002
                                                                                   ------------      ------------      ------------
<S>                                                                                <C>               <C>               <C>
Revenues:
    The Work Number services ...................................................   $     12,328      $     19,149      $     27,184
    Unemployment cost management services ......................................             --                --               848
    Human resources and benefits application services ..........................          7,993             8,565             9,757
    Customer premises systems ..................................................         10,835             6,882             2,870
    Maintenance and support ....................................................          4,876             4,417             3,893
                                                                                   ------------      ------------      ------------
        Total revenues .........................................................         36,032            39,013            44,552
                                                                                   ------------      ------------      ------------
Cost of revenues:
    The Work Number services ...................................................          3,973             6,179             9,320
    Unemployment cost management services ......................................             --                --               450
    Human resources and benefits application services ..........................          4,460             6,956             7,530
    Customer premises systems ..................................................          8,388             5,790             2,652
    Maintenance and support ....................................................          1,367             1,275             1,028
    Inventory write-down .......................................................             --                --               307
                                                                                   ------------      ------------      ------------
        Total cost of revenues .................................................         18,188            20,200            21,287
                                                                                   ------------      ------------      ------------
        Gross margin ...........................................................         17,844            18,813            23,265
                                                                                   ------------      ------------      ------------
Operating expenses:
    Selling and marketing ......................................................          7,820             8,374             8,516
    General and administrative .................................................          5,477             5,767             7,454
    Intellectual property settlement ...........................................             --             1,612                --
    Restructuring charge .......................................................             --                --             2,627
                                                                                   ------------      ------------      ------------
        Total operating expenses ...............................................         13,297            15,753            18,597
                                                                                   ------------      ------------      ------------
        Operating income .......................................................          4,547             3,060             4,668
                                                                                   ------------      ------------      ------------
Other income, net:
    Interest income ............................................................             85               539             1,493
    Interest expense ...........................................................             (4)               --               (18)
    Other, net .................................................................              1                23                92
                                                                                   ------------      ------------      ------------
        Total other income, net ................................................             82               562             1,567
                                                                                   ------------      ------------      ------------
        Earnings from continuing operations before income tax expense and
           cumulative effect of change in accounting principle .................          4,629             3,622             6,235
Income tax expense .............................................................          1,862             1,481             2,302
                                                                                   ------------      ------------      ------------
        Earnings from continuing operations before cumulative effect of
           change in accounting principle ......................................          2,767             2,141             3,933
Discontinued operations:
    Gain on operations and  disposal of discontinued operations, net ...........            117                36                --
                                                                                   ------------      ------------      ------------
        Earnings before cumulative effect of change in accounting principle ....          2,884             2,177             3,933
Cumulative effect of change in accounting principle, net of taxes ..............             --            (1,655)               --
                                                                                   ------------      ------------      ------------
        Net earnings ...........................................................   $      2,884      $        522      $      3,933
                                                                                   ============      ============      ============

Basic earnings per share:
    Continuing operations ......................................................   $       0.28      $       0.21      $       0.31
    Discontinued operations, net ...............................................           0.01                --                --
    Cumulative effect of change in accounting principle, net ...................             --             (0.16)               --
                                                                                   ------------      ------------      ------------
        Net earnings ...........................................................   $       0.29      $       0.05      $       0.31
                                                                                   ============      ============      ============
Diluted earnings per share:
    Continuing operations ......................................................   $       0.26      $       0.19      $       0.29
    Discontinued operations, net ...............................................           0.01                --                --
    Cumulative effect of change in accounting principle, net ...................             --             (0.15)               --
                                                                                   ------------      ------------      ------------
        Net earnings ...........................................................   $       0.27      $       0.05      $       0.29
                                                                                   ============      ============      ============

Weighted average number of common shares outstanding:
    Basic ......................................................................     10,091,349        10,255,928        12,622,689
    Diluted ....................................................................     10,527,236        11,068,583        13,481,683
</Table>


          See accompanying notes to consolidated financial statements.


                                       38
<PAGE>

                        TALX CORPORATION AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
                   YEARS ENDED MARCH 31, 2000, 2001, AND 2002
             (IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)

<Table>
<Caption>
                                                                               ACCUMULATED
                                                     ADDITIONAL                   OTHER                                    TOTAL
                                            COMMON     PAID-IN   ACCUMULATED  COMPREHENSIVE  TREASURY   COMPREHENSIVE  SHAREHOLDERS'
                                            STOCK      CAPITAL     DEFICIT        INCOME      STOCK        INCOME         EQUITY
                                           --------  ----------  -----------  -------------  --------   -------------  -------------
<S>                                        <C>       <C>         <C>          <C>            <C>        <C>            <C>
BALANCE AT MARCH 31, 1999 ...............  $     55   $ 23,478    $ (3,432)     $     --     $     (6)                   $ 20,095
Net earnings and total
    comprehensive income ................        --         --       2,884            --           --   $       2,884       2,884
                                                                                                        -------------
Repurchase of 58,500 shares of
    common stock ........................        --         --          --            --         (481)                       (481)
Issuance of 61,065 shares of
    common stock and 41,598 shares
    of treasury stock upon exercise
    of stock options ....................         1        271        (143)           --          329                         458
Issuance of 29,959 shares of
    common stock and 17,850 shares
    of treasury stock under
    employee stock purchase plan ........        --        229         (35)           --          158                         352
Issuance of 20,407 shares of
    common stock upon exercise
    of warrants .........................        --         --          --            --           --                          --
                                           --------   --------    --------      --------     --------   -------------    --------
BALANCE AT MARCH 31, 2000 ...............        56     23,978        (726)           --           --                      23,308
Net earnings, restated ..................        --         --         522            --           --   $         522         522
Net unrealized gain on marketable
    equity securities ...................        --         --          --            35           --              35          35
                                                                                                        -------------
Total comprehensive income, restated ....                                                               $         557
                                                                                                        =============
Repurchase of 112,500 shares of
    common stock ........................        --         --          --            --       (1,928)                     (1,928)
Issuance of 42,293 shares of
    common stock and 90,867 shares
    of treasury stock upon exercise
    of stock options ....................         1        193      (1,167)           --        1,560                         587
Issuance of 13,316 shares of
    common stock and 19,286 shares
    of treasury stock under
    employee stock purchase plan ........        --        218         (34)           --          301                         485
Issuance of 39,895 shares of
    common stock upon exercise
    of warrants .........................        --         --          --            --           --                          --
Issuance of 563,935 shares of
    common stock and 838 shares of
    treasury stock upon 10% stock
    dividend ............................         6      9,863      (9,869)           --           --                          --
Issuance of 3,128,552 shares of
    common stock and 66 shares of
    treasury stock upon 3-for-2
    stock split .........................        31        (31)         --            --           --                          --
Income tax benefit from stock
    options exercised ...................        --         67          --            --           --                          67
Cash dividends ($0.08 per share) ........        --         --        (754)           --           --                        (754)
                                           --------   --------    --------      --------     --------                    --------
BALANCE AT MARCH 31, 2001 ...............  $     94   $ 34,288    $(12,028)     $     35     $    (67)                   $ 22,322
                                           ========   ========    ========      ========     ========                    ========
</Table>

                                   (continued)


                                       39
<PAGE>

                        TALX CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                    YEARS ENDED MARCH 31, 2000, 2001 AND 2002
             (IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)

                                   (CONTINUED)

<Table>
<Caption>
                                                                           ACCUMULATED
                                                ADDITIONAL                    OTHER                                      TOTAL
                                     COMMON      PAID-IN   ACCUMULATED    COMPREHENSIVE   TREASURY    COMPREHENSIVE   SHAREHOLDERS'
                                      STOCK      CAPITAL     DEFICIT          INCOME        STOCK        INCOME          EQUITY
                                    ---------   ---------- -----------    -------------   ---------   -------------   -------------
<S>                                 <C>         <C>        <C>            <C>             <C>         <C>             <C>
BALANCE AT MARCH 31, 2001 ........  $      94   $  34,288   $ (12,028)     $      35      $     (67)                    $  22,322
Net earnings, restated ...........         --          --       3,933             --             --   $       3,933         3,933
Net unrealized loss on
    marketable equity
    securities ...................         --          --          --            (35)            --             (35)          (35)
                                                                                                      -------------
Total comprehensive income,
    restated .....................                                                                    $       3,898
                                                                                                      =============
Repurchase of 287,500 shares
    of common stock ..............         --          --          --             --         (5,486)                       (5,486)
Issuance of 74,109 shares of
    common stock and 95,742
    shares of treasury stock
    upon exercise of stock
    options ......................          1         373      (1,784)            --          2,125                           715
Issuance of 8,019 shares of
    common stock and 28,683
    shares of treasury stock
    under employee stock
    purchase plan ................         --         182         (66)            --            524                           640
Issuance of 67,667 shares of
    common stock and 45,375
    shares of treasury stock
    upon exercise of warrants ....         --          --        (667)            --            842                           175
Issuance of 1,263,626 shares of
    common stock upon 10% stock
    dividend .....................         13      31,831     (31,868)            --             --                           (24)
Issuance of 341,854 shares of
    common stock upon
    acquisitions .................          3      11,746          --             --             --                        11,749
Issuance of 2,750,000 shares
    of common stock upon
    secondary stock offering .....         28      82,373          --             --             --                        82,401
Income tax benefit from stock
    options exercised ............         --       1,265          --             --             --                         1,265
Cash dividends ($0.12 per
    share) .......................         --          --      (1,527)            --                                       (1,527)
                                    ---------   ---------   ---------      ---------      ---------                     ---------

BALANCE AT MARCH 31, 2002 ........  $     139   $ 162,058   $ (44,007)     $      --      $  (2,062)                    $ 116,128
                                    =========   =========   =========      =========      =========                     =========
</Table>


          See accompanying notes to consolidated financial statements.


                                       40
<PAGE>

                        TALX CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<Table>
<Caption>
                                                                                 YEARS ENDED MARCH 31,
                                                                      ----------------------------------------
                                                                         2000           2001           2002
                                                                      ---------      ----------     ----------
                                                                                     (RESTATED)     (RESTATED)
<S>                                                                   <C>            <C>            <C>
Cash flows from operating activities:
   Net earnings .................................................     $   2,884      $     522      $   3,933
   Adjustments to reconcile net earnings to net cash provided
     by operating activities:
     Depreciation and amortization ..............................         4,145          4,615          3,911
     Inventory write-down .......................................            --             --            307
     Capitalized software write-down ............................            --             --          1,941
     Discontinued operations, net ...............................           859             --             --
     Deferred taxes .............................................         1,800         (1,110)          (782)
     Cumulative effect of change in accounting principle ........            --          1,655             --
     Change in assets and liabilities, net of acquisitions:
       Accounts receivable ......................................        (1,428)           573          1,699
       Inventories ..............................................           430            205            216
       Work in progress, less progress billings .................           486          1,641             76
       Prepaid expenses and other current assets ................        (1,105)           (79)          (261)
       Other assets .............................................           (68)            60           (940)
       Accounts payable .........................................          (272)          (308)          (188)
       Accrued expenses and other liabilities ...................         1,056          2,092         (2,093)
       Income taxes payable .....................................            87            (18)         2,082
       Deferred revenue .........................................           317           (539)         1,444
                                                                      ---------      ---------      ---------
         Net cash provided by operating activities ..............         9,191          9,309         11,345
                                                                      ---------      ---------      ---------
Cash flows from investing activities:
   Additions to property and equipment ..........................        (1,678)        (1,819)        (1,606)
   Acquisitions, net of cash acquired ...........................            --             --       (102,477)
   Capitalized software development costs .......................        (1,818)        (2,766)        (2,357)
   Proceeds from maturity of short-term investments .............            --          3,000          5,365
   Proceeds from sale of short-term investments .................            --             --        233,097
   Purchases of short-term investments ..........................        (3,015)        (4,505)      (234,126)
                                                                      ---------      ---------      ---------
     Net cash used in investing activities ......................        (6,511)        (6,090)      (102,104)
                                                                      ---------      ---------      ---------
Cash flows from financing activities:
   Dividends paid ...............................................            --           (472)        (1,396)
   Borrowings under long-term debt facility .....................            --             --         30,000
   Issuance of common stock .....................................           810          1,072         83,905
   Repurchase of common stock ...................................          (481)        (1,928)        (5,486)
                                                                      ---------      ---------      ---------
     Net cash provided by (used in) financing activities ........           329         (1,328)       107,023
                                                                      ---------      ---------      ---------
     Net increase in cash and cash equivalents ..................         3,009          1,891         16,264
Cash and cash equivalents at beginning of year ..................           267          3,276          5,167
                                                                      ---------      ---------      ---------
Cash and cash equivalents at end of year ........................     $   3,276      $   5,167      $  21,431
                                                                      =========      =========      =========
</Table>


          See accompanying notes to consolidated financial statements.


                                       41
<PAGE>

                        TALX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2001 AND 2002

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (a)  Description of Business

We are the leading provider of automated employment and income verification and
unemployment cost management services and a leader in providing outsourced
employee self-service applications. Our services enable mortgage lenders,
pre-employment screening companies, employers and other authorized users to
obtain employee human resources and payroll information. We also provide
unemployment insurance claims processing and unemployment tax planning and
management to a broad range of employers. Further, we allow employees to review
and modify information in human resources, benefits and payroll management
information systems without requiring employer assistance.

Our services and software use interactive web and interactive voice response
software, fax and other technologies and are designed to enhance service levels,
improve productivity and reduce costs by automating historically labor
intensive, paper-based processes and enabling users to perform self-service
transactions. We typically serve large organizations, including approximately
two-thirds of the Fortune 500 and a number of federal, state and local
government agencies.

     (b)  Principles of Consolidation

The consolidated financial statements include the accounts of TALX Corporation
and its subsidiaries. All significant intercompany balances and transactions
have been eliminated in consolidation.

     (c)  Cash and Cash Equivalents

We consider all highly liquid investments with an original maturity of three
months or less to be cash and cash equivalents.

     (d)  Short-term Investments

Short-term investments at March 31, 2001 consist of U.S. government agency debt
instruments. We classify our debt and marketable equity securities in one of two
categories: available-for-sale or held-to-maturity. Held-to-maturity securities
are those securities which we have the ability and intent to hold until
maturity. All other securities are classified as available-for-sale. All of our
securities were classified as available-for-sale at March 31, 2001. Interest
income is recognized when earned. Debt securities classified as
available-for-sale are stated at market value.

     (e)  Inventories

Inventories are stated at the lower of cost (average) or market. Inventories
consist primarily of hardware and spare parts.

     (f)  Property and Equipment

Property and equipment is recorded at cost less accumulated depreciation and
amortization. Depreciation is computed using straight-line and accelerated
methods over the estimated useful lives of the assets. Amortization of leasehold
improvements is computed using the straight-line method over the lesser of the
useful life of the asset or lease term.

     (g)  Product Development and Capitalized Software Development Costs

Product development costs are charged to operations as incurred. Software
development costs are expensed as incurred until technological feasibility is
achieved, after which they are capitalized on a product-by-product basis.
Amortization of capitalized software development costs is computed using the
straight-line method over the remaining estimated economic life of the product,
which is typically three years. Amortization of capitalized software development
costs starts when the product is available for general release to clients.


                                       42
<PAGE>

     (h)  Goodwill and Other Intangible Assets

The Company has adopted the provisions of the Financial Accounting Standards
Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 141,
"Business Combinations," and will adopt SFAS No. 142, "Goodwill and Other
Intangible Assets" as of April 1, 2002. SFAS No. 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001. SFAS No. 142 requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually. SFAS No. 142 also requires that intangible assets
with definite useful lives be amortized over their respective estimated useful
lives to their estimated residual values.

     (i)  Revenue Recognition, Work in Progress and Deferred Revenue

Revenues from The Work Number are recognized in the period that they are earned,
from transaction fees charged to users for verifications of employment history
and income. Additionally, revenue for set up fees, monthly maintenance and
employer conversion fees are recognized on a straight-line basis from the time
the service is available to be used by our clients through the end of the
service period. Revenues from our unemployment cost management services, called
UC eXpress, are recognized in the period that they are earned, evenly over the
life of the contract. Transaction fees are recorded as the services are
provided. Revenue which is contingent upon achieving certain performance
criteria is recognized when those criteria are met. Human resources and benefits
application services revenue is primarily recognized on a straight-line basis
from the time the service is available to be used by our clients through the end
of the service period. Because of seasonal variations of our service offerings,
a greater number of clients have services available to them from October through
December than during any other period during the year. As a result, revenues in
our third fiscal quarter are substantially higher than in the other three
quarters of the year. Historically, over fifty percent of annual revenues in
this revenue line have been recorded in the third fiscal quarter. We recognize
hardware and software license revenue upon shipment based on vendor-specific
objective evidence. Revenues for customization services of customer premises
systems are recognized by the contract method of accounting using percentage of
completion for larger, more complex systems and the completed contract method
for smaller systems. Revenue from maintenance contracts is deferred and
recognized ratably over the maintenance period. Deferred revenue represents the
unearned portion of The Work Number setup fees, as well as, Human Resources and
Benefits Application Services, UC eXpress and maintenance fees. Commissions paid
are deferred and expensed over the related service period.

     (j)  Concentration of Credit Risk

We sell our services and software in a variety of industries. No client
represented over 10% of revenues in fiscal 2000, 2001 or 2002. We perform
periodic credit evaluations of our clients' financial condition and generally do
not require collateral; however, we maintain a security interest in hardware
until payment is received. Credit losses from clients have been within
management's expectations, and management believes the allowance for doubtful
accounts adequately provides for any expected losses.

     (k)  Income Taxes

We record income taxes under the asset and liability method. Deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.

     (l)  Fair Value of Financial Instruments

We disclose estimated fair values for our financial instruments. A financial
instrument is defined as cash or a contract that both imposes on one entity a
contractual obligation to deliver cash or another financial instrument to a
second entity and conveys to that second entity a contractual right to receive
cash or another financial instrument from the first entity. Our financial
instruments include long-term debt and a revolving line of credit facility. The
carrying value of these commitments approximate fair value due to their stated
interest rates approximating market rates. These estimated fair value amounts
have been determined using available market information or other appropriate
valuation methodologies.

     (m)  Stock Option Plans

We record stock-based compensation over the vesting period for the difference
between the quoted market price of an award at the


                                       43
<PAGE>

date of grant and the exercise price of the option, if any. We provide pro forma
net income and pro forma earnings per share disclosures for employee stock
option grants made in 1995 and later years as if the fair-value-based method had
been applied.

     (n)  Management's Use of Estimates

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

     (o)  Net Earnings Per Share

Basic earnings per share is computed using the weighted average number of common
shares outstanding during the period. Diluted earnings per share reflects the
incremental increase in common shares outstanding assuming the exercise of all
employee stock options and warrants that would have had a dilutive effect on
earnings per share.

     (p)  Reclassifications

Certain balances in prior fiscal years have been reclassified to conform to the
presentation adopted in the current fiscal year.

(2)  RESTATEMENT OF FINANCIAL STATEMENTS

In response to inquiries made by the Securities and Exchange Commission during
the course of its recent investigation, we commenced a review of the accounting
treatment for two items in the year ended March 31, 2001. We have restated
certain of our previously issued financial statements. As a result, certain
information in the accompanying financial statements and notes has been restated
from its original presentation. The two items reviewed were the accounting for a
patent technology license agreement and the award of certain bonus payments to
the executive officers. The $1.6 million paid in connection with the patent
technology license entered into with Ronald A. Katz Technology Licensing, L.P.
and A2D, L.P. in March 2001 had been recorded as an intangible asset and was
being amortized over a 10-year period. We have decided to expense the entire
amount in the March 2001 quarter. Certain bonus payments to the executive
officers, recommended by the compensation committee and approved by the board of
directors on May 15, 2001, totaling approximately $158,000, had been reflected
as an expense related to the quarter ended June 30, 2001. We have decided to
record the entire expense in the quarter ended March 31, 2001.

The effect of these restatements is to reduce earnings for the year ended March
31, 2001 by $1.1 million, after income tax, and to increase earnings over the
following 10-year period by the same dollar amount in the aggregate.

Independent of the SEC investigation, we have also considered recent guidance
from the SEC staff concerning the accounting for service transactions across
many industries, and have restated certain revenues, as well as attendant costs,
in the Human Resources and Benefits Application Services and The Work Number
Services revenue lines. This guidance requires, for certain of our contracts,
revenues to be recognized on a straight-line basis from the time the service is
available to be used by our clients through the end of the service period.
Previously, we had consistently recorded revenues as services were provided.
During 2001, the Company changed its method of accounting for these service
transactions to be in accordance with Staff Accounting Bulletin (SAB) No. 101.
The Company has retroactively adopted SAB 101 as of April 1, 2000, and has
recorded a cumulative effect adjustment of $1.7 million, net of tax of $1.1
million, in 2001 to reflect the application of the new accounting. The
cumulative effect adjustment was computed based on revenue of $2.9 million, and
related commission expense of $175,000, initially recognized in 2000 and prior
years that was delayed to 2001 and future periods under SAB 101. The impact of
this change on 2001 results was a decrease in earnings from continuing
operations of $1.1 million, or $0.10 diluted earnings per share.

Additionally, during the course of the review into these matters, we identified
an inaccuracy in the method of computing the weighted average shares outstanding
used for the computation of diluted earnings per share.

The following tables indicate the impact of all restatements to our statements
of operations and balance sheets. The restatements had no impact on our cash
flows from operations, investing activities or financing activities.


                                       44
<PAGE>

<Table>
<Caption>
                                                                                           FISCAL 2001
                                                                 --------------------------------------------------------------
                                                                  June 30,    Sept. 30,     Dec. 31,    March 31,
                                                                    2000         2000         2000         2001        Total
                                                                 ----------   ----------   ----------   ----------   ----------
                                                                        (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                                              <C>          <C>          <C>          <C>          <C>
AS RESTATED:
   STATEMENT OF OPERATIONS DATA:
   Revenues:
     The Work Number services                                         4,145        4,568        4,580        5,856       19,149
     Human resources and benefits application services                  856        1,031        5,158        1,520        8,565
   Cost of revenues:                                                                                                         --
     The Work Number services                                         1,291        1,540        1,452        1,896        6,179
     Human resources and benefits application services                1,305        1,921        2,010        1,720        6,956
   Gross margin                                                       3,384        3,822        7,516        4,088       18,813
   Operating expenses:                                                                                                       --
     Selling and marketing                                            1,959        2,003        2,381        2,031        8,374
     General and administrative                                       1,368        1,500        1,566        1,333        5,767
     Intellectual property settlement                                    --           --           --        1,612        1,612
   Operating income (loss)                                               57          319        3,569         (888)       3,060
   Total other income (expense), net                                    121          129          134          180          562
   Earnings (loss) before income tax expense and cumulative
     effect of change in accounting principle                           178          448        3,703         (708)       3,622
   Income tax expense (benefit)                                          83          178        1,508         (289)       1,481
   Net earnings (loss) before cumulative effect of change
     in accounting principle                                             95          306        2,195         (419)       2,177
   Cumulative effect of change in accounting principle               (1,655)          --           --           --       (1,655)
   Net earnings (loss)                                               (1,560)         306        2,195         (419)         522
                                                                 ==========   ==========   ==========   ==========   ==========

   Earnings (Loss) per share:
     Earnings (Loss) before cumulative effect of
       change in accounting principle                                  0.01         0.03         0.20        (0.04)        0.20
     Cumulative effect of change in accounting principle              (0.16)          --           --           --        (0.15)
                                                                 ----------   ----------   ----------   ----------   ----------
     Net earnings (loss)                                              (0.15)        0.03         0.20        (0.04)        0.05
                                                                 ==========   ==========   ==========   ==========   ==========

   Diluted Shares                                                10,189,484   10,930,813   11,175,945   10,336,701   11,068,583
                                                                 ==========   ==========   ==========   ==========   ==========

   BALANCE SHEET DATA:
   Assets:
     Work in progress, less progress billings                         2,122        1,880        1,979        1,043
     Prepaid expenses and other current assets                        1,475        1,720        1,550        2,658
     Deferred tax assets, net                                         1,986        2,502        1,874        2,727
     Total current assets                                            20,572       20,956       22,576       24,187
     Other assets                                                       128          125          112           80
     Total assets                                                    29,888       30,674       32,240       33,434
   Liabilities and shareholders' equity:
     Accrued expenses and other liabilities                             929        1,457        1,673        4,829
     Deferred revenue                                                 5,172        5,906        4,353        4,381
     Total current liabilities                                        7,222        8,442        8,062       10,011
     Total liabilities                                                8,459        9,602        9,235       11,112
     Accumulated deficit                                             (2,648)     (12,906)     (11,192)     (12,028)
     Total shareholders' equity                                      21,429       21,072       23,005       22,322
</Table>


                                       45
<PAGE>

<Table>
<Caption>
                                                                                           FISCAL 2001
                                                                 --------------------------------------------------------------
                                                                  June 30,    Sept. 30,     Dec. 31,    March 31,
                                                                    2000         2000         2000         2001        Total
                                                                 ----------   ----------   ----------   ----------   ----------
                                                                        (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                                              <C>          <C>          <C>          <C>          <C>
AS ORIGINALLY RECORDED:
   STATEMENT OF OPERATIONS DATA:
   Revenues:
     The Work Number services                                         4,132        4,531        4,635        5,796       19,094
     Human resources and benefits application services                2,061        2,806        3,490        2,338       10,694
   Cost of revenues:                                                                                                         --
     The Work Number services                                         1,291        1,540        1,452        1,896        6,179
     Human resources and benefits application services                1,305        1,921        2,009        1,720        6,956
   Gross margin                                                       4,576        5,560        5,904        4,846       20,887
   Operating expenses:                                                                                                       --
     Selling and marketing                                            2,055        2,144        2,249        2,094        8,542
     General and administrative                                       1,368        1,500        1,566        1,175        5,609
     Intellectual property settlement                                    --           --           --           --           --
   Operating income (loss)                                            1,153        1,916        2,089        1,577        6,736
   Total other income (expense), net                                    121          129          134          180          562
   Earnings (loss) before income tax expense and cumulative
     effect of change in accounting principle                         1,274        2,045        2,223        1,757        7,298
   Income tax expense (benefit)                                         533          833          902          722        2,990
   Net earnings (loss) before cumulative effect of change
     in accounting principle                                            741        1,248        1,321        1,035        4,345
   Cumulative effect of change in accounting principle                   --           --           --           --           --
   Net earnings (loss)                                                  741        1,248        1,321        1,035        4,345
                                                                 ==========   ==========   ==========   ==========   ==========

   Earnings (Loss) per share:
     Earnings (Loss) before cumulative effect of
       change in accounting principle                                  0.07         0.12         0.13         0.10         0.41
     Cumulative effect of change in accounting principle                 --           --           --           --           --
                                                                 ----------   ----------   ----------   ----------   ----------
     Net earnings (loss)                                               0.07         0.12         0.13         0.10         0.41
                                                                 ==========   ==========   ==========   ==========   ==========

   Diluted Shares                                                10,446,309   10,448,098   10,555,882   10,658,398   10,527,172
                                                                 ==========   ==========   ==========   ==========   ==========

   BALANCE SHEET DATA:
   Assets:
     Work in progress, less progress billings                         3,074        3,309        3,197        2,905
     Prepaid expenses and other current assets                        1,205        1,309        1,270        2,313
     Deferred tax assets, net                                           476          338          317          159
     Total current assets                                            19,744       19,810       21,957       23,136
     Other assets                                                       128          125          112        1,692
     Total assets                                                    29,060       29,528       31,621       33,995
   Liabilities and shareholders' equity:
     Accrued expenses and other liabilities                             929        1,457        1,673        4,670
     Deferred revenue                                                 2,042        1,516        1,365        1,278
     Total current liabilities                                        4,092        4,052        5,074        6,749
     Total liabilities                                                5,330        5,212        6,247        7,850
     Accumulated deficit                                               (347)      (9,662)      (8,822)      (8,205)
     Total shareholders' equity                                      23,730       24,316       25,375       26,145
</Table>




                                       46

<PAGE>
<Table>
<Caption>
                                                                                            FISCAL 2002
                                                                 --------------------------------------------------------------
                                                                  June 30,    Sept. 30,     Dec. 31,    March 31,
                                                                    2001         2001         2001         2002        Total
                                                                 ----------   ----------   ----------   ----------   ----------
                                                                        (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                                              <C>          <C>          <C>          <C>          <C>
AS RESTATED:
   STATEMENT OF OPERATIONS DATA:
   Revenues:
     The Work Number services                                         6,103        6,659        6,856        7,566       27,184
     Human resources and benefits application services                1,380        1,281        5,543        1,553        9,757
   Cost of revenues:                                                                                                         --
     The Work Number services                                         1,864        2,447        2,335        2,674        9,320
     Human resources and benefits application services                1,832        1,968        2,265        1,465        7,530
   Gross margin                                                       4,401        4,338        8,729        5,797       23,265
   Operating expenses:                                                                                                       --
     Selling and marketing                                            2,190        2,347        2,113        1,866        8,516
     General and administrative                                       1,335        2,029        1,992        2,098        7,454
     Intellectual property settlement                                    --           --           --           --           --
   Operating income (loss)                                              876       (2,665)       4,624        1,833        4,668
   Total other income (expense), net                                    123          476          564          404        1,567
   Earnings (loss) before income tax expense and cumulative
     effect of change in accounting principle                           999       (2,189)       5,188        2,237        6,235
   Income tax expense (benefit)                                         424         (813)       1,885          806        2,302
   Net earnings (loss) before cumulative effect of change
     in accounting principle                                            575       (1,376)       3,303        1,431        3,933
   Cumulative effect of change in accounting principle                   --           --           --           --           --
   Net earnings (loss)                                                  575       (1,376)       3,303        1,431        3,933
                                                                 ==========   ==========   ==========   ==========   ==========

   Earnings (Loss) per share:
     Earnings (Loss) before cumulative effect of
       change in accounting principle                                  0.05        (0.11)        0.23         0.10         0.29
     Cumulative effect of change in accounting principle                 --           --           --           --           --
                                                                 ----------   ----------   ----------   ----------   ----------
     Net earnings (loss)                                               0.05        (0.11)        0.23         0.10         0.29
                                                                 ==========   ==========   ==========   ==========   ==========

   Diluted Shares                                                11,409,587   12,592,057   14,468,025   14,499,913   13,481,683
                                                                 ==========   ==========   ==========   ==========   ==========

   BALANCE SHEET DATA:
   Assets:
     Work in progress, less progress billings                         1,227        1,299          849        1,377
     Prepaid expenses and other current assets                        3,489        4,833        3,035        3,340
     Deferred tax assets, net                                         3,072        3,589        2,904        2,948
     Total current assets                                            22,635      107,669      105,568       41,669
     Other assets                                                        70           62           57        1,711
     Total assets                                                    32,111      126,965      124,807      179,738
   Liabilities and shareholders' equity:
     Accrued expenses and other liabilities                           1,156        2,457        2,100       20,455
     Deferred revenue                                                 5,308        7,232        6,323        7,632
     Total current liabilities                                        7,518       11,156        9,563       38,670
     Total liabilities                                                8,636       12,025        9,880       63,610
     Accumulated deficit                                            (11,794)     (45,456)     (44,814)     (44,007)
     Total shareholders' equity                                      23,475      114,940      114,927      116,128
</Table>



                                       47

<PAGE>

<Table>
<Caption>
                                                                                            FISCAL 2002
                                                                 --------------------------------------------------------------
                                                                  June 30,    Sept. 30,     Dec. 31,    March 31,
                                                                    2001         2001         2001         2002        Total
                                                                 ----------   ----------   ----------   ----------   ----------
                                                                        (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                                              <C>          <C>          <C>          <C>          <C>
AS ORIGINALLY RECORDED:
   STATEMENT OF OPERATIONS DATA:
   Revenues:
     The Work Number services                                         6,072        6,666        7,186        7,488       27,412
     Human resources and benefits application services                2,580        2,924        3,416        1,878       10,797
   Cost of revenues:                                                                                                         --
     The Work Number services                                         1,884        2,468        2,356        2,695        9,403
     Human resources and benefits application services                1,853        1,988        2,286        1,484        7,610
   Gross margin                                                       5,529        5,947        6,890        6,004       24,370
   Operating expenses:                                                                                                       --
     Selling and marketing                                            2,260        2,447        2,007        1,882        8,596
     General and administrative                                       1,493        2,029        1,992        2,099        7,612
     Intellectual property settlement                                    --           --           --           --           --
   Operating income (loss)                                            1,776       (1,156)       2,891        2,023        5,535
   Total other income (expense), net                                    123          476          564          404        1,567
   Earnings (loss) before income tax expense and cumulative
     effect of change in accounting principle                         1,899         (680)       3,455        2,427        7,102
   Income tax expense (benefit)                                         750         (258)       1,245          875        2,612
   Net earnings (loss) before cumulative effect of change
     in accounting principle                                          1,149         (422)       2,210        1,552        4,490
   Cumulative effect of change in accounting principle                   --           --           --           --           --
   Net earnings (loss)                                                1,149         (422)       2,210        1,552        4,490
                                                                 ==========   ==========   ==========   ==========   ==========

   Earnings (Loss) per share:
     Earnings (Loss) before cumulative effect of
       change in accounting principle                                  0.11        (0.03)        0.16         0.11         0.34
     Cumulative effect of change in accounting principle                 --           --           --           --           --
                                                                 ----------   ----------   ----------   ----------   ----------
     Net earnings (loss)                                               0.11        (0.03)        0.16         0.11         0.34
                                                                 ==========   ==========   ==========   ==========   ==========

   Diluted Shares                                                10,918,572   12,592,057   14,049,056   14,097,402   13,021,313
                                                                 ==========   ==========   ==========   ==========   ==========

   BALANCE SHEET DATA:
   Assets:
     Work in progress, less progress billings                         3,383        3,307        1,964        2,595
     Prepaid expenses and other current assets                        3,077        4,321        2,629        2,917
     Deferred tax assets, net                                           179          140           94           70
     Total current assets                                            21,486      105,716      103,467       39,586
     Other assets                                                     1,640        1,591        1,545        3,158
     Total assets                                                    32,531      126,541      124,193      179,101
   Liabilities and shareholders' equity:
     Accrued expenses and other liabilities                           1,155        2,457        2,100       20,455
     Deferred revenue                                                 1,331        1,455        1,452        2,616
     Total current liabilities                                        3,540        5,380        4,692       33,654
     Total liabilities                                                4,658        6,249        5,008       58,594
     Accumulated deficit                                             (7,396)     (40,104)     (40,556)     (39,628)
     Total shareholders' equity                                      27,873      120,292      119,185      120,507
</Table>





                                       48
<PAGE>

<Table>
<Caption>
                                                                                        FISCAL 2003
                                                                                        -----------
                                                                                         June 30,
                                                                                           2002
                                                                                        -----------
                                                                        (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                                                     <C>
AS RESTATED:
   STATEMENT OF OPERATIONS DATA:
   Revenues:
     The Work Number services                                                                7,617
     Human resources and benefits application services                                       1,445
   Cost of revenues:
     The Work Number services                                                                2,815
     Human resources and benefits application services                                       1,588
   Gross margin                                                                             14,423
   Operating expenses:
     Selling and marketing                                                                   4,863
     General and administrative                                                              5,855
     Intellectual property settlement                                                           --
   Operating income (loss)                                                                   3,705
   Total other income (expense), net                                                          (331)
   Earnings (loss) before income tax expense and cumulative
     effect of change in accounting principle                                                3,374
   Income tax expense (benefit)                                                              1,299
   Net earnings (loss) before cumulative effect of change
     in accounting principle                                                                 2,075
   Cumulative effect of change in accounting principle                                          --
   Net earnings (loss)                                                                       2,075
                                                                                        ==========

   Earnings (Loss) per share:
     Earnings (Loss) before cumulative effect of
       change in accounting principle                                                         0.14
     Cumulative effect of change in accounting principle                                        --
                                                                                        ----------
     Net earnings (loss)                                                                      0.14
                                                                                        ==========

   Diluted Shares                                                                       14,399,979
                                                                                        ==========

   BALANCE SHEET DATA:
   Assets:
     Work in progress, less progress billings                                                1,284
     Prepaid expenses and other current assets                                               3,822
     Deferred tax assets, net                                                                3,287
     Total current assets                                                                   29,559
     Other assets                                                                            1,642
     Total assets                                                                          170,080
   Liabilities and shareholders' equity:
     Accrued expenses and other liabilities                                                  8,498
     Deferred revenue                                                                        8,745
     Total current liabilities                                                              28,325
     Total liabilities                                                                      51,356
     Accumulated deficit                                                                   (43,954)
     Total shareholders' equity                                                            118,724
</Table>




                                       49
<PAGE>
<Table>
<Caption>
                                                                                                FISCAL 2003
                                                                                                -----------
                                                                                                 June 30,
                                                                                                   2002
                                                                                                -----------
                                                                              (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                                                           <C>
AS ORIGINALLY RECORDED:
   STATEMENT OF OPERATIONS DATA:
   Revenues:
     The Work Number services                                                                        7,804
     Human resources and benefits application services                                               2,097
   Cost of revenues:
     The Work Number services                                                                        2,836
     Human resources and benefits application services                                               1,608
   Gross margin                                                                                     15,221
   Operating expenses:
     Selling and marketing                                                                           4,918
     General and administrative                                                                      5,854
     Intellectual property settlement                                                                   --
   Operating income (loss)                                                                           4,449
   Total other income (expense), net                                                                  (331)
   Earnings (loss) before income tax expense and cumulative
     effect of change in accounting principle                                                        4,118
   Income tax expense (benefit)                                                                      1,585
   Net earnings (loss) before cumulative effect of change
     in accounting principle                                                                         2,533
   Cumulative effect of change in accounting principle                                                  --
   Net earnings (loss)                                                                               2,533
                                                                                                ==========

   Earnings (Loss) per share:
     Earnings (Loss) before cumulative effect of
       change in accounting principle                                                                 0.18
     Cumulative effect of change in accounting principle                                                --
                                                                                                ----------
     Net earnings (loss)                                                                              0.18
                                                                                                ==========

   Diluted Shares                                                                               14,166,757
                                                                                                ==========

   BALANCE SHEET DATA:
   Assets:
     Work in progress, less progress billings                                                        2,817
     Prepaid expenses and other current assets                                                       3,344
     Deferred tax assets, net                                                                          122
     Total current assets                                                                           27,449
     Other assets                                                                                    3,047
     Total assets                                                                                  169,375
   Liabilities and shareholders' equity:
     Accrued expenses and other liabilities                                                          8,498
     Deferred revenue                                                                                3,203
     Total current liabilities                                                                      22,783
     Total liabilities                                                                              45,814
     Accumulated deficit                                                                           (39,118)
     Total shareholders' equity                                                                    123,561
</Table>



                                       50
<PAGE>


(3)  ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:

<Table>
<Caption>
                                                                                                     MARCH 31,
                                                                                             ------------------------
                                                                                                2001           2002
                                                                                             --------        --------
                                                                                                   (IN THOUSANDS)
<S>                                                                                          <C>             <C>
        Accounts receivable.............................................................     $  7,632        $ 13,011
        Less allowance for doubtful accounts............................................          225             542
                                                                                             --------        --------
                                                                                             $  7,407        $ 12,469
                                                                                             ========        ========
</Table>

Billings to customers are made in accordance with the terms of the individual
contracts.

The following table represents activity within our allowance for doubtful
accounts for the years ended March 31, 2000 and 2001:

<Table>
<Caption>
                                                                                                          (IN THOUSANDS)
                                                                                                          --------------
<S>                                                                                                       <C>
        Balance at March 31, 1999 .......................................................................    $    155
            Additions....................................................................................         346
            Write-offs...................................................................................        (131)
                                                                                                             --------
        Balance at March 31, 2000 .......................................................................    $    370
            Additions....................................................................................         462
            Write-offs...................................................................................        (607)
                                                                                                             --------
        Balance at March 31, 2001........................................................................         225
            Acquisitions.................................................................................         362
            Additions....................................................................................         505
            Write-offs...................................................................................        (550)
                                                                                                             --------
        Balance at March 31, 2002........................................................................    $    542
                                                                                                             ========
</Table>


                                       51
<PAGE>
(4)  PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<Table>
<Caption>
                                                                                 RANGE OF
                                                                                 ESTIMATED             MARCH 31,
                                                                                USEFUL LIVES   ------------------------
                                                                                (IN YEARS)       2001            2002
                                                                                ------------   ----------    ----------
                                                                                                     (IN THOUSANDS)
<S>                                                                             <C>            <C>           <C>
        Computer equipment...............................................         3-5          $    5,611    $   13,404
        Office furniture and equipment...................................         5-10                970         1,315
        External software................................................         3-5               1,303         2,074
        Leasehold improvements...........................................         3-10              3,667         3,882
                                                                                               ----------    ----------
                                                                                                   11,551        20,675
        Less accumulated depreciation and amortization...................                           6,391         9,318
                                                                                               ----------    ----------
                                                                                               $    5,160    $   11,357
                                                                                               ==========    ==========
</Table>

(5)  PRODUCT DEVELOPMENT AND CAPITALIZED SOFTWARE DEVELOPMENT COSTS

Product development costs and amortization of capitalized software development
costs for the years ended March 31, 2000, 2001 and 2002 were as follows:

<Table>
<Caption>
                                                                                               MARCH 31,
                                                                                ------------------------------------
                                                                                  2000          2001           2002
                                                                                --------     ---------     ---------
                                                                                          (IN THOUSANDS)
<S>                                                                             <C>          <C>           <C>
        Product development costs charged to general and
           administrative expenses.........................................     $    369     $     405     $     381
                                                                                ========     =========     =========
        Amortization of capitalized software development costs
           charged to cost of revenues.....................................     $  2,239     $   2,159     $   1,161
                                                                                ========     =========     =========
        Write-offs of capitalized software development costs...............     $     --     $      --     $   1,941
                                                                                ========     =========     =========
</Table>

(6)  ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS

We acquired three businesses during fiscal 2002.

On July 2, 2001, we completed our acquisition of Ti3, Inc. ("Ti3"). As
consideration for the acquisition, we paid the Ti3 shareholders approximately
$50,000 in cash and issued to them 341,854 shares of our common stock, for an
estimated aggregate value of $11.8 million, based on the then recent average
trading prices for our common stock. Additionally, we incurred $655,000 of costs
related to the transaction, which were capitalized into goodwill. Of the shares
issued, 34,187 were placed in a one-year escrow to support indemnification
obligations. We may make additional payments in cash or shares of our common
stock to Ti3 shareholders depending upon Ti3's financial performance in the 12
months immediately after the closing and utilization of Ti3's tax-loss
carry-forwards during such period. This acquisition was accounted for under the
purchase method, and is included in our results of operations for the period
beginning July 2, 2001 and ending March 31, 2002. None of the goodwill recorded
with this transaction will be deductible for tax purposes. The share amounts
discussed above do not include the effect of the 10% stock dividend declared on
September 6, 2001.

On March 27, 2002, our subsidiary, Garcia Acquisition Sub, Inc. ("Garcia"),
purchased certain of the assets and assumed certain of the liabilities of the
unemployment cost management services business (the "GM Unemployment
Compensation Business") of GatesMcDonald & Company, a subsidiary of Nationwide
Mutual Insurance Company. The GM Unemployment Compensation Business provides
unemployment cost management services to a broad range of employers.

The cost of the acquisition was $44.3 million, including transaction costs and
was paid in cash, a portion of which was financed with borrowings under our term
note agreement (see Note 7). The asset purchase agreement provides for
GatesMcDonald & Company to indemnify us for certain existing liabilities and
obligations of the business, subject to certain limitations. An escrow account,
to be maintained by a bank pursuant to the terms of an escrow agreement, is also
available for a fifteen-month period following the date of the asset purchase
agreement to satisfy the indemnification obligations of GatesMcDonald & Company


                                       52
<PAGE>

under the asset purchase agreement, subject to certain limitations contained in
the asset purchase agreement. For such purposes, four million dollars
($4,000,000) of the purchase price was paid into the escrow account. The
indemnification obligations of GatesMcDonald & Company with respect to tax and
certain employee benefit matters terminate upon the expiration of the applicable
statutes of limitation, authorization and title indemnification obligations
terminate after two years and all other indemnification obligations terminate 15
months from the date of the asset purchase agreement. The parties executed
several ancillary agreements in connection with the asset purchase agreement in
order to provide for the orderly transition of the GM Unemployment Compensation
Business and the employees of such Business from GatesMcDonald & Company to us.
These ancillary documents included a transition services agreement, an
intellectual property license agreement, a lease services agreement and an
employee services agreement. This acquisition was accounted for under the
purchase method, and is included in our results of operations for the period
beginning March 27, 2002 and ending March 31, 2002. We expect that 100% of the
goodwill recorded with this transaction will be deductible for tax purposes.

On March 27, 2002, we also purchased all of the 257,200 issued and outstanding
shares of common stock of James E. Frick, Inc., d/b/a The Frick Company, a
Missouri corporation ("Frick") from the James E. Frick Profit Sharing and
Employee Stock Ownership Plan (the "ESOP"), and options to acquire 190,500
shares of Frick's common stock held by the four principal optionholders. Frick
provides unemployment cost control, unemployment claims handling, tax planning
and related services and employment information verification services to a broad
range of clients. Frick is now our wholly owned subsidiary.

The total purchase price for the Frick acquisition was $79.7 million, including
transaction costs, which includes amounts allocable to offer to purchase
remaining options to purchase 29,000 shares held by key employee optionholders.
The purchase price was based on a value of $162.60 per share of common stock,
less in the case of an option, the exercise price and withholding and other
applicable taxes, plus up to $16.78 from the escrow, as described below. The
purchase price was paid in cash, a portion of which was financed with borrowing
under our term note agreement (see Note 7). Subsequent to the closing, we
purchased from the key employee optionholders the remaining options to purchase
29,000 shares of Frick's common stock subject to the same terms and conditions
as, and for a price per share of underlying common stock equal to that received
by, the four principal optionholders under the acquisition agreement. We expect
that 100% of the goodwill recorded with this transaction will be deductible for
tax purposes.

The terms of the acquisition agreement required the sellers to enter into an
escrow agreement with us. For such purpose, $8,000,000 of the purchase price was
deposited with a bank to be disbursed in accordance with the escrow agreement.
Of the escrow funds, $3,000,000 is available to satisfy our claims relating only
to the tax and intellectual property representations, warranties and covenants,
and the remainder is available to satisfy any type of indemnifiable claim under
the acquisition agreement. The sellers' indemnification obligations terminate,
and the undisputed escrow funds will be distributed on March 27, 2003. Except
for claims related to willful misrepresentation, our only remedy for indemnified
losses is against the escrow. This acquisition was accounted for under the
purchase method, and is included in our results of operations for the period
beginning March 27, 2001 and ending March 31, 2002.


                                       53
<PAGE>

The following table summarizes the estimated fair value of the assets acquired
and liabilities assumed for each of our three acquisitions as of the date of
each acquisition. We are currently in the process of obtaining third-party
valuations of certain intangible assets; thus, the following allocations of
purchase price are subject to refinement.

<Table>
<Caption>
                                                                    GM UNEMPLOYMENT
                                                                     COMPENSATION
                                               TI3         FRICK        BUSINESS       TOTALS
                                             --------     --------  ---------------   --------
                                                              (IN THOUSANDS)
<S>                                          <C>          <C>          <C>            <C>
    Cash and cash equivalents ..........     $    569     $  2,681     $     --       $  3,250
    Accounts receivable, net ...........          373        3,291        3,097          6,761
    Other current assets ...............           21          810           --            831
    Property and equipment, net ........          213        6,286          595          7,094
    Goodwill ...........................       10,994       62,205       29,365        102,564
    Other intangibles ..................          570        7,358       11,329         19,257
    Other assets .......................          388          173          518          1,079
                                             --------     --------     --------       --------
       Total assets acquired ...........       13,128       82,804       44,904        140,836
                                             --------     --------     --------       --------
    Current liabilities ................          454        2,567          601          3,622
    Other long term liabilities ........           --          569           --            569
                                             --------     --------     --------       --------
       Total liabilities assumed .......          454        3,136          601          4,191
                                             --------     --------     --------       --------
       Net assets acquired .............     $ 12,674     $ 79,668     $ 44,303       $136,645
                                             ========     ========     ========       ========
</Table>

The following table summarizes other intangible asset activity for fiscal 2002.
We are currently in the process of obtaining third-party valuations of certain
intangible assets; thus, the following amounts are subject to refinement.

<Table>
<Caption>
                                             CUSTOMER               CUSTOMER
                                               BASE      SOFTWARE   RECORDS       TOTALS
                                             --------    --------   --------     -------
                                                           (IN THOUSANDS)
<S>                                          <C>         <C>        <C>          <C>
Balance at March 31, 2001 ..............     $    --     $    --     $    --     $    --
Amounts acquired .......................      16,904         153       2,200      19,257
Amortization ...........................          44          38           1          83
                                             -------     -------     -------     -------
   Balance at March 31, 2002 ...........     $16,860     $   115     $ 2,199     $19,174
                                             =======     =======     =======     =======

Weighted Average Lives .................       14.82        3.00       20.00
                                             =======     =======     =======
</Table>


                                       54
<PAGE>

The following unaudited pro forma summarized results of operations for the
annual periods ended March 31, 2001 and 2002 for TALX and Ti3, Inc. and December
31, 2000 and 2001 for The Frick Company and the GM Unemployment Compensation
Business. These financial statements were prepared as though all three
acquisitions occurred on April 1, 2000 (in thousands, except per share amounts):

<Table>
<Caption>
                                                                                MARCH 31,
                                                                      -------------------------
                                                                         2001          2002
                                                                      -----------   -----------
                                                                       (RESTATED)    (RESTATED)
<S>                                                                   <C>           <C>
     Total revenue.................................................   $   108,640   $   117,663
                                                                      ===========   ===========
     Operating income..............................................         7,100         9,251
                                                                      ===========   ===========
     Net earnings..................................................         1,730         4,943
                                                                      ===========   ===========

     Earnings per share:
       Basic.......................................................   $      0.16   $      0.39
       Diluted.....................................................          0.15          0.37

     Weighted average number of shares outstanding:
       Basic.......................................................        10,632        12,623
       Diluted.....................................................        11,445        13,482
</Table>

The pro forma results are not necessarily indicative of what would have occurred
if the acquisition had been in effect for the periods presented. In addition,
they are not intended to be a projection of future results and do not reflect
any synergies that might have been achieved from combining the operations.

Prior to restatement, total revenue, operating income, net earnings, basic
earnings per share, diluted earnings per share and diluted weighted shares were
reported as (in thousands, except per share information) $110,714, $10,776,
$5,553, $0.52, $0.51 and 10,903 for 2001 and $118,931, $10,118, $5,500, $0.44,
$0.42 and 13,021 for 2002, respectively.

(7)  ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities for the years ended March 31, 2001 and
2002 consist of the following:

<Table>
<Caption>
                                                                     MARCH 31,
                                                             -----------------------
                                                               2001          2002
                                                             ---------     ---------
                                                                   (IN THOUSANDS)
                                                                     (RESTATED)
<S>                                                          <C>           <C>
        Accrued acquisition costs.......................     $      --     $  17,298
        Accrued compensation and benefits...............         2,500         2,032
        Accrued license costs...........................         1,512            --
        Other...........................................           817         1,125
                                                             ---------     ---------
                                                             $   4,829     $  20,455
                                                             =========     =========
</Table>

Prior to restatement, other accrued expenses and total accrued expenses were
$658,000 and $4,670,000, respectively, for 2001.

(8)  LONG-TERM DEBT

Long-term debt at March 31, 2001 and 2002 consisted of:

<Table>
<Caption>
                                                                              MARCH 31,
                                                                      -----------------------
                                                                        2001          2002
                                                                      ---------     ---------
                                                                          (IN THOUSANDS)
<S>                                                                   <C>           <C>
        Borrowings under term note...............................     $      --     $  30,000
             Less current portion................................            --         8,000
                                                                      ---------     ---------
        Long-term debt............................................    $      --     $  22,000
                                                                      =========     =========
</Table>

In connection with the acquisitions of the GM Unemployment Compensation Business
and Frick, on March 27, 2002, pursuant to a loan agreement dated as of March 27,
2002, (the "Loan Agreement"), we obtained secured financing consisting of a
$30,000,000 term loan (the "Term Loan") and a $10,000,000 revolving credit
facility (the "Revolving Credit Facility") from LaSalle Bank National
Association, as administrative agent and lender, and Southwest Bank of St.
Louis, as lender, and any other lenders that may become party to the Loan
Agreement (collectively, the "Lenders"). We used the proceeds of the Term Loan
to


                                       55
<PAGE>

pay a portion of the purchase price for the acquisitions; however, we have not
borrowed under the Revolving Credit Facility. We must repay principal of the
Term Loan in quarterly installments, with the final installment due on February
27, 2005. In addition, principal payments are required out of excess cash flow,
as defined in the Term Loan agreement. The Revolving Credit Facility also
matures on February 27, 2005.

The Term Loan and advances under the Revolving Credit Facility bear interest at
rates we select under the terms of the Loan Agreement, including a base rate or
eurodollar rate, plus an applicable margin. Until March 27, 2003, eurodollar
rate loans will bear interest at the applicable eurodollar rate plus 2.25% and
base rate loans will bear interest at the applicable base rate plus 0.00%. After
that, the applicable margin for eurodollar rate loans will vary from 2.00% to
2.25%, and the applicable margin for base rate loans will remain at 0.00%, in
each case based upon our ratio of total indebtedness to EBITDA. We may make
prepayments under the Term Loan during the first twelve months after the closing
date without penalty, except that we will be obligated to pay a $600,000
prepayment premium under certain limited circumstances. In addition, if William
W. Canfield ceases serving as our chief executive officer during the first 24
months after closing, and we do not retain a substitute satisfactory to the
Lenders within 120 days, then we are required to repay all outstanding loans
(Term Loan and Revolving Credit Facility).

The Loan Agreement is secured by security interests in substantially all the
assets of us and of our three subsidiaries (Ti3, Garcia and Frick), the
guarantees of our three subsidiaries, and a pledge of the stock of each of those
subsidiaries.

The Loan Agreement includes certain covenants, including, without limitation,
restrictions on the use of proceeds of the Term Loan and loans made under the
Revolving Credit Facility. The Term Loan was to be used solely to pay a portion
of the purchase price for the acquisitions of the GM Unemployment Compensation
Business and Frick. The proceeds of loans made under the Revolving Credit
Facility may be used solely for working capital, permitted capital expenditures,
as the source for payment of our obligations with respect to certain existing
letters of credit, to pay the transaction cost of the Loan Agreement, and to
finance certain permitted acquisitions. The Loan Agreement also requires
compliance with certain financial covenants based on our minimum net worth,
minimum EBITDA, our ratio of total indebtedness to EBITDA and our ratio of
EBITDA to fixed charges. The Loan Agreement further requires compliance with
certain operating and other covenants which limit, among other things, the
incurrence of additional indebtedness by us and our subsidiaries, the amount of
capital expenditures to be made by us and our subsidiaries, sales of assets and
mergers and dissolutions, and impose restrictions on distributions to
shareholders, change of control of TALX, investments, acquisitions and liens,
and which require compliance, in all material respects, with material laws. The
Loan Agreement also contains various representations and warranties, including
among other things, the accuracy of financial statements and other information
delivered to the Lenders, the absence of changes which would have or would
reasonably be likely to have a material adverse effect (as such term is defined
in the Loan Agreement), and other representations and warranties customarily
included in secured credit facilities of this nature.

At March 31, 2002 our outstanding borrowings carried an interest rate of 4.29%.

Scheduled minimum long-term debt repayments are $8 million, $10 million and $12
million in fiscal years 2003, 2004 and 2005, respectively. Payments are due in
equal quarterly amounts. We may accelerate credit facility repayments, depending
on available operating cash flow.

(9)  LEASES

We have non-cancelable operating leases, primarily for office space and office
equipment, that expire through fiscal 2009 and provide for purchase or renewal
options. Total rent expense for operating leases, including contingent rentals,
was $1,063,000, $1,360,000 and $1,494,000 in 2000, 2001 and 2002 respectively.


                                       56
<PAGE>

The following is a schedule, by year, of the future minimum payments under
capital and operating leases, together with the present value of the net minimum
payments as of March 31, 2002.

<Table>
<Caption>
                                                                                         CAPITAL     OPERATING
                                                                                         LEASES       LEASES
                                                                                         -------     ---------
                                                                                            (IN THOUSANDS)
<S>                                                                                      <C>         <C>
Fiscal Year:
   2003 ..............................................................                   $   172     $  5,074
   2004 ..............................................................                       131        4,415
   2005 ..............................................................                        24        3,733
   2006 ..............................................................                        --        3,546
   2007 ..............................................................                        --        1,680
   Thereafter ........................................................                        --          486
                                                                                         -------     --------
Total minimum lease payments .........................................                       327     $ 18,934
                                                                                                     ========
   Less amount representing interest .................................                        19
                                                                                         -------
Total present value of minimum capital lease payments ................                       308
   Less current portion ..............................................                       156
                                                                                         -------
Long-term capital lease obligations ..................................                   $   152
                                                                                         =======
</Table>

(10)  INCOME TAXES

Income tax expense consists of the following:

<Table>
<Caption>
                                                                              MARCH 31,
                                                                -----------------------------------
                                                                  2000         2001         2002
                                                                --------    ----------   ----------
                                                                         (IN THOUSANDS)
                                                                            (RESTATED)   (RESTATED)
<S>                                                             <C>         <C>          <C>
Current:
   Federal .................................................     $    52     $ 3,006      $ 2,412
   State and local .........................................          11         644          840
Deferred:
   Federal .................................................       1,510      (1,786)        (705)
   State and local .........................................         289        (383)        (245)
                                                                 -------     -------      -------
     Income tax expense before discontinued operations .....       1,862       1,481        2,302
Discontinued operations ....................................          70          24           --
                                                                 -------     -------      -------
   Total income tax expense ................................     $ 1,932     $ 1,505      $ 2,302
                                                                 =======     =======      =======
</Table>

Prior to restatement, current federal, current state and local, deferred
federal, deferred state and local, income tax expense before discontinued
operations and total income tax expense were reported as (in thousands) $2,188,
$404, $336, $62, $2,990 and $3,014 for 2001 and $2,318, $756, ($348), ($114),
$2,612 and $2,612 for 2002, respectively.

Income tax expense differed from the amounts computed by applying the federal
income tax rate of 34% to earnings from continuing operations before income tax
expense as a result of the following:

<Table>
<Caption>
                                                                                        MARCH 31,
                                                                            ----------------------------------
                                                                              2000        2001         2002
                                                                            ---------  ----------    ---------
                                                                                     (IN THOUSANDS)
                                                                                       (RESTATED)    (RESTATED)
<S>                                                                         <C>        <C>           <C>
Computed "expected" tax expense ........................................     $ 1,574     $ 1,244     $ 2,119
Increase (decrease) in income taxes resulting from:
   State and local income taxes, net of federal income tax benefit .....         198         172         394
   Travel and entertainment ............................................          29          53          54
   Tax exempt interest .................................................          --          --        (302)
   Other, net ..........................................................          61          12          37
                                                                             -------     -------     -------
                                                                             $ 1,862     $ 1,481     $ 2,302
                                                                             =======     =======     =======
</Table>

Prior to restatement, computed "expected" tax expense, state and local income
taxes, travel and entertainment and other, net were recorded as (in thousands)
$2,481, $308, $30, $0, $171 and $2,990 for 2001 and $2,415, $424, $60, ($300),
$13 and $2,612 for 2002, respectively.


                                       57
<PAGE>

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at March 31, 2001 and
2002 are presented below:

<Table>
<Caption>
                                                                     MARCH 31,
                                                               ----------------------
                                                                  2001       2002
                                                               ----------  ----------
                                                                  (IN THOUSANDS)
                                                               (RESTATED)  (RESTATED)
<S>                                                            <C>         <C>
Deferred tax assets:
   Allowance for doubtful accounts .........................     $   87     $   54
   Accrual for incentive compensation ......................         65         --
   Intellectual property settlement ........................        661        551
   Valuation allowance on inventory ........................         24         --
   Accrual for compensated absences ........................         71         94
   Deferred revenue ........................................      1,842      2,365
   Net operating loss carryforwards ........................         --        542
   Differences in depreciation and amortization ............        442        635
   Tax credit carryforwards ................................        176         --
                                                                 ------     ------
     Total deferred tax assets .............................      3,368      4,241
                                                                 ------     ------
Deferred tax liabilities:
   Differences in capitalized software development cost
     methods ...............................................      1,543      1,256
   Differences in intangible asset amortization methods ....         --        193
   Differences in expense recognition methods ..............        199        215
                                                                 ------     ------
     Total deferred tax liabilities ........................      1,742      1,664
                                                                 ------     ------
     Net deferred tax liabilities ..........................     $1,626     $2,577
                                                                 ======     ======
</Table>

We acquired a net operating loss carryforward of approximately $1.4 million in
the acquisition of Ti3. This net operating loss carryforward is available to
offset our consolidated future earnings, subject to certain limitations.

In assessing the realization of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income
and tax planning strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income over the
periods in which the deferred tax assets are deductible, management believes it
is more likely than not we will realize the benefits of these deductible
differences.

Prior to restatement, accrual for incentive compensation, intellectual property
settlement, deferred revenue, total deferred tax assets and net deferred tax
liabilities were reported as (in thousands) $0, $0, $0, $800 and ($942) for 2001
and $0, $0, $38, $1,363 and ($301) for 2002, respectively.

(11)  RESTRUCTURING CHARGES AND INVENTORY WRITE-DOWN

During the quarter ended September 30, 2001, we reorganized our sales and
delivery operations and refocused our product lines related to our human
resources and benefit applications and customer premises systems businesses. In
conjunction with the reorganization, we reduced our workforce by approximately
17%, closed certain regional sales offices and wrote-down hardware inventory and
capitalized software. As a result of these actions, we incurred restructuring
charges of $1.9 million associated with the write-off of capitalized software,
$349,000 related to employee severance costs and $337,000 related to office
closing costs. These items are reflected in the line item "restructuring
charges" on the statement of earnings and $240,000 is reflected in accrued
expenses on the balance sheet as of March 31, 2002. Additionally, we incurred a
charge of $307,000 related to the write-down of certain hardware inventory
items. This charge is reflected as a separate component of cost of goods sold on
the statement of earnings.

(12)  SHAREHOLDERS' EQUITY

TALX has adopted a stock option plan for employees that provides for the
issuance of a maximum of 3,049,200 shares of common stock pursuant to incentive
or non-qualified options. Options are granted by the Board of Directors at
prices not less than fair market value as of the date of the grant. Options vest
20% per year and expire six to ten years after the date of the grant.

TALX has adopted a stock option plan for outside directors that provides for the
issuance of a maximum of 145,200 shares of


                                       58
<PAGE>

common stock. Options are granted in the amount of 2,500 shares each to outside
directors at prices not less than fair market value as of the date of the grant,
which is April 1 of each year. The options vest one year from the date of grant.
Options outstanding amount to 43,560 and 54,568 at March 31, 2001 and 2002,
respectively.

Activity under the plans for the three years ended March 31, 2002 is as follows:

<Table>
<Caption>
                                                                                                    WEIGHTED
                                                                                                     AVERAGE
                                                                                     SHARES      EXERCISE PRICE
                                                                                   -----------   --------------
<S>                                                                                <C>           <C>
Outstanding at March 31, 1999.................................................         998,621         2.87
Granted -- 2000...............................................................         343,398         4.61
Cancelled -- 2000.............................................................         (63,830)        3.67
Exercised -- 2000.............................................................        (181,151)        2.45
                                                                                   -----------
Outstanding at March 31, 2000.................................................       1,097,038         3.43
Granted -- 2001...............................................................         321,303         8.51
Cancelled -- 2001.............................................................         (56,858)        5.35
Exercised -- 2001.............................................................        (229,075)        2.56
                                                                                   -----------
Outstanding at March 31, 2001.................................................       1,132,408         4.98
Granted -- 2002...............................................................         446,502        23.25
Cancelled -- 2002.............................................................          (6,029)       17.16
Exercised -- 2002.............................................................        (175,038)        4.03
                                                                                   -----------
Outstanding at March 31, 2002.................................................       1,397,843        10.88
                                                                                   ===========
</Table>

No compensation cost has been recognized for the stock option plans. Had
compensation cost for the Company's stock option plans been recognized for
awards in fiscal 2000, net earnings would be reduced by $156,000 or $0.02 per
share, based on the weighted average fair value of options granted of $4.61 per
option. The effect for fiscal 2001 would be to reduce net earnings by $394,000
or $0.04 per share, based on the weighted average fair value of options granted
of $8.51 per option. The effect for fiscal 2002 would be to reduce net earnings
by $839,000 or $0.06 per share, based on the weighted average fair value of
options granted of $23.25 per option.

The full impact of calculating compensation cost for stock options under SFAS
No. 123 was not reflected in the determination of the impact, because
compensation cost is reflected over the options' vesting period of six to ten
years and compensation cost for options granted prior to April 1, 1995 is not
considered. The fair value of option grants for fiscal 2000, 2001 and 2002 is
estimated on the date of the grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions: expected volatility of 86%, 62%
and 59% in fiscal 2000, 2001 and 2002, respectively; risk-free interest rate of
6.00%, 4.91% and 4.81% in fiscal 2000, 2001 and 2002, respectively; expected
life of 4.5, 5.0 and 5.0 years in fiscal 2000, 2001 and 2002, respectively; and
an expected dividend yield of 0.00%, 3.50% and 3.50% in fiscal 2000, 2001 and
2002, respectively.

<Table>
<Caption>
                                                         OPTIONS OUTSTANDING                        OPTIONS EXERCISABLE
                                          -------------------------------------------------  ------------------------------
                                                          WEIGHTED AVERAGE
                                                              REMAINING        WEIGHTED                          WEIGHTED
                                           NUMBER OF      CONTRACTUAL LIFE      AVERAGE      NUMBER OF          AVERAGE
           RANGE OF EXERCISE PRICE          SHARES             (YEARS)       EXERCISE PRICE    SHARES        EXERCISE PRICE
          ---------------------------     -----------    ------------------- --------------  ----------      --------------
<S>                                       <C>            <C>                 <C>             <C>             <C>
          $   0.00 --    3.12........         267,374           5.5             $  2.83         130,921          $  2.80
              3.12 --    6.23........         393,325           5.9                4.14         174,575             4.04
              6.23 --    9.35........         277,275           8.1                8.28          41,646             8.28
              9.35 --   12.46........          10,892           4.0               10.47          10,892            10.47
             12.46 --   18.69........          30,000           9.6               16.90              --               --
             18.69 --   21.81........          10,325           9.3               19.91           1,265            19.43
             21.81 --   24.92........         287,651           8.9               22.90              --               --
             24.92 --   28.04........         110,001           9.1               25.20              --               --
             28.04 --   31.15........          11,000           9.3               31.15              --               --
                                          -----------                                        ----------
                                            1,397,843                                           359,299
                                          ===========                                        ==========
</Table>

During fiscal 1997, shareholders approved the TALX Corporation 1996 Employee
Stock Purchase Plan (ESPP), which was amended in 1998 and 2000 and amended and
restated in 2001. The ESPP allows eligible employees the right to purchase


                                       59
<PAGE>
common stock on a quarterly basis at the lower of 85% of the market price at the
beginning or end of each three-month offering period. Of the 907,500 shares of
common stock shares reserved for the ESPP, there were 553,476 shares remaining
at March 31, 2002.

Additionally, as of March 31, 2002, the Company had 45,375 outstanding warrants
at a weighted average exercise price of $4.82.

During fiscal 2001, we began paying dividends on our common stock on a quarterly
basis. Dividends of $0.08 and $0.12 per share were paid to shareholders during
fiscal years 2001 and 2002, respectively. Any future determination to pay
dividends will be at the discretion of our board of directors and will depend
upon our earnings, capital requirements and operating and financial condition
and such other factors as the board may deem relevant.

(13)  BUSINESS SEGMENTS

FASB Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information," requires companies to provide certain information about their
operating segments. We have two reportable segments: Payroll-Based Services and
Software and Unemployment Cost Management Services.

PAYROLL-BASED SERVICES AND SOFTWARE:  This segment includes the following:

         o        The Work Number Services - The Work Number, W-2 eXpress,
                  ePayroll and FasTime;

         o        Human Resources and Benefits Application Services; and

         o        Customer Premises Systems and Related Maintenance and Support

UNEMPLOYMENT COST MANAGEMENT SERVICES: This segment includes our UC eXpress
services suite.

The accounting policies of the operating segments are the same as those
described in the summary of significant accounting policies. Interest income and
expense and income taxes are not reported on an operating segment basis because
they are not considered in the performance evaluation by our chief operating
decision-maker, our chairman and CEO.


                                       60
<PAGE>

Summarized financial information concerning our reportable operating segments
are shown in the following table for the periods indicated:

<Table>
<Caption>
                                                                          PAYROLL-BASED
                                                                          SERVICES AND       UNEMPLOYMENT COST
                                                                            SOFTWARE        MANAGEMENT SERVICES       TOTAL
                                                                          -------------     -------------------     ----------
                                                                                              (IN THOUSANDS)
                                                                                                (RESTATED)
<S>                                                                       <C>               <C>                     <C>
      MARCH 31, 2000
      Revenues..................................................          $    36,032          $       --           $   36,032
      Income from operations....................................                4,547                  --                4,547
      Total assets..............................................               30,133                  --               30,133
      Depreciation and amortization.............................                4,145                  --                4,145
      Capital expenditures......................................                1,678                  --                1,678

      MARCH 31, 2001
      Revenues..................................................          $    39,013          $       --           $   39,013
      Income from operations....................................                3,060                  --                3,060
      Total assets..............................................               33,434                  --               33,434
      Depreciation and amortization.............................                4,615                  --                4,615
      Capital expenditures......................................                1,819                  --                1,819

      MARCH 31, 2002
      Revenues..................................................          $    43,704          $      848           $   44,552
      Income from operations....................................                4,514                 154                4,668
      Total assets..............................................               52,103             127,635              179,738
      Depreciation and amortization.............................                3,801                 110                3,911
      Capital expenditures......................................                1,606                  --                1,606
</Table>

Prior to our restatements, Payroll-Based Services and Software revenues, income
from operations and total assets were recorded as (in thousands) $41,087, $6,736
and $33,995 for 2001 and $44,972, $5,381 and $51,466 for 2002, respectively.

(14)  DISCONTINUED OPERATIONS

Effective March 31, 2000, we sold all of the assets, net of liabilities, of the
database services business to WPZ Holdings, Inc., the parent company of one of
the division's largest customers. The sales price was $1,273,000, which
represented the current book value of the net assets sold. We realized pre-tax
and after-tax gains of $187,000 and $117,000, respectively. While the effective
date of the transaction was March 31, 2000, cash settlement occurred April 5,
2000. At March 31, 2000, the receivable for the sales price is included in
prepaid expenses and other current assets.

During the quarter ended September 30, 2000, we concluded all transition-related
activity for the database services business. Completing this transition ahead of
schedule resulted in a savings of $61,000 of the transition reserve. Therefore,
we realized pre-tax and after-tax gains of $61,000 and $37,000, respectively.

The results of operations for the database business for the years ended March
31, 2000, 2001 and 2002 were as follows:

<Table>
<Caption>
                                                                                      MARCH 31,
                                                                       --------------------------------------
                                                                         2000            2001         2002
                                                                       ---------      ---------      --------
                                                                                    (IN THOUSANDS)
<S>                                                                    <C>             <C>           <C>
Revenues.........................................................      $   4,800       $     --      $     --
                                                                       =========       ========      ========
Gain on disposal.................................................            187             61            --
   Income tax expense............................................             70             24            --
                                                                       ---------       --------      --------
   Gain on disposal, net.........................................            117             37            --
                                                                       ---------       --------      --------
Net earnings.....................................................      $     117       $     37      $     --
                                                                       =========       ========      ========
</Table>

As of March 31, 2000, 2001 and 2002 there were no assets or liabilities related
to the database business on the balance sheets.


                                       61
<PAGE>

(15)  DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts for our cash and cash equivalents, short-term investments,
trade receivables, accounts payable, accrued expenses and income taxes payable
approximate fair value because of the short-term maturity of these instruments.
The carrying value of long-term debt and borrowings under our revolving line of
credit facility approximate fair value due to their stated interest rates
approximating market rates. These estimated fair value amounts have been
determined using available market information or other appropriate valuation
methodologies.

(16)  EMPLOYEE BENEFIT PLAN

We sponsor a profit-sharing/401(k) plan. The plan covers substantially all of
our employees. We make contributions to the plan, subject to ERISA limitations,
up to 2.4% of employees' earnings. Total expense under the plan for the years
ended March 31, 2000, 2001 and 2002 was $219,000, $305,000 and $322,000,
respectively.

(17)  COMMITMENTS AND CONTINGENCIES

On December 26, 2001, a purported class action lawsuit was filed in the United
States District Court for the Eastern District of Missouri (Civil Action No.
4:01CV02014DJS) by Matt L. Brody, an alleged shareholder of the Company, against
the Company, certain of its executive officers and directors (William W.
Canfield, Craig N. Cohen and Richard F. Ford) (collectively, the "Individual
Defendants"), and two underwriters (Stifel, Nicolaus & Company, Incorporated and
A.G. Edwards & Sons, Inc.) in the Company's August 2001 secondary common stock
offering ("Secondary Offering"). The case purportedly is brought on behalf of
all persons who purchased or otherwise acquired shares of the Company's common
stock between July 18, 2001 and October 1, 2001 ("Putative Class Period"),
including as part of the Secondary Offering. The complaint alleges, among other
things, that certain statements in the registration statement and prospectus for
the Secondary Offering, as well as other statements made by the Company and/or
the Individual Defendants during the Putative Class Period, were materially
false and misleading because they allegedly did not properly account for certain
software and inventory, did not reflect certain write-offs, and did not
accurately disclose certain business prospects. The complaint alleges violations
of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule
10b-5 promulgated thereunder against the Company and the Individual Defendants,
violations of Section 11 of the Securities Act of 1933 against the Company, the
Individual Defendants and the underwriters, and violation of Section 15 of the
Securities Act of 1933 against Mr. Canfield.

Three additional purported class action lawsuits were filed in the same court,
against the same defendants and making substantially the same allegations: on
January 8, 2002 by Donald Metzger (Civil Action No. 4:02CV00031DJS); on January
9, 2002 by Anna Goodman (Civil Action No. 4:02CV00033DJS); and on January 30,
2002 by Al Hinton (Civil Action No. 4:02CV00168DJS) each of whom allegedly were
shareholders of the Company during the Putative Class Period. On February 15,
2002, these three lawsuits were consolidated with and into the Brody lawsuit
(Civil Action No. 4:01CV02014DJS) for all purposes, which currently is pending
before the Honorable Donald J. Stohr, United States District Judge.

The consolidated lawsuit seeks, among other things, an award of unspecified
money damages, including interest, for all losses and injuries allegedly
suffered by the putative class members as a result of the defendants' alleged
conduct and unspecified equitable/injunctive relief as the Court deems proper.

On May 20, 2002, the Company and the Individual Defendants filed a motion to
dismiss the lawsuits, and the underwriter defendants filed a separate motion to
dismiss. The plaintiffs filed their opposition to the motions to dismiss on June
19, 2002. The defendants' reply memoranda in support of the motions to dismiss
are due on July 9, 2002.

The Company believes the plaintiffs' claims are without merit and intends to
defend vigorously against them. However, due to the inherent uncertainties of
litigation, the Company cannot accurately predict the ultimate outcome of the
litigation. An unfavorable outcome could have a material adverse impact on the
Company's business, financial condition and results of operations.

Additionally, we are required to indemnify each of the Individual Defendants, as
officers and/or directors of the Company, in connection with the above matters,
provided they acted in good faith and in a manner they reasonably believed to be
in, or not opposed to, the best interests of the Company. Stifel, Nicolaus &
Company and A.G. Edwards & Sons, Inc. have made demands on the Company to
indemnify them in connection with these matters.

The Company has provided notice of the consolidated litigation to its directors
and officers liability insurance carriers.


                                       62
<PAGE>


We are a defendant from time to time in routine lawsuits incidental to our
business, which based on information currently available, we believe,
individually or in the aggregate, will not have a material adverse effect upon
us.

The Securities and Exchange Commission is conducting an investigation into our
August 2001 secondary offering of common stock and second fiscal quarter 2001
financial results. We are cooperating fully with the investigation, and have
voluntarily produced documents requested by the Commission and have made our
employees available for interviews or testimony upon request. We believe that
there is no basis for any action by the Commission.

(18)  SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid during the year for interest totaled $4,000 for the year ended March
31, 2000 and $0 for the years ended March 31, 2001 and 2002. Cash paid during
the year for income taxes totaled $13,000, $2,653,000 and $1,003,000 for the
years ended March 31, 2000, 2001 and 2002, respectively.

(19)  SUBSEQUENT EVENTS (UNAUDITED)

As discussed in Note 17 above, we are a defendant from time to time in routine
lawsuits incidental to our business. Except to the extent described below in
this Note 19 or above in Note 17, based on information available as of the date
of this Form 10-K/A, we believe that no current proceedings, individually or in
the aggregate, will have a material adverse effect upon us.

In October 2002, the consolidated litigation discussed in Note 17 above was
transferred from the Honorable Donald J. Stohr, United States District Judge, to
the Honorable Henry E. Audrey, United States District Judge. The parties are
awaiting the Court's ruling on the motions discussed above in Note 17.

As a result of the delay in filing our Form 10-Q for the period ending September
30, 2002, The Nasdaq Stock Market notified us that effective Tuesday, November
26, 2002, the letter "E" would be appended to our trading symbol, signifying the
delay. Similarly, The Nasdaq Stock Market informed us that we were not in
compliance with the requirements of NASD Marketplace Rule 4310(c)(14) because we
had not then filed the Form 10-Q. Our Form 10-Q for the period ending September
30, 2002 was filed on December 17, 2002.

On December 20, 2002, we participated in an appeal hearing before a Nasdaq
Listing Qualifications Panel. Our potential delisting is stayed, pending the
determination of the Panel, which may consider public interest and other
factors. There can be no assurance that the panel will grant the request for
continued listing of our common stock.

As previously disclosed in Note 17 above, the Securities and Exchange Commission
is conducting an investigation into our August 2001 secondary offering of common
stock and second fiscal quarter 2001 financial results. We are cooperating fully
with the investigation, and have voluntarily produced documents requested by the
Commission and have made our employees available for interviews or testimony
upon request. On November 12, 2002, the staff of the Central Regional Office of
the Commission sent us a "Wells letter" indicating the staff's plans to
recommend to the Commission that it institute an enforcement action against us
and two of our executive officers, William Canfield and Craig Cohen, related to
two matters. The Wells letter states that the SEC staff will allege, among other
things, that our financial statements were misleading as a result of
capitalizing instead of expensing $1.6 million related to a patent technology
license agreement executed in March 2001 and expensing approximately $158,000 in
bonus payments to executive officers in the first quarter of fiscal 2002 instead
of the fourth fiscal quarter of 2001. Those items are among those that are the
subject of our restatement discussed herein. The remedies the Commission may
consider include an injunction against us and the individuals and, if
appropriate, an officer and director bar and disgorgement and civil money
penalties against the individuals. We and the individuals have been given the
opportunity to file a written response to the Wells letter setting forth the
reasons why an enforcement action should not be instituted by the Commission.

As described above, the Company is filing herewith restated financial statements
for each of the quarters ended June 30, 2000 through June 30, 2002 and for the
fiscal years ended March 31, 2001 and 2002. As a result of the restatement, we
could become subject to additional litigation or regulatory proceedings or both.
As of the date hereof, we are not aware of any litigation having been commenced
against us related to this restatement. However, such litigation could be
commenced against us in the future and the plaintiffs who have filed lawsuits
against us previously could amend their complaints to include claims related to
this restatement, and if so, we could not predict the outcome of any such
litigation at this time. Additionally, the lenders under our March 27, 2002 Loan
Agreement, which is described more fully below under Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources, could seek to exercise remedies which may be available to
them, such as acceleration of our loan, in the event they determine that, as a
result of the restatement discussed above or the SEC investigation discussed
below, we have breached a covenant or representation and warranty in the Loan
Agreement. If an unfavorable result occurred in any such action, our business
and financial conditions could be harmed.

As of the date hereof, the SEC is investigating our accounting for two items
which are the subject of this restatement. At this time, we cannot predict
whether or not any additional regulatory investigation related to this
restatement will be commenced, or if it is, the outcome of any such
investigation. However, if any such investigation were to result in a regulatory
proceeding or action against us, our business and financial condition could be
harmed.

Regardless of the outcome of any litigation or regulatory proceeding, litigation
and regulatory proceedings of this type are expensive and will require that we
devote substantial resources and executive time to defend these proceedings.

The Company's directors and officers liability insurance carriers have received
notice of the consolidated litigation and SEC investigation.

                                       63
<PAGE>
                                    PART III

ITEM 11. EXECUTIVE COMPENSATION

The information set forth below in this Item 11 amends and restates the
corresponding information which was contained under the caption "Executive
Compensation," "Compensation Committee Interlocks and Insider Participation,"
"Equity Compensation Plan Information," "Shareholder Approved Equity
Compensation," "Non-Shareholder Approved Equity Compensation," "Employment
Agreements" and "Director Compensation" included in the Proxy Statement for the
2002 Annual Meeting of Stockholders, and originally incorporated by reference
into the Form 10-K.

Compensation Summary. The following table sets forth certain summary information
for the fiscal years ended March 31, 2002, 2001 and 2000 concerning the
compensation paid and awarded to each of the Named Executives during such fiscal
years.

                           SUMMARY COMPENSATION TABLE

<Table>
<Caption>
                                                                                                   LONG TERM
                                                           ANNUAL COMPENSATION                    COMPENSATION
                                           ---------------------------------------------------    -------------
                                                                                  OTHER ANNUAL     SECURITIES      ALL OTHER
                NAME AND                                                          COMPENSATION     UNDERLYING     COMPENSATION
           PRINCIPAL POSITION              YEAR     SALARY($)     BONUS($)(1)        ($)(2)       OPTIONS(#)(3)      ($)(4)
           ------------------              ----     ---------     -----------     ------------    -------------   ------------
<S>                                        <C>      <C>           <C>             <C>             <C>             <C>
William W. Canfield.....................   2002      $318,316      $118,125           ---                           $35,435
Chairman,  President and Chief Executive   2001       287,500       217,500           ---            110,000         38,202
Officer                                    2000       257,000       156,000           ---             36,300         40,432
                                                                                                      45,375
Craig N. Cohen..........................   2002      $185,491       $45,000           ---             33,000        $ 4,334
Vice  President -  Application  Services   2001       158,750        80,000           ---             18,150          3,624
and Software,  Chief  Financial  Officer   2000       145,000        72,500           ---             27,225          2,933
and Secretary

Michael E. Smith........................   2002      $139,310       $41,000           ---             11,000        $ 4,050
Vice President - Business                  2001       120,000        34,200           ---              7,260          4,151
Development                                2000       113,000        28,476           ---              7,260          2,434
</Table>

----------

(1)    Includes bonuses earned with respect to the reported year, which were
       paid in the following year. The payment of bonuses is at the discretion
       of the Compensation Committee of the Board of Directors.

(2)    The Company has not included in the Summary Compensation Table the value
       of incidental personal perquisites furnished by the Company to the Named
       Executives, since such value did not exceed the lesser of $50,000 or 10%
       of the total of annual salary and bonus reported for any of such Named
       Executives.

(3)    All amounts have been adjusted to give effect to all stock dividends and
       splits.




                                       64
<PAGE>
(4)    Represents contributions made by the Company on behalf of the Named
       Executives under the Company's 401(k) Plan and $35,435 in 2002 for Mr.
       Canfield's premiums paid by the Company on his life insurance policies.

Stock Option Awards. The following table presents certain information concerning
stock options granted during fiscal 2002 to each of the Named Executives. All
amounts have been adjusted to give effect to a 10% stock dividend in October
2001. The exercise price for all of the grants of stock options was the fair
market value of the Common Stock on the dates of grant as determined by the
Compensation Committee of the Board of Directors, except in the case of Mr.
Canfield, for whom the exercise price was 110% of the fair market value, in
accordance with the terms of the Option Plan for 10% shareholders.

                        OPTION GRANTS IN LAST FISCAL YEAR

<Table>
<Caption>
                                                   INDIVIDUAL GRANTS(1)
                               -------------------------------------------------------
                                NUMBER OF      % OF TOTAL                                    POTENTIAL REALIZABLE $
                                 SHARES          OPTIONS                                     VALUE AT ASSUMED ANNUAL
                               UNDERLYING      GRANTED TO      EXERCISE                       RATES OF STOCK PRICE
                                 OPTIONS      EMPLOYEES IN      PRICE       EXPIRATION            APPRECIATION FOR
                                 GRANTED      FISCAL YEAR       ($/SH)         DATE               OPTION TERM (2)
                               ----------     ------------     --------     ----------      ------------------------
NAME                                                                                            5%            10%
----                                                                                        ----------    ----------
<S>                            <C>             <C>             <C>          <C>             <C>           <C>
William W. Canfield......       110,000          25.5%          $ 25.20        5/10/11      $1,743,296    $3,764,490
Craig N. Cohen...........        33,000           7.6%            22.91        5/10/11         598,559     1,204,917
Michael E. Smith.........        11,000           2.5%            22.91        5/10/11         199,520       401,639
</Table>

----------

(1)      Represents incentive stock options granted pursuant to the Company's
         1994 Stock Option Plan. For a description of certain terms of such
         stock options, see "-Benefit Plans-1994 Stock Option Plan" below.

(2)      As required by the rules of the SEC, potential values are stated based
         on the prescribed assumptions that Common Stock will appreciate in
         value from the date of grant to the end of the option term at the
         indicated rates (compounded annually) and therefore are not intended to
         forecast possible future appreciation, if any, in the price of Common
         Stock.

The following table sets forth, for the Named Executives, the number of shares
for which stock options were exercised in fiscal 2002, the realized value or
spread (the difference between the exercise price and market value on the date
of exercise) and the number and unrealized spread of the unexercised options
held by each at fiscal year end. All amounts have been adjusted to give effect
to all stock dividends and splits.

               AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
                          FISCAL YEAR-END OPTION VALUES

<Table>
<Caption>
                                                            NUMBER OF SHARES                       VALUE OF UNEXERCISED
                           NUMBER OF                    UNDERLYING UNEXERCISED                     IN-THE-MONEY OPTIONS
                            SHARES      VALUE         OPTIONS AT FISCAL YEAR END                   AT FISCAL YEAR-END(2)
                          ACQUIRED ON  REALIZED  -------------------------------------    -----------------------------------------
NAME                       EXERCISE     $(1)     EXERCISABLE   UNEXERCISABLE    TOTAL     EXERCISABLE    UNEXERCISABLE     TOTAL
----                      -----------  --------  -----------   -------------   -------    -----------    -------------   ----------
<S>                       <C>          <C>       <C>           <C>             <C>        <C>            <C>             <C>
William W. Canfield ...     50,000     593,485     158,945        164,230      323,175     $1,643,860     $  828,081     $2,471,941
Craig N. Cohen ........         --          --      48,865         59,070      107,935        491,236        351,971        843,206
Michael E. Smith ......         --          --      34,741         19,690       54,431        404,255        116,140        520,395
</Table>

----------

(1)      Reflects the difference between the exercise price and the market price
         on the date of exercise.

(2)      Reflects the difference between the exercise price and $16.00 per
         share, which was the closing price of the Common Stock on March 31,
         2002.


                                       65
<PAGE>

                      EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth aggregate information regarding the shares of our
common stock that may be issued under all of our equity compensation plans as of
March 31, 2002.

<Table>
<Caption>
                                                                                                            (c)
                                                                                               NUMBER OF SECURITIES REMAINING
                                         (a)                               (b)                 AVAILABLE FOR FUTURE ISSUANCE
                          NUMBER OF SECURITIES TO BE ISSUED     WEIGHTED-AVERAGE EXERCISE     UNDER EQUITY COMPENSATION PLANS
                             UPON EXERCISE OF OUTSTANDING     PRICE OF OUTSTANDING OPTIONS,   (EXCLUDING SECURITIES REFLECTED
     PLAN CATEGORY           OPTIONS, WARRANTS AND RIGHTS          WARRANTS AND RIGHTS             IN COLUMN (a)) (1)
     -------------        ---------------------------------   -----------------------------    ------------------------------
<S>                       <C>                                 <C>                              <C>
Equity compensation
plans approved by
security holders........              1,397,843                          $10.88                          1,238,231

Equity compensation
plans not approved by
security holders........                 45,375                          $ 4.82                                 --
     Total..............              1,443,218                          $10.69                          1,238,231
</Table>

----------

(1)      599,715 shares remain available for issuance under the 1994 Stock
         Option Plan, as amended; 85,040 shares remain available for issuance
         under the 1996 Outside Directors' Plan, as amended; and 553,476 shares
         remain available for issuance under the 1996 Employee Stock Purchase
         Plan, as amended.

SHAREHOLDER-APPROVED EQUITY COMPENSATION

1994 Stock Option Plan. On August 31, 1994, the Company adopted a stock option
plan, that succeeded an earlier plan, that was amended and restated in July 1996
and further amended in September 1998 and September 2000 (the "1994 Stock Option
Plan"), with the approval of shareholders. Under the 1994 Stock Option Plan, the
Board of Directors may from time to time grant options to purchase up to
3,049,200 shares (after giving effect to all stock dividends and splits) of
Common Stock to certain key employees, who will be designated by a committee
selected to administer the Plan; 599,715 shares are available for future grants
as of July 5, 2002. The purchase price of stock options will not be less than
fair market value (110% of fair market value in the case of 10% shareholders),
in the case of incentive stock options, or as determined by the committee in the
case of non-qualified stock options. The purchase price may be paid in cash or,
in the discretion of the committee, shares of Common Stock. Option terms will
not be more than ten years (five years in the case of incentive stock options
awarded to 10% shareholders). Options vest ratably over five years from the date
of grant; provided, that except in the case of death, disability or termination
of employment, no option may be exercised at any time unless the optionee is
then an employee or an officer or director of the Company or a subsidiary and
has been so continuously since the granting of the option. Notwithstanding the
foregoing limitations, in the event of a Change in Control (as defined in the
1994 Stock Option Plan), options will become immediately exercisable and remain
exercisable during the term thereof, notwithstanding a subsequent termination
within twelve months of the date of the Change in Control. Unless earlier
terminated by the Board, the 1994 Stock Option Plan will terminate on July 15,
2006.

1996 Employee Stock Purchase Plan. In July 1996, the Company established the
1996 Employee Stock Purchase Plan which was amended in September 1998 and
September 2000 and amended and restated in May 2001 (the "1996 Employee Stock
Purchase Plan" or "ESPP"), with the approval of shareholders, to provide
employees of the Company with an opportunity to purchase Common Stock through
payroll deductions through periodic offerings to be made during the period from
January 1, 1997 to December 31, 2006. A total of 907,500 shares (after giving
effect to all stock dividends and splits) of Common Stock were reserved for
issuance under the ESPP, and 354,024 shares of such shares have been issued
under the ESPP as of July 5, 2002. The ESPP is intended to qualify as an
employee stock purchase plan within the meaning of Section 423 of the Internal
Revenue Code.

The Company generally makes one or more periodic offerings, each offering to
last three months, provided that a committee of the Board of Directors will have
the power to change the duration without shareholder approval, to participating
employees to purchase stock under the ESPP. Employees will participate in the
ESPP through authorized payroll deductions, which must exceed $20.00 per month
but may not exceed 15% of the compensation such employee receives during each
offering period or $25,000 in value of stock per year. Amounts withheld from
payroll are applied at the end of each offering period to purchase


                                       66
<PAGE>

shares of Common Stock. If a participant ceases his or her payroll deductions,
the committee that administers the ESPP may return any cash remaining in the
participant's account to the participant or allow such cash to remain in such
account to be applied to the purchase of shares at the end of the then current
offering period. The purchase price of the Common Stock is equal to 85% of the
lower of (i) the market price of Common Stock at the beginning of the applicable
offering period or (ii) the market price of Common Stock at the end of each
offering period. The committee that administers the ESPP may impose reasonable
administrative fees on participants to defray the costs of administering the
ESPP. Fees imposed may not exceed the actual administrative costs of the ESPP.

In addition, the Company has established a stock option plan for its outside
directors. See "--Director Compensation" above.

NON-SHAREHOLDER APPROVED EQUITY COMPENSATION

AGE Investments Warrant. In May 1999, we entered into an agreement with A.G.
Edwards & Sons, Inc. under which they provide us with strategic advisory
services. Pursuant to that agreement, we issued to AGE Investments, Inc., an
affiliate of A.G. Edwards & Sons, Inc., warrants to purchase a total of 45,375
shares (after anti-dilution adjustments) of our common stock at an exercise
price of $4.82 per share, which vested ratably over three years. The warrants
expire on May 7, 2007. The warrants provide A.G.E. Investments certain
registration rights with respect to the common stock it receives upon exercise
of the warrants.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with William W. Canfield (36
months; $330,000 per year), Craig N. Cohen (24 months; $192,000 per year) and
Michael E. Smith (12 months; $139,000 per year). The term of each agreement as
well as each individual's current annual base salary is as noted in parenthesis
next to each individual's name. Mr. Cohen's agreement was amended to increase
the term to 24 months from 12 months, in May 2002. Each employment agreement
will automatically be extended annually for an additional one-year period unless
prior written notice is delivered to the employee or the Company by the other 90
days prior to the anniversary date of such employment agreement. Such employees
are also eligible for a performance bonus based on a formula recommended by a
committee of the Board of Directors and approved by the Board of Directors. Each
employment agreement contains confidentiality provisions that extend
indefinitely after termination of employment as well as non-solicitation and
non-competition provisions that extend for one year after termination of
employment.

If the employment agreement is terminated by the Company without "cause" (as
defined in the agreement, but including, without limitation, breach by the
employee of the employment agreement) or by the employee for "good reason" (as
defined in the agreement, but including, without limitation, breach of the
employment agreement by the Company, the reduction of salary, benefits or other
perquisites provided to employee under the agreement and failure by the Company
to agree to an extension of such employee's employment agreement), the Company
would be obligated to pay the employee his annual base salary plus a bonus
(based on their estimated bonus for the year of termination) over the period
(the "Continuation Period") which is equal to the original term of his agreement
and which period commences on the date of early termination of such employee,
and such amount shall be payable ratably over such Continuation Period, as well
as to continue his employee benefits over such Continuation Period; however, if
his employment agreement is terminated otherwise, the employee is only entitled
to be paid through the date of his early termination.

Further, if within 12 months of a "Change of Control" of the Company the
employee, under certain circumstances, is terminated or resigns, (a) in the case
of Mr. Canfield, he will be entitled to (i) a lump-sum cash payment equal to $1
less than three times an amount equal to the average annual compensation
received by Mr. Canfield from the Company reported on his Form W-2 for the five
calendar years preceding the calendar year of the Change of Control and (ii) the
continuation of certain health insurance benefits for a three-year period, (b)
in the case of Mr. Cohen, he will be entitled to (i) a lump-sum cash payment
equal to two times his annual base salary plus, (ii) a lump sum cash payment
equal to two times his anticipated annual bonus (based on their estimated bonus
for the year of termination), and (c) in the case of Mr. Smith, he will be
entitled to (i) a lump-sum cash payment equal to his annual base salary plus,
(ii) a lump sum cash payment equal to his anticipated annual bonus (based on his
estimated bonus for the year of termination), (iii) the continuation of certain
health insurance and other employee benefits for a one-year period and (iv)
payment for certain outplacement services. Additionally, the Company has agreed
to make certain "gross-up" payments in the event any excise taxes are imposed
pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended or
replaced, related to the employment agreements.


                                       67
<PAGE>

The term "Change of Control" shall mean (i) a change of control of a nature that
would be required to be reported in response to Item 1(a) of the Current Report
on Form 8-K, as in effect on the date of the agreement, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, or any comparable successor
provisions. Without limiting the foregoing, a "Change of Control" shall also
include, without limitation, (i) the purchase or other acquisition by any person
or group of beneficial ownership of 25% or more of either the then outstanding
shares of common stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote in the election of directors,
(ii) when individuals who, as of the date of the employment agreement,
constitute the Board of Directors of the Company cease for any reason to
constitute at least two-thirds of the Board of Directors, provided that
generally persons who are approved by the incumbent Board will be deemed a
member thereof, and (iii) approval by the shareholders of the Company of a
reorganization, merger, or consolidation, in each case, with respect to which
persons who were the shareholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own more
than 50% of the combined power entitled to vote generally in the election of
directors of the reorganized, merged or consolidated company's then outstanding
voting securities, or a liquidation or dissolution of the Company or of the sale
of all or substantially all of the assets of the Company. The employment
agreements contain an arbitration provision.

DIRECTOR COMPENSATION

The Company pays each director a $2,000 fee for each Board meeting attended, a
$500 fee for each special Board meeting attended and a $250 fee for each
Committee meeting attended, plus expenses. Officers of the Company do not
receive any additional compensation for serving the Company as members of the
Board of Directors or any of its Committees.

Pursuant to the Company's Outside Directors' Stock Option Plan (the "Outside
Directors' Plan"), adopted in July 1996 and amended in May 2001, each
non-employee director receives on April 1 of each year an option to purchase
2,500 shares of Common Stock at an exercise price equal to the fair market value
of the Common Stock on the grant date. The options have a term of six years and
become exercisable one year after date of grant, provided, that no option may be
exercised at any time unless the participant is then an outside director and has
been so continuously since the granting of the option (except as described
below), and provided further that upon a Change in Control (as defined in the
Outside Directors' Plan), the options will become immediately exercisable.
Unexercised options will expire upon the termination of a participant's service
as a director of the Company, unless such termination was by reason of death or
disability or subsequent to a Change in Control, in which case the personal
representative of the participant may exercise any or all of the participant's
unexercised unexpired options (provided such exercise occurs within 12 months of
the date of the participants' death or termination) or, in the case of a Change
in Control, the participant may exercise any or all of the participant's
unexercised unexpired options but not after the term of such options. A total of
145,200 shares of Common Stock have been authorized for issuance under the
Outside Directors' Plan (after giving effect to all stock dividends and splits).
On April 1, 2002, 10,000 options were issued pursuant to the Plan, as amended. A
total of 60,160 options have been issued as of July 5, 2002, after giving effect
to all stock dividends and splits. Unless earlier terminated by the Board of
Directors, the Plan will terminate on July 15, 2006.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mr. Canfield is the Chairman, President and Chief Executive Officer of the
Company. Although Mr. Canfield is a member of the Compensation Committee, he
does not participate in deliberations concerning his own compensation or in
setting his performance objectives or goals.


                                     PART IV

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

(a)  The following documents are filed as part of this report:

     (1) Financial Statements

         See Item 8 -- Index to Consolidated Financial Statements

     (2) Financial Statement Schedules

         None; such schedules have been omitted because of the absence of
         conditions under which they are required or because the information is
         included in the financial statements or notes thereto.

     (3) Exhibits

         See Exhibit Index for the exhibits filed as part of or incorporated by
         reference into this report.

(b)  Reports on Form 8-K

     Current Report on Form 8-K filed by the Company on April 2, 2002, relating
     to the acquisition of the unemployment cost management businesses of
     GatesMcDonald & Company and The Frick Company, as amended by Form 8-K/A
     filed by the Company on June 25, 2002.

                                       68
<PAGE>
                        TALX CORPORATION AND SUBSIDIARIES
                                   SIGNATURES


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

                                       TALX CORPORATION

Date: December 23, 2002                By:       /s/ WILLIAM W. CANFIELD
                                          --------------------------------------
                                                   William W. Canfield
                                              Chairman, President and Chief
                                                    Executive Officer
                                              (Principal Executive Officer)

Date: December 23, 2002                By:        /s/ L. KEITH GRAVES
                                          --------------------------------------
                                                    L. Keith Graves
                                             Controller and Chief Accounting
                                                         Officer
                                             (Principal Accounting Officer)

CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER

I, William W. Canfield, certify that:

         1.   I have reviewed this annual report on Form 10-K/A of TALX
              Corporation;

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

         3.   Based on my knowledge, the financial statements, and other
              financial information included in this annual 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;

                                       By: /s/ William W. Canfield
                                           -----------------------
                                       William W. Canfield
                                       Chairman, President and Chief Executive
                                       Officer
                                       December 23, 2002


CERTIFICATIONS OF PRINCIPAL FINANCIAL OFFICER

I, Craig N. Cohen, certify that:

         1.   I have reviewed this annual report on Form 10-K/A of TALX
              Corporation;

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

         3.   Based on my knowledge, the financial statements, and other
              financial information included in this annual 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;

                                       By: /s/ Craig N. Cohen
                                           ------------------
                                       Craig N. Cohen
                                       Vice President and Chief Financial
                                       Officer
                                       December 23, 2002



                                       69
<PAGE>
                                  EXHIBIT INDEX

<Table>
<Caption>
EXHIBIT NO.                          DESCRIPTION
-----------                          -----------
<S>          <C>
2.1          Asset Purchase Agreement between Gates, McDonald & Company and
             Garcia Acquisition Sub, Inc. dated as of March 27, 2002,
             incorporated by reference to Exhibit 2.1 to our Current Report on
             Form 8-K filed April 2, 2002+

2.2          Escrow Agreement by and among Garcia Acquisition Sub, Inc., Gates,
             McDonald & Company and LaSalle Bank National Association dated as
             of March 27, 2002, incorporated by reference to Exhibit 2.2 to our
             Current Report on Form 8-K filed April 2, 2002

2.3          Acquisition Agreement by and among the James E. Frick Profit
             Sharing and Employee Stock Ownership Plan and the principal holders
             of options to acquire capital stock of James E. Frick, Inc. and
             TALX Corporation dated as of March 27, 2002, incorporated by
             reference to Exhibit 2.3 to our Current Report on Form 8-K filed
             April 2, 2002+

2.4          Escrow Agreement by and among TALX Corporation, Falcon, LLC and UMB
             Bank, N.A. dated as of March 27, 2002, incorporated by reference to
             Exhibit 2.4 to our Current Report on Form 8-K filed April 2, 2002

2.5          Lease Services Agreement by and between Gates, McDonald & Company
             and Garcia Acquisition Sub, Inc. dated as of March 27, 2002,
             incorporated by reference to Exhibit 2.5 to our Current Report on
             Form 8-K filed April 2, 2002

2.6          Employee Services Agreement by and between Nationwide Mutual
             Insurance Company and Garcia Acquisition Sub, Inc. dated as of
             March 27, 2002, incorporated by reference to Exhibit 2.6 to our
             Current Report on Form 8-K filed April 2, 2002

2.7          Master Transition Services Agreement by and between Gates, McDonald
             & Company and Garcia Acquisition Sub, Inc. dated as of March 27,
             2002, incorporated by reference to Exhibit 2.7 to our Current
             Report on Form 8-K filed April 2, 2002

2.8          Intellectual Property License Agreement by and between Gates,
             McDonald & Company and Garcia Acquisition Sub, Inc. dated as of
             March 27, 2002, incorporated by reference to Exhibit 2.8 to our
             Current Report on Form 8-K filed April 2, 2002

3.1          Restated Articles of Incorporation of TALX Corporation, as amended,
             incorporated by reference to Exhibit 3.1 to our Annual Report on
             Form 10-K for the year ended March 31, 1997 (File No. 000-21465)

3.2          Bylaws of TALX Corporation, incorporated by reference to Exhibit
             3.2 to our Quarterly Report on Form 10-Q for the period ended
             December 31, 2001 (File No. 000-21465)

4.1          See Exhibit 3.1

4.2          Warrant Agreement dated as of October 22, 1996 among TALX
             Corporation, First Albany Corporation and Principal Financial
             Securities, Inc., incorporated by reference to Exhibit 4.2 to our
             Annual Report on Form 10-K for the year ended March 31, 1997 (File
             No. 000-21465)

10.1         Form of Incentive Stock Option Agreement, incorporated by reference
             to Exhibit 10.2 to our Registration Statement on Form S-1 (File No.
             333-10969) ++

10.2         TALX Corporation Amended and Restated 1994 Stock Option Plan,
             incorporated by reference to Exhibit 10.2 to our Registration
             Statement on Form S-1 (File No. 333-10969) ++

10.3         Form of Non-Qualified Stock Option Agreement, incorporated by
             reference to Exhibit 10.4 to our Registration Statement on Form S-1
             (File No. 333-10969) ++

10.4         TALX Corporation Outside Directors' Stock Option Plan, incorporated
             by reference to Exhibit 10.6 to our Registration Statement on Form
             S-1 (File No. 333-10969) ++

10.4.1       Amendment to TALX Corporation Outside Directors' Stock Option Plan,
             incorporated by reference to Exhibit 10.6.1 to our Annual Report on
             Form 10-K for the year ended March 31, 2001 (File No. 000-21465) ++

10.5         Form of Director Stock Option Agreement, incorporated by reference
             to Exhibit 10.7 to our Annual Report on
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                                       70
<PAGE>

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<S>          <C>
             Form 10-K for the year ended March 31, 1998 (File No.
             000-21465) ++

10.6         Lease dated March 28, 1996 by and between TALX Corporation and
             Stephen C. Murphy, Thomas W. Holley, Arthur S. Margulis and Samuel
             B. Murphy, Trustee of the Samuel B. Murphy Revocable Living Trust
             UTA 1/9/91, dba "Adie Road Partnership," incorporated by reference
             to Exhibit 10.10 to our Registration Statement on Form S-1 (File
             No. 333-10969)

10.7         Lease dated August 23, 1993 by and between Prudential Insurance
             Company of America, a New Jersey corporation and EKI Incorporated,
             incorporated by reference to Exhibit 10.11 to Amendment No. 1 to
             our Registration Statement on Form S-1 (File No. 333-10969)

10.8         Amended and Restated Preferred Stock Purchase Agreement dated
             December 23, 1988 among TALX Corporation, MiTek Industries, Inc.,
             Intech Group, Inc., Gateway Venture, Zinsmeyer Trusts Partnership,
             and Missouri Venture Partners, L.P., incorporated by reference to
             Exhibit 10.13 to Amendment No. 1 to our Registration Statement on
             Form S-1 (File No. 333-10969)

10.9         Securities Purchase Agreement dated November 28, 1990 among TALX
             Corporation, MiTek Industries, Inc., Intech Group, Inc., Gateway
             Venture Partners II, L.P. and Zinsmeyer Trusts Partnership,
             incorporated by reference to Exhibit 10.14 to Amendment No. 1 to
             our Registration Statement on Form S-1 (File No. 333-10969)

10.10        Amendment and Waiver Agreement dated as of July 28, 1996 between
             TALX Corporation, Intech Group, Inc., Intech Partners, L.P., MiTek
             Industries, Inc., Gateway Venture Partners II, L.P., Zinsmeyer
             Trusts Partnership and the Missouri State Employee's Retirement
             System, incorporated by reference to Exhibit 10.15 to our
             Registration Statement on Form S-1 (File No. 333-10969)

10.11        Debenture Purchase Agreement dated May 11, 1990 among TALX
             Corporation, Intech Group, Inc., MiTek Industries, Inc., Gateway
             Venture Partners II, L.P., Zinsmeyer Trusts Partnership, H. Richard
             and Gloria Grodsky, W. Gary and Debra Lowe, Michael and Della Smith
             and John E. and Janet B. Tubbesing, incorporated by reference to
             Exhibit 10.19 to our Registration Statement on Form S-1 (File No.
             333-10969)

10.12        Employment Agreement between TALX Corporation and Mr. Canfield,
             incorporated by reference to Exhibit 10.21 to Amendment No. 2 to
             our Registration Statement on Form S-1 (File No. 333-10969) ++

10.13        Employment Agreement between TALX Corporation and Mr. Smith,
             incorporated by reference to Exhibit 10.23 to Amendment No. 2 to
             our Registration Statement on Form S-1 (File No. 333-10969) ++

10.14        Employment Agreement between TALX Corporation and Mr. Cohen,
             incorporated by reference to Exhibit 10.14 to our Annual Report on
             Form 10-K filed July 1, 2002 ++

10.15        License Agreement by and between A2D, L.P. and TALX Corporation,
             dated as of April 1, 2001, incorporated by reference to exhibit
             10.26 to our Annual Report on Form 10-K for the year ended March
             31, 2001 (File No. 000-21465) *

10.16        Loan Agreement among LaSalle Bank National Association, Southwest
             Bank of St. Louis and TALX Corporation dated as of March 27, 2002,
             incorporated by reference to Exhibit 10.1 to our Current Report on
             Form 8-K filed April 2, 2002+

10.17        Security Agreement executed and delivered by TALX Corporation in
             favor of LaSalle Bank National Association dated as of March 27,
             2002, incorporated by reference to Exhibit 10.2 to our Current
             Report on Form 8-K filed April 2, 2002

10.18        Security Agreement executed and delivered by Ti3, Inc. in favor of
             LaSalle Bank National Association dated as of March 27, 2002,
             incorporated by reference to Exhibit 10.3 to our Current Report on
             Form 8-K filed April 2, 2002

10.19        Security Agreement executed and delivered by Garcia Acquisition
             Sub, Inc. in favor of LaSalle Bank National Association dated as of
             March 27, 2002, incorporated by reference to Exhibit 10.4 to our
             Current Report on Form 8-K filed April 2, 2002

10.20        Security Agreement executed and delivered by James E. Frick, Inc.
             in favor of LaSalle Bank National Association dated as of March 27,
             2002, incorporated by reference to Exhibit 10.5 to our Current
             Report on Form 8-K filed April 2, 2002

10.21        Collateral Assignment of Asset Purchase Agreement executed and
             delivered by Garcia Acquisition Sub, Inc. in
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                                       71
<PAGE>
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<S>          <C>
             favor of LaSalle Bank National Association dated as of March 27,
             2002, incorporated by reference to Exhibit 10.6 to our Current
             Report on Form 8-K filed April 2, 2002

10.22        Collateral Assignment of Asset Purchase Agreement executed and
             delivered by TALX Corporation in favor of LaSalle Bank National
             Association dated as of March 27, 2002, incorporated by reference
             to Exhibit 10.7 to our Current Report on Form 8-K filed April 2,
             2002

10.23        Stock Pledge of Ti3 Stock executed and delivered by TALX
             Corporation in favor of LaSalle Bank National Association dated as
             of March 27, 2002, incorporated by reference to Exhibit 10.8 to our
             Current Report on Form 8-K filed April 2, 2002

10.24        Stock Pledge of Garcia Stock executed and delivered by TALX
             Corporation in favor of LaSalle Bank National Association dated as
             of March 27, 2002, incorporated by reference to Exhibit 10.9 to our
             Current Report on Form 8-K filed April 2, 2002

10.25        Stock Pledge of Frick Stock executed and delivered by TALX
             Corporation in favor of LaSalle Bank National Association dated as
             of March 27, 2002, incorporated by reference to Exhibit 10.10 to
             our Current Report on Form 8-K filed April 2, 2002

10.26        Guaranty executed and delivered by Ti3, Inc. in favor of LaSalle
             Bank National Association dated as of March 27, 2002, incorporated
             by reference to Exhibit 10.11 to our Current Report on Form 8-K
             filed April 2, 2002

10.27        Guaranty executed and delivered by Garcia Acquisition Sub, Inc. in
             favor of LaSalle Bank National Association dated as of March 27,
             2002, incorporated by reference to Exhibit 10.12 to our Current
             Report on Form 8-K filed April 2, 2002

10.28        Guaranty executed and delivered by James E. Frick, Inc. in favor of
             LaSalle Bank National Association dated as of March 27, 2002,
             incorporated by reference to Exhibit 10.13 to our Current Report on
             Form 8-K filed April 2, 2002

10.29        Form of Warrant to Purchase Common Stock dated as of May 7, 1999
             issued by TALX Corporation to AGE Investments, Inc., incorporated
             by reference to Exhibit 10.1 to our Registration Statement on
             Form S-3 (File No. 333-63690)

11.1         Statement regarding computation of Per Share Earnings

21.1         Subsidiaries of TALX Corporation, incorporated by reference to
             Exhibit 21.1 to our Annual Report on Form 10-K filed July 1, 2002

23.1         Consent of KPMG LLP

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

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

----------

+        TALX Corporation undertakes to furnish supplementally a copy of any
         schedule to the Securities Exchange Commission upon request.

++       Represents management contract or compensatory plan or arrangement.

* Certain portions of this agreement have been omitted pursuant to a
confidential treatment request and filed separately with the Securities and
Exchange Commission.


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