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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                      ------------------------------------
                                   FORM 10-K

<TABLE>
<S>         <C>                                                           <C>
   [X]          Annual Report Pursuant to Section 13 or 15(d) of the
             Securities Exchange Act of 1934 For the fiscal year ended
                                   March 31, 2001
                                         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
</TABLE>

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

<TABLE>
<S>                                            <C>
                   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
</TABLE>

          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. [ ]
As of June 1, 2001, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was approximately $307,036,316. 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 1, 2001 there were 9,450,438 shares of the Registrant's Common Stock
outstanding.
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                                     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 include, but are not limited to, statements
relating to:

     - our business strategy;

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

     - the anticipated benefits of the Ti3 acquisition;

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

     - 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 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
services and a leader in providing outsourced employee self-service
applications. We use 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 to allow employees to review and modify
information in human resources, benefits and payroll management information
systems without requiring employer assistance. Our services and software 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 150 of the Fortune 500 and 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 their site. We refer to this as our "customer premises systems"
business. In 1993, we began to deliver benefits enrollment and other human
resource services as an application services provider, 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 application
service for employment and income verification. This application service is
supported by a database of employment information that we have gathered from
over 550 clients and, as of March 31, 2001, contained more than 43 million
employment records.

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With the market's acceptance of our application services 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 1 -- 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.

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
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.

All share and per share information in this Form 10-K reflects our October 2000
ten percent stock dividend and our January 2001 three-for-two stock split.

RECENT DEVELOPMENTS

We have recently entered into a merger agreement with Ti3, Inc., 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.

For the fiscal year ended March 31, 2001, Ti3 generated revenues of $3.6 million
and pre-tax earnings of $172,000. Ti3's most significant client, a large
staffing company, accounted for approximately 43% of revenues for the year, and
Ti3's four largest clients accounted for approximately 82% of revenues.

     DESCRIPTION OF THE MERGER

Pursuant to a merger agreement between us and Ti3 dated as of June 21, 2001,
subject to the satisfaction of specified conditions, an acquisition subsidiary
of ours will merge with and into Ti3. Ti3 will remain in existence following the
merger as our wholly-owned subsidiary. We anticipate that the merger, which has
been approved by Ti3 shareholders, will close on or about July 2, 2001.

At closing, we will pay Ti3 shareholders a maximum of $11.8 million in our
common stock. For this purpose our share price will be valued at the weighted
average per share trading price of every transaction of our common stock over
the course of the ten consecutive full trading days ending with the full trading
day immediately preceding the closing date. We expect to initially issue
approximately 368,750 shares of our common stock, assuming an issue price of
$32.00 and disregarding any dissenting shareholders. We may elect to pay up to
10% of the consideration in cash rather than in shares of our common stock.

At closing, Ti3 shareholders will deposit into escrow for a period of one year
the number of shares of our common stock valued at $1,180,000 based upon our
share price as determined above. The escrow agent will hold the shares in trust
and will only use them to satisfy any losses for which the Ti3 shareholders are
obligated to indemnify us.

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In addition to the consideration to be delivered at the closing of the merger,
we may make an additional payment to Ti3 shareholders depending upon Ti3's
financial performance in the 12 months immediately after the closing. The
additional payment, if any, will be equal to the product of (A) 30% of our
price-to-earnings ratio at the end of the most recently completed four quarters
following the closing, subject to a minimum ratio of 22.5 and a maximum ratio of
45.0, and (B) the amount by which Ti3's after-tax earnings for the 12 months
after closing exceeds the product of $0.90 and the number of shares issued to
Ti3's shareholders at closing. Assuming we issue 368,750 shares at closing, Ti3
would need to generate pre-tax earnings of approximately $550,000 for the twelve
months following the closing in order to receive any such additional payment.

We will also pay the Ti3 shareholders 75% of the lesser of (1) the actual amount
of the tax loss carry-forward utilized by us during the twelve months following
the closing or (2) all pre-tax earnings generated by Ti3 during that period. As
of March 31, 2001, Ti3 had a tax loss carry-forward of $1.16 million.

We may make these additional payments either in our common stock or in cash,
subject to certain limitations. We will value any shares of our common stock
transferred for these purposes based upon the weighted average per share trading
price of every transaction of our common stock over the course of the ten
consecutive full trading days ending three full trading days immediately
preceding the first anniversary of the closing.

The shares of our common stock to be issued to Ti3 shareholders will not be
registered under the Securities Act and may not be offered or sold in the United
States absent registration or an applicable exemption from the registration
requirements. We have agreed to grant the Ti3 shareholders the right to demand
registration no earlier than 180 days after the closing, as well as certain
piggyback registration rights.

Before we can complete the merger, the parties must satisfy or waive a number of
conditions. The obligations of all parties are subject to a number of customary
conditions outside the control of the party entitled to the benefit of the
condition. Our obligation to consummate the merger is subject to satisfaction or
waiver of the following additional conditions:

     - our satisfaction that our securities to be issued as provided in the
       merger can be issued in compliance with the requirements of the
       Securities Act of 1933, as amended;

     - the performance by Ti3 and its shareholders of their respective
       obligations under the merger agreement; and

     - no occurrence of an event that has or is reasonably expected to have a
       material adverse effect on Ti3.

The obligation of Ti3 and its shareholders to consummate the merger is subject
to satisfaction or waiver of the condition that we perform our obligations under
the merger agreement.

The merger agreement may be terminated at any time prior to the closing of the
merger in any of the following cases:

     - by mutual consent of us and Ti3;

     - by the non-delaying party to the merger, if the merger does not close on
       or before July 31, 2001 due to the delay of the other party; and

     - by us if we determine that the merger has become inadvisable or
       impractical by reason of the institution or threat of any litigation,
       investigation or proceeding.

SERVICES AND PRODUCTS

We provide application 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 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 three general categories: The Work
Number services, human

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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 paystubs 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, credit issuers 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, 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    - provides control over          - decreases the opportunity
  otherwise spent responding       third- party access to           for human error
  to verification inquiries        personal compensation
                                   information
- eases the administrative       - provides information           - reduces likelihood of fraud
  burden of human resources        without requiring the            by the applicant by
  and payroll staff                cooperation or knowledge of      providing independent
                                   co-workers                       evidence directly to the
                                                                    verifier
- lowers the risk of             - expedites the verification     - expedites the verification
  liability resulting from         process, so that                 process, so that
  providing erroneous or           transactions may occur more      transactions may occur more
  unauthorized information to      quickly                          quickly
  third 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. We also generate revenues from employer data conversion and ongoing
maintenance fees.

As of March 31, 2001, The Work Number database contained over 43 million
employee records and had contracts to receive over 8 million additional records.
The 43 million records on-line represent approximately 17 million current and 26
million former employees of over 550 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.

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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:

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

     - 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

     - automating the process for collecting correction requests.

We generate revenues from these services by charging clients a fee on a
per-employee basis. We introduced W-2 eXpress in fiscal 2000, and as of March
31, 2001 we held records of over 3 million employees of 29 clients in our
database, generally pursuant to multi-year contracts.

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:

     - receive pay statement information;

     - access current and historical payroll information; and

     - review and change direct deposit account information.

Employers that send us electronic transmissions of their employees' paystubs and
direct deposit data can reduce the amount of staff required to process routine
employee payroll requests. Prior to the end of our current fiscal year, 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 are expected
to begin using the service in the second fiscal quarter of 2002. We plan to
charge ePayroll clients on a per-employee per-month basis, plus an initial
set-up fee, generally pursuant to multi-year contracts.

     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, we introduced eChoice, our advanced benefits enrollment
service

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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,
plus an initial set-up fee, 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.

     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. As of March 31, 2001, there were
approximately 150 employers using our customer premises systems. 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.

     DIRECT SALES FORCE

Our sales and marketing effort is based in St. Louis, and we have
representatives located in eleven other U.S. cities. Our sales and marketing
effort relies on a team approach consisting of approximately 65 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 all of 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:

     - 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

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       website. In exchange, we have agreed, among other things, to share
       revenue with Hewitt resulting from its referrals.

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

     - Gates, McDonald & Company: GatesMcDonald is a leading provider of risk
       and employee benefit cost management services and has agreed to assist us
       with marketing our services to its clients in exchange for a share of
       revenue generated by such activities.

     - 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 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:

     - service and product quality, reliability and performance;

     - functionality and ease of use;

     - company reputation for integrity and confidentiality;

     - company financial strength; and

     - cost of the service or product.

Our primary competitors relating to The Work Number services are The Frick
Company, Jon-Jay Associates and The Sheakley Group of Companies, which are
employee benefit cost management service providers offering employment and
income verification 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 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

Our business is based on databases we construct and applications we build to
access and manipulate data. To build our applications, we use a proprietary
integrated visual development environment and software system

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known as TALXWare. 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:

     - speech recognition;

     - text-to-speech;

     - facsimile;

     - terminal emulation; and

     - 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 payments under a license 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 $2.1 million in fiscal 1999, $1.8
million in fiscal 2000 and $2.2 million in fiscal 2001. As of March 31, 2001,
our total product development staff consisted of 19 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, 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.

Our 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
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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 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 and $18 million at March 31, 2001,
with a one-year backlog of approximately $7 million at March 31, 2000 and $9
million at March 31, 2001. 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, 2001, The Work Number database contained employee records from
over 550 clients, representing more than 43 million present and former
employees. Additionally, as of that date, we had contracts with over 100
additional clients to provide records of over 8 million present and former
employees in backlog. These clients typically employ over 5,000 employees, and
include approximately 150 of the Fortune 500 companies and federal, state and
local government agencies. Our clients operate in a wide variety of industries,
including financial services, telecommunications services, retail, consumer
products, temporary services and government. No client accounted for more than
10% of total revenues in any of the fiscal years 1999, 2000 or 2001.

EMPLOYEES

As of March 31, 2001, we employed 241 full-time and 13 part-time employees. 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:

    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. If we are unable to
attract and retain a sufficient number of employer clients, if we cannot
persuade them to include a greater

                                        10
<PAGE>   11

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 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.

     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
our transaction-based fees. If residential mortgage activity declines, whether
due to increases in mortgage interest rates or otherwise, our revenues and
profitability would 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 the most active users of The Work Number are mortgage lenders,
who 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 that they purchase. Accordingly, most
lenders seek this information from mortgage applicants. If Fannie Mae or Freddie
Mac were to require fewer years of employment and income data or eliminate the
requirement for independent verification, 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, 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, due to 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.

                                        11
<PAGE>   12

     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.

While we believe no controlling legal precedent exists, the Federal Trade
Commission, which enforces the FCRA, or consumers 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.

     NEW 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, Congress has recently enacted
the Gramm-Leach-Bliley Act, which contains provisions protecting the privacy of
consumer non-public personal information collected by financial institutions.
This may limit our ability to disclose data received from financial institutions
for The Work Number services. Additionally, new privacy standards relating to
patients' medical records were recently released by the Department of Health and
Human Services. These privacy standards could limit or impose additional costs
in connection with our benefits enrollment and similar services. Many states
have also enacted consumer 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.

     WE MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE TI3'S OPERATIONS AND PERSONNEL
     INTO OUR EXISTING BUSINESS.

As of June 21, 2001, we entered into an agreement to acquire Ti3, Inc., an
application service provider primarily for the staffing industry utilizing
interactive voice response and Internet technologies. We expect that the
acquisition will expand and complement our application services business,
enhance our revenues and increase market opportunities. Achieving the benefits
of the acquisition will depend in part on our ability to integrate their
operations and personnel in a timely and efficient manner so as to minimize the
risk that the transaction will result in the loss of market opportunity or key
employees or the diversion of the attention of management. Additionally, this is
our first business acquisition as a public company and we have no experience in
managing this type of acquisition.

We cannot be sure that we will successfully integrate Ti3 with our company. In
addition, we are not certain that we will realize any of the benefits that we
seek to achieve through the acquisition. In fiscal 2001, Ti3 derived
approximately 43% of its revenues from one client and approximately 82% of its
revenues from four clients. We cannot assure you that we will be able to retain
any of those clients or any other clients of Ti3.
                                        12
<PAGE>   13

Further, after acquiring Ti3, we could discover that we have assumed liabilities
that we were not expecting. Our inability to overcome any problems that might
develop in attempting to integrate Ti3 could significantly harm our revenues and
results of operations.

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

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. Our data processing center is located in St. Louis,
Missouri, which historically has 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 two quarters of each calendar year, which
correspond to our second and third fiscal quarters.

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

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

     - market acceptance of new services;

     - the hiring and training of additional staff;

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

     - general economic conditions.

We cannot assure you that we will be able to sustain our level of total revenue
or 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.

     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.

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.

                                        13
<PAGE>   14

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 product enhancements due to integration of
technology from new suppliers could significantly harm our revenues and
profitability.

     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.

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.

     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.
                                        14
<PAGE>   15

     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 loss of one or more competitive advantages
and decreased revenues.

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.

     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 integration
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 product 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. 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:

     - be time-consuming;

     - result in costly litigation;

     - divert the efforts of our technical and management personnel;

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

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

     - require us to pay substantial damage awards;

     - damage our reputation; or

                                        15
<PAGE>   16

     - 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.

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

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

We consider the primary competitors to The Work Number to be The Frick Company,
Jon-Jay Associates and The Sheakley Group of Companies, which are employee
benefits cost management service providers offering employment and income
verification 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. We also compete 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.

    ANY ACQUISITION THAT WE MAY UNDERTAKE COULD BE DIFFICULT TO INTEGRATE,
    DISRUPT OUR BUSINESS, DILUTE SHAREHOLDER VALUE AND SIGNIFICANTLY HARM OUR
    RESULTS OF OPERATIONS.

We expect to review opportunities to acquire other businesses that would
complement our current products and services, expand the breadth of our markets,
enhance our technical capabilities or otherwise offer growth opportunities.
While we have no current agreements or material negotiations underway, except
for our agreement to acquire Ti3, we may acquire businesses in the future. If we
make any acquisitions, we could issue stock that would dilute existing
shareholders' percentage ownership, incur substantial debt or assume contingent
liabilities. We have only limited experience in acquiring other businesses and
believe potential acquisitions could involve the following risks:

     - problems assimilating the acquired operations, technologies and products;

     - unanticipated costs associated with the acquisition;

     - diversion of management's attention from our core business;

     - adverse effects on existing business relationships with suppliers,
       contract manufacturers, customers and industry experts;

     - risks associated with entering markets in which we have no or limited
       prior experience; and

     - potential loss of the acquired organization's or our own key employees.

We cannot assure you that we would be successful in overcoming problems in
connection with such acquisitions, and our inability to do so could
significantly harm our revenues and results of operations.

                                        16
<PAGE>   17

     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:

     - provide for a classified board of directors;

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

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

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

     - 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;

     - 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;

     - 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

     - in the case of Missouri law, restrict specified types of "business
       combinations" and "control share acquisitions," as well as regulate some
       tender offers.

These provisions may:

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

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

     - 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 $41.79 per share to a low of $9.05 during the twelve months ended June
21, 2001. The price could continue to be subject to wide fluctuations due to
factors including:

     - actual or anticipated variations in our operating results;

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

     - new services or contracts by us or our competitors;

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

     - changes in financial estimates by securities analysts;

     - conditions and trends in outsourcing of human resources, benefits and
       payroll services; and

     - 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.

                                        17
<PAGE>   18

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. Such litigation, if instituted, 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.

ITEM 2. PROPERTIES

Our headquarters and executive offices are located in an approximately 38,000
square foot office building located at 1850 Borman Court, St. Louis, Missouri
63146 pursuant to a lease ending in September 2002 with an annual base rental of
approximately $413,000, subject to increases for taxes, insurance and operating
expenses. We have entered into a lease ending in 2005 for approximately 22,000
square feet of additional office space located near our headquarters with an
annual base rental of approximately $226,000, subject to increases for taxes,
insurance and operating expenses. We also lease sales offices in Arizona,
Georgia, Massachusetts and the District of Columbia. We believe our facilities
have been generally well maintained, are in good operating condition and are
adequate for our current requirements.

ITEM 3. LEGAL PROCEEDINGS

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

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

None.

                                        18
<PAGE>   19

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS

Our common stock trades on the Nasdaq National Market under the symbol "TALX."
The following table sets forth the high and low sale prices of our common stock
as reported by the Nasdaq National Market for each of the quarters since the
beginning of fiscal 2000 through the end of fiscal 2001.

<TABLE>
<CAPTION>
                                                                 HIGH      LOW
                                                                ------    ------
<S>                                                             <C>       <C>
FISCAL 2000:
  First quarter.............................................    $ 5.67    $ 3.93
  Second quarter............................................      5.67      4.16
  Third quarter.............................................      9.37      4.42
  Fourth quarter............................................     13.23      7.41
FISCAL 2001:
  First quarter.............................................    $12.70    $ 7.64
  Second quarter............................................     17.34      9.03
  Third quarter.............................................     28.05     12.72
  Fourth quarter............................................     32.62     18.48
</TABLE>

On June 21, 2001, the last reported sale price on the Nasdaq National Market for
our common stock was $36.61 per share. As of June 1, 2001, there were
approximately 96 holders of record of our common stock.

During fiscal 2001, we began paying dividends on our common stock on a quarterly
basis. The following table sets forth dividends declared per share of common
stock for the periods indicated:

<TABLE>
<CAPTION>
                                                                DIVIDEND
                                                                --------
<S>                                                             <C>
FISCAL 2001:
  Second Quarter............................................     $0.02
  Third Quarter.............................................     $0.03
  Fourth Quarter............................................     $0.03
</TABLE>

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.

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, 2001 from our consolidated
financial statements and the related notes, 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.

                                        19
<PAGE>   20

<TABLE>
<CAPTION>
                                                                                YEARS ENDED MARCH 31,
                                                              ---------------------------------------------------------
                                                                1997        1998        1999        2000        2001
                                                              ---------   ---------   ---------   ---------   ---------
                                                                   (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                                           <C>         <C>         <C>         <C>         <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
  The Work Number services..................................  $   1,642   $   4,270   $   9,109   $  12,328   $  19,094
  Human resources and benefits application services.........      2,173       2,925       5,126       7,993      10,694
  Customer premises systems.................................     11,013       9,886      10,948      10,835       6,882
  Maintenance and support...................................      3,559       4,192       4,920       4,876       4,417
                                                              ---------   ---------   ---------   ---------   ---------
    Total revenues..........................................     18,387      21,273      30,103      36,032      41,087
                                                              ---------   ---------   ---------   ---------   ---------
Cost of revenues:
  The Work Number services..................................        678       1,807       3,138       3,973       6,179
  Human resources and benefits application services.........        941       2,010       3,225       4,460       6,956
  Customer premises systems.................................      5,560       5,967       7,874       8,388       5,790
  Maintenance and support...................................      1,025       1,325       1,545       1,367       1,275
                                                              ---------   ---------   ---------   ---------   ---------
    Total cost of revenues..................................      8,204      11,109      15,782      18,188      20,200
                                                              ---------   ---------   ---------   ---------   ---------
Gross margin................................................     10,183      10,164      14,321      17,844      20,887
                                                              ---------   ---------   ---------   ---------   ---------
Operating expenses:
  Selling and marketing.....................................      5,902       7,952       8,339       7,820       8,542
  General and administrative................................      2,613       3,496       4,853       5,477       5,609
  Restructuring charge......................................         --          --         496          --          --
                                                              ---------   ---------   ---------   ---------   ---------
    Total operating expenses................................      8,515      11,448      13,688      13,297      14,151
                                                              ---------   ---------   ---------   ---------   ---------
Operating income (loss).....................................      1,668      (1,284)        633       4,547       6,736
Other income (expense), net.................................       (409)        158           8          82         562
Income tax expense (benefit)................................        466        (416)        239       1,862       2,990
                                                              ---------   ---------   ---------   ---------   ---------
Earnings (loss) from continuing operations..................        793        (710)        402       2,767       4,308
                                                              ---------   ---------   ---------   ---------   ---------
Discontinued operations:
  Loss from discontinued operations, net....................       (164)         --          --          --          --
  Gain (loss) on disposal of discontinued operations, net...       (900)       (374)         --         117          37
                                                              ---------   ---------   ---------   ---------   ---------
    Gain (loss) from discontinued operations, net...........     (1,064)       (374)         --         117          37
                                                              ---------   ---------   ---------   ---------   ---------
Earnings (loss) before extraordinary item...................       (271)     (1,084)        402       2,884       4,345
Extraordinary item..........................................       (971)         --          --          --          --
                                                              ---------   ---------   ---------   ---------   ---------
      Net earnings (loss)...................................  $  (1,242)  $  (1,084)  $     402   $   2,884   $   4,345
                                                              =========   =========   =========   =========   =========
Net earnings (loss) per common share(1):
  Basic:
    Continuing operations...................................  $    0.12   $   (0.08)  $    0.05   $    0.30   $    0.46
    Discontinued operations, net............................      (0.16)      (0.04)         --        0.01        0.01
    Extraordinary item......................................      (0.14)         --          --          --          --
                                                              ---------   ---------   ---------   ---------   ---------
      Net earnings (loss)...................................  $   (0.18)  $   (0.12)  $    0.05   $    0.31   $    0.47
                                                              =========   =========   =========   =========   =========
  Diluted:
    Continuing operations...................................  $    0.12   $   (0.08)  $    0.04   $    0.30   $    0.45
    Discontinued operations, net............................      (0.16)      (0.04)         --        0.01          --
    Extraordinary item......................................      (0.14)         --          --          --          --
                                                              ---------   ---------   ---------   ---------   ---------
      Net earnings (loss)...................................  $   (0.18)  $   (0.12)  $    0.04   $    0.31   $    0.45
                                                              =========   =========   =========   =========   =========
  Cash dividends declared per common share..................  $      --   $      --   $      --   $      --   $    0.08
Weighted average number of common shares outstanding:
  Basic(1)..................................................  6,848,550   8,730,779   8,912,219   9,173,954   9,323,571
  Diluted(1)................................................  6,848,550   8,730,779   9,107,067   9,335,059   9,570,156
</TABLE>

<TABLE>
<CAPTION>
                                                                                      MARCH 31,
                                                              ---------------------------------------------------------
                                                                1997        1998        1999        2000        2001
                                                              ---------   ---------   ---------   ---------   ---------
                                                                                   (IN THOUSANDS)
<S>                                                           <C>         <C>         <C>         <C>         <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments...........  $   5,801   $   2,879   $     267   $   6,291   $   9,725
Working capital.............................................     13,351       9,079       8,316      15,158      16,387
Net assets of business held for sale........................        707       1,157         859          --          --
Total assets................................................     24,072      24,121      24,564      30,133      33,995
Total debt..................................................         36          --          --          --          --
Shareholders' equity........................................     20,403      19,508      20,095      23,308      26,145
ADDITIONAL INFORMATION:
Employment records in The Work Number database..............      7,017      13,115      18,285      30,298      43,005
Employment records under contract(2)........................     10,638      17,134      25,831      36,089      52,000
</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.

                                        20
<PAGE>   21

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.

OVERVIEW

Our software and services consist of The Work Number 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:

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

     - W-2 eXpress, our new suite of W-2 payroll services; and

     - ePayroll, our new suite of payroll self-service applications.

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 those expected from ePayroll,
represent fees charged to clients on a per-employee basis. We first introduced
W-2 eXpress in fiscal 2000, with no meaningful revenues generated until the
fourth quarter of fiscal 2001. We expect our first clients to begin using
ePayroll in our second fiscal quarter of 2002. Costs of revenues related to The
Work Number services consist of telecommunications services, 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 and
telecommunications services.

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.

On June 21, 2001 we entered into an agreement to acquire Ti3, Inc., an
application service provider primarily for the staffing industry utilizing
interactive voice response and Internet technologies. Pursuant to the merger, we
expect to initially issue approximately 368,750 shares of our common stock,
assuming an issue price of $32.00, disregarding any dissenting shareholders. The
actual number of shares we will issue will vary as described in
"Business -- Recent Developments." We may issue additional shares of our common
stock based upon the performance of Ti3 in the twelve months following the
merger. During the year ended March 31, 2001, Ti3 generated revenues of $3.6
million and pre-tax earnings of $172,000.

                                        21
<PAGE>   22

RESULTS OF OPERATIONS

The following tables set forth our (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,
                                                                -----------------------------
                                                                 1999       2000       2001
                                                                -------    -------    -------
                                                                       (IN THOUSANDS)
<S>                                                             <C>        <C>        <C>
Revenues:
  The Work Number services..................................    $ 9,109    $12,328    $19,094
  Human resources and benefits application services.........      5,126      7,993     10,694
  Customer premises systems.................................     10,948     10,835      6,882
  Maintenance and support...................................      4,920      4,876      4,417
                                                                -------    -------    -------
     Total revenues.........................................    $30,103    $36,032    $41,087
                                                                =======    =======    =======
Gross margin:
  The Work Number services..................................    $ 5,971    $ 8,355    $12,915
  Human resources and benefits application services.........      1,901      3,533      3,738
  Customer premises systems.................................      3,074      2,447      1,092
  Maintenance and support...................................      3,375      3,509      3,142
                                                                -------    -------    -------
     Total gross margin.....................................    $14,321    $17,844    $20,887
                                                                =======    =======    =======
</TABLE>

<TABLE>
<CAPTION>
                                                                      YEARS ENDED MARCH 31,
                                                                  ------------------------------
                                                                  1999         2000         2001
                                                                  ----         ----         ----
<S>                                                               <C>          <C>          <C>
Gross margin percentage by revenue category:
  The Work Number services..................................      65.6%        67.8%        67.6%
  Human resources and benefits application services.........      37.1         44.2         35.0
  Customer premises systems.................................      28.1         22.6         15.9
  Maintenance and support...................................      68.6         72.0         71.1
</TABLE>

<TABLE>
<CAPTION>
                                                                       YEARS ENDED MARCH 31,
                                                                   -----------------------------
                                                                   1999        2000        2001
                                                                   -----       -----       -----
<S>                                                                <C>         <C>         <C>
PERCENTAGE OF TOTAL REVENUES

Revenues:
  The Work Number services..................................        30.3%       34.2%       46.5%
  Human resources and benefits application services.........        17.0        22.2        26.0
  Customer premises systems.................................        36.4        30.1        16.7
  Maintenance and support...................................        16.3        13.5        10.8
                                                                   -----       -----       -----
     Total revenues.........................................       100.0       100.0       100.0
Cost of revenues............................................        52.4        50.5        49.2
                                                                   -----       -----       -----
Gross margin................................................        47.6        49.5        50.8
                                                                   -----       -----       -----
Operating expenses:
  Selling and marketing.....................................        27.8        21.7        20.8
  General and administrative................................        16.1        15.2        13.6
  Restructuring charge......................................         1.6          --          --
                                                                   -----       -----       -----
     Total operating expenses...............................        45.5        36.9        34.4
                                                                   -----       -----       -----
Operating income............................................         2.1        12.6        16.4
Other income, net...........................................          --         0.2         1.4
                                                                   -----       -----       -----
Earnings from continuing operations before income tax
  expense...................................................         2.1        12.8        17.8
Income tax expense..........................................         0.8         5.1         7.3
                                                                   -----       -----       -----
Earnings from continuing operations.........................         1.3         7.7        10.5
Discontinued operations, net................................          --         0.3         0.1
                                                                   -----       -----       -----
Net earnings................................................         1.3%        8.0%       10.6%
                                                                   =====       =====       =====
</TABLE>

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

Revenues. Total revenues increased 14.0% to $41.1 million in fiscal 2001 from
$36.0 million in fiscal 2000. Revenues from The Work Number services increased
54.9% to $19.1 million in fiscal 2001 from $12.3 million
                                        22
<PAGE>   23

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 33.8% to $10.7 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 shift our strategy towards 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 and human resources and benefits application services.

Gross Margin. Gross margin increased 17.1% to $20.9 million in fiscal 2001 from
$17.8 million in fiscal 2000. As a percentage of total revenues, gross margin
increased to 50.8% in fiscal 2001 from 49.5% in fiscal 2000. The Work Number
services gross margin increased 54.6% to $12.9 million, or 67.6% 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 increased 5.8% to $3.7 million in fiscal 2001 from $3.5
million in fiscal 2000, but as a percentage of corresponding revenue, decreased
to 35.0% in fiscal 2001 from 44.2% in fiscal 2000. This decrease in gross margin
percentage is principally due to costs associated with transitioning personnel
from our customer premises systems business in anticipation of possible future
growth in human resources and benefits application services. 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 remain as we shift 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 9.2%
to $8.5 million in fiscal 2001 from $7.8 million in fiscal 2000. The increase in
expense reflects the expansion of our sales and marketing efforts. As a
percentage of revenues, such expenses decreased to 20.8% in fiscal 2001 from
21.7% in fiscal 2000. The decrease in percentage of revenues is 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 2.4% to $5.6 million in fiscal 2001 from $5.5 million in fiscal 2000.
The increase in such expenses reflects the increased infrastructure costs of a
growing business and workforce. As a percentage of revenues, such expenses
decreased to 13.6% in fiscal 2001 from 15.2% in fiscal 2000. The decrease in
general and administrative expenses as a percentage of revenues is due to the
greater operating efficiencies resulting from higher revenues.

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 41.0% in fiscal 2001 and
40.2% in fiscal 2000. The increase in effective tax rate is due to higher state
tax rates and the expiration of certain tax credit carryforwards.

                                        23
<PAGE>   24

FISCAL YEAR ENDED MARCH 31, 2000 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1999

Revenues.  Total revenues increased 19.7% to $36.0 million in fiscal 2000 from
$30.1 million in fiscal 1999. Revenues from The Work Number services increased
35.3% to $12.3 million in fiscal 2000 from $9.1 million in fiscal 1999, due to
an increase in the number of employment records in the database and related
transaction volume, new clients gained from continued marketing and an increase
in pricing during the period. Revenues from human resources and benefits
application services increased 55.9% to $8.0 million in fiscal 2000 from $5.1
million in fiscal 1999, due to the addition of new clients seeking to outsource
their non-core functions, and an increase in pricing during the period. Revenues
from customer premises systems decreased 1.0% to $10.8 million in fiscal 2000
from $10.9 million in fiscal 1999. This decrease was due to our decision in
fiscal 2000 to discontinue sales of customer premises systems to new clients.
Revenues from maintenance and support related to the customer premises systems
remained constant at $4.9 million for fiscal 2000 and 1999, reflecting the
support provided to an increased installed base of customer premises systems,
offset by the cancellation of maintenance on older systems.

Gross Margin.  Gross margin increased 24.6% to $17.8 million in fiscal 2000 from
$14.3 million in fiscal 1999. As a percentage of total revenues, gross margin
increased to 49.5% in fiscal 2000 from 47.6% in fiscal 1999. The Work Number
services gross margin increased 39.9% to $8.4 million, or 67.8% of corresponding
revenue, in fiscal 2000 from $6.0 million, or 65.6% of corresponding revenue, in
fiscal 1999, as revenues increased. This increase in gross margin percentage was
due to growth in our personnel and infrastructure costs at a slower rate than
our revenue growth. Human resources and benefits application services gross
margin increased 85.8% to $3.5 million, or 44.2% of corresponding revenue, in
fiscal 2000 from $1.9 million, or 37.1% of corresponding revenue, in fiscal
1999. This increase was primarily due to a price increase that we implemented
during fiscal 2000 without a corresponding increase in cost. Customer premises
systems gross margin decreased 20.4% to $2.4 million, or 22.6% of corresponding
revenue, in fiscal 2000 from $3.1 million, or 28.1% of corresponding revenue, in
fiscal 1999, due to certain fixed costs that remain as we shift our business
focus to The Work Number services and human resources and benefits application
services. Maintenance and support gross margin increased 4.0% to $3.5 million,
or 72.0% of corresponding revenue, in fiscal 2000 from $3.4 million, or 68.6% of
corresponding revenue, in fiscal 1999. These increases are due to greater
operating efficiencies resulting from the transition of some personnel to our
other products and services and lower cost of hardware components.

Selling and Marketing Expenses.  Selling and marketing expenses decreased 6.2%
to $7.8 million in fiscal 2000 from $8.3 million in fiscal 1999. These decreases
reflect our restructuring efforts during the third quarter of fiscal 1999, which
included a workforce reduction and the closing of several regional sales
offices. As a percentage of revenues, such expenses decreased to 21.7% in fiscal
2000 from 27.8% in fiscal 1999.

General and Administrative Expenses.  General and administrative expenses
increased 12.9% to $5.5 million in fiscal 2000 from $4.9 million in fiscal 1999.
The increase in such expenses reflects the increased infrastructure costs of a
growing business and workforce. As a percentage of revenues, such expenses
decreased to 15.2% in fiscal 2000 from 16.1% in fiscal 1999. The decrease in
general and administrative expenses as a percentage of revenues is due to
greater operating efficiencies resulting from higher revenue.

Restructuring Charge.  During the third quarter of fiscal 1999, we reorganized
our sales and delivery operations to focus on our application services
businesses and de-emphasized our customer premises systems business line. In
conjunction with the restructuring, we reduced our workforce by approximately 8%
and closed several regional sales offices. As a result of these actions, we
incurred pre-tax restructuring charges of $318,000 related to employee severance
costs and $178,000 of other costs.

Other Income, Net.  Interest income increased 54.5% to $85,000 in fiscal 2000
from $55,000 in fiscal 1999. The increase is due to a higher average level of
invested funds during the year. Interest expense decreased 93.0% to $4,000 in
fiscal 2000 from $57,000 in fiscal 1999. This decrease is due to the limited
usage of the line of credit during fiscal 2000 compared to fiscal 1999.

                                        24
<PAGE>   25

Income Tax Expense.  Our effective income tax rate was 40.2% in fiscal 2000 and
37.3% in fiscal 1999. The increase in effective tax rate is due to higher state
tax rates and the expiration of certain tax credit carryforwards.

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.

                                        25
<PAGE>   26

QUARTERLY RESULTS OF OPERATIONS

The following tables set forth (1) specified unaudited statement of operations
data for each of the four quarters in fiscal 2000 and 2001, (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,
                                          1999       1999        1999       2000        2000       2000        2000       2001
                                        --------   ---------   --------   ---------   --------   ---------   --------   ---------
                                                                  (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                     <C>        <C>         <C>        <C>         <C>        <C>         <C>        <C>
Revenues:
  The Work Number services...........    $2,635     $2,822      $3,147     $3,724      $4,132     $4,531      $4,635     $5,796
  Human resources and benefits
    application services.............     1,155      2,143       2,974      1,721       2,061      2,806       3,490      2,338
  Customer premises systems..........     3,151      2,409       2,594      2,681       2,127      2,347       1,558        849
  Maintenance and support............     1,262      1,280       1,210      1,124       1,142      1,113       1,070      1,091
                                         ------     ------      ------     ------      ------     ------      ------     ------
    Total revenues...................     8,203      8,654       9,925      9,250       9,462     10,797      10,753     10,074
                                         ------     ------      ------     ------      ------     ------      ------     ------
Gross margin:
  The Work Number services...........     1,730      1,906       2,143      2,575       2,841      2,991       3,183      3,900
  Human resources and benefits
    application services.............       433      1,140       1,471        489         756        885       1,481        618
  Customer premises systems..........       972        408         459        608         177        906         489       (482)
  Maintenance and support............       925        942         860        783         802        778         751        810
                                         ------     ------      ------     ------      ------     ------      ------     ------
    Total gross margin...............     4,060      4,396       4,933      4,455       4,576      5,560       5,904      4,846
                                         ------     ------      ------     ------      ------     ------      ------     ------
Operating expenses:
  Selling and marketing..............     1,883      1,939       2,068      1,931       2,055      2,144       2,249      2,094
  General and administrative.........     1,384      1,300       1,427      1,364       1,368      1,500       1,566      1,175
                                         ------     ------      ------     ------      ------     ------      ------     ------
    Total operating expenses.........     3,267      3,239       3,495      3,295       3,423      3,644       3,815      3,269
                                         ------     ------      ------     ------      ------     ------      ------     ------
Operating income.....................       793      1,157       1,438      1,160       1,153      1,916       2,089      1,577
                                         ======     ======      ======     ======      ======     ======      ======     ======
Gain from discontinued operations,
  net................................        --         --          --        117          --         36          --         --
                                         ======     ======      ======     ======      ======     ======      ======     ======
Net earnings.........................    $  486     $  714      $  899     $  785      $  741     $1,248      $1,321     $1,035
                                         ======     ======      ======     ======      ======     ======      ======     ======
Basic and diluted earnings per share:
  Earnings from continuing
    operations.......................    $ 0.05     $ 0.08      $ 0.10     $ 0.07      $ 0.08     $ 0.13      $ 0.14     $ 0.11
  Gain from discontinued operations,
    net..............................        --         --          --       0.01          --       0.01          --         --
                                         ------     ------      ------     ------      ------     ------      ------     ------
    Net earnings.....................    $ 0.05     $ 0.08      $ 0.10     $ 0.08      $ 0.08     $ 0.14      $ 0.14     $ 0.11
                                         ======     ======      ======     ======      ======     ======      ======     ======
</TABLE>

<TABLE>
<CAPTION>
                                                                             QUARTERS ENDED
                                        -----------------------------------------------------------------------------------------
                                        JUNE 30,   SEPT. 30,   DEC. 31,   MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MARCH 31,
                                          1999       1999        1999       2000        2000       2000        2000       2001
                                        --------   ---------   --------   ---------   --------   ---------   --------   ---------
<S>                                     <C>        <C>         <C>        <C>         <C>        <C>         <C>        <C>
Gross margin percentage by revenue
  category:
  The Work Number services...........      65.7%      67.5%       68.1%      69.1%       68.8%      66.0%       68.7%      67.3%
  Human resources and benefits
    application services.............      37.5       53.2        49.5       28.4        36.7       31.5        42.4       26.4
  Customer premises systems..........      30.8       16.9        17.7       22.7         8.3       38.6        31.4      (56.8)
  Maintenance and support............      73.3       73.6        71.1       69.7        70.2       69.9        70.2       74.2
</TABLE>

                                        26
<PAGE>   27

<TABLE>
<CAPTION>
                                                                             QUARTERS ENDED
                                        -----------------------------------------------------------------------------------------
                                        JUNE 30,   SEPT. 30,   DEC. 31,   MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MARCH 31,
                                          1999       1999        1999       2000        2000       2000        2000       2001
                                        --------   ---------   --------   ---------   --------   ---------   --------   ---------
<S>                                     <C>        <C>         <C>        <C>         <C>        <C>         <C>        <C>
PERCENTAGE OF TOTAL REVENUES:
Revenues:
  The Work Number services...........      32.1%      32.6%       31.7%      40.3%       43.7%      42.0%       43.1%      57.5%
  Human resources and benefits
    application services.............      14.1       24.8        30.0       18.6        21.8       26.0        32.5       23.3
  Customer premises systems..........      38.4       27.8        26.1       29.0        22.4       21.7        14.4        8.4
  Maintenance and support............      15.4       14.8        12.2       12.1        12.1       10.3        10.0       10.8
                                         ------     ------      ------     ------      ------     ------      ------     ------
    Total revenues...................     100.0      100.0       100.0      100.0       100.0      100.0       100.0      100.0
Cost of revenues.....................      50.5       49.2        50.3       51.8        51.6       48.5        45.1       51.9
                                         ------     ------      ------     ------      ------     ------      ------     ------
Gross margin.........................      49.5       50.8        49.7       48.2        48.4       51.5        54.9       48.1
                                         ------     ------      ------     ------      ------     ------      ------     ------
Operating expenses:
  Selling and marketing..............      23.0       22.4        20.8       20.9        21.7       19.9        20.9       20.8
  General and administrative.........      16.8       15.0        14.4       14.7        14.5       13.9        14.6       11.6
                                         ------     ------      ------     ------      ------     ------      ------     ------
    Total operating expenses.........      39.8       37.4        35.2       35.6        36.2       33.8        35.5       32.4
                                         ------     ------      ------     ------      ------     ------      ------     ------
Operating income.....................       9.7       13.4        14.5       12.6        12.2       17.7        19.4       15.7
                                         ======     ======      ======     ======      ======     ======      ======     ======
Gain from discontinued operations,
  net................................        --         --          --        1.3          --        0.3          --         --
                                         ======     ======      ======     ======      ======     ======      ======     ======
Net earnings.........................       5.9%       8.3%        9.1%       8.5%        7.8%      11.5%       12.3%      10.3%
                                         ======     ======      ======     ======      ======     ======      ======     ======
</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."

Revenues from human resources and benefits application services are seasonally
higher during the second and third quarters of our fiscal year due to the nature
of the services being provided. Our second and third fiscal quarters correspond
to the third and fourth calendar quarters. We believe many of our clients permit
employees to update their benefit choices only annually, in most cases during
the last calendar quarter. We expect revenues generated from our new W-2 eXpress
service will be particularly affected by seasonality, as revenue relating to
this service should principally be earned in our fourth fiscal quarter. Our
revenues have increased on a quarter-by-quarter comparison in fiscal 2001 over
fiscal 2000 due to the addition of new clients seeking to outsource non-core
functions.

LIQUIDITY AND CAPITAL RESOURCES

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

Our working capital was $15.2 million at March 31, 2000 and $16.4 million at
March 31, 2001. Total working capital increased in fiscal 2001 due principally
to our earnings for the year.

Our accounts receivable decreased from $8.0 million at March 31, 2000 to $7.4
million at March 31, 2001. The decrease was due to improved account collections,
offset by increased revenues in the fourth quarter of fiscal 2001 compared to
2000. As a percentage of our total revenues for the fourth quarter of each
fiscal year, accounts receivable at fiscal year-end decreased from 86% at March
31, 2000, to 74% at March 31, 2001 as a result of improved account collections.

Our capital expenditures, principally purchases of computer equipment, were $1.8
million in fiscal 2001. At March 31, 2001, we had no significant capital
spending or purchase commitments other than normal purchase commitments and
commitments under facilities and operating leases, but would expect capital
expenditures to increase slightly during the next fiscal year.

                                        27
<PAGE>   28

In November 1998, our board of directors authorized us to repurchase up to
350,000 shares of our stock in the open market over the following two-year
period. In November 2000, this program expired; thereafter, our board of
directors authorized a new program allowing us to repurchase up to 400,000
shares of our stock in the open market over the following two-year period.
During fiscal 2001, we repurchased 112,500 shares for $1.9 million, consisting
of 102,500 under the 1998 plan and 10,000 under the 2000 plan. Cumulative shares
repurchased amount to 202,587 under the 1998 plan and 10,000 under the 2000
plan. Except for the 3,251 shares remaining in the treasury at March 31, 2001,
all shares repurchased have been reissued in connection with employee stock
option exercises and employee stock purchase plan purchases.

In the second quarter of fiscal 2001, we began paying quarterly dividends on our
common stock, declaring a total of approximately $754,000 in dividends during
each of the last three quarters of fiscal 2001.

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. We have a $5,000,000
line of credit facility with a commercial bank, all of which was available at
March 31, 2001. Outstanding borrowings, if any, bear interest at London
Inter-Bank Overnight Rate plus 2.25% and will be secured by accounts receivable
and inventory. The credit facility expires March 31, 2002.

Subsequent to the end of fiscal year 2001, we filed a registration statement
with the Securities and Exchange Commission relating to the proposed public
offering of 2,740,000 shares of our common stock, including 240,000 shares of
selling shareholders. We also intend to grant an over-allotment option to the
underwriters covering 411,000 shares. We intend to use the proceeds of the
offering for general corporate purposes, which may include potential
acquisitions. The registration statement has not yet become effective, and we
may not sell, nor may we accept offers to buy, the securities prior to the time
the registration statement becomes effective. This document shall not constitute
an offer to sell or the solicitation of an offer to buy nor shall there be any
sale of these securities in any State in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any such State. When available, a written prospectus pertaining to the
offering may be obtained from CIBC World Markets, One World Financial Center,
200 Liberty Street, New York, New York 10281 or from Adams, Harkness & Hill,
Inc., 60 State Street, Boston, Massachusetts 02109. We cannot assure you that
such offering will be completed on favorable terms, if at all.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We maintain a short-term investment portfolio consisting of federal agency debt
obligations. These available for sale securities are subject to interest rate
risk and will fall in value if market interest rates increase. We have the
ability to hold our fixed income investments until maturity, and therefore, we
would not expect our operating results or cash flows to be affected to any
significant degree by the effect of a sudden change in market interest rates on
our securities portfolio.

Our current line of credit facility with a commercial bank provides for
borrowings that bear interest at LIBOR plus 2.25%. We had no borrowings
outstanding under this line of credit at March 31, 2001. We currently believe
that the effect, if any, of changes in interest rates on our financial position,
results of operations and cash flows would not be material.

                                        28
<PAGE>   29

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....................   30

Consolidated Balance Sheets as of March 31, 2000 and
  2001......................................................   31

Consolidated Statements of Operations for the years ended
  March 31, 1999, 2000 and 2001.............................   32

Consolidated Statements of Shareholders' Equity for the
  years ended March 31, 1999, 2000 and 2001.................   33

Consolidated Statements of Cash Flows for the years ended
  March 31, 1999, 2000 and 2001.............................   34

Notes to Consolidated Financial Statements..................   35
</TABLE>

                                        29
<PAGE>   30

                          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, 2000 and 2001, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
years in the three-year period ended March 31, 2001. 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, 2000 and 2001, and the results of their operations
and their cash flows for each of the years in the three-year period ended March
31, 2001, in conformity with accounting principles generally accepted in the
United States of America.

/s/  KPMG LLP

St. Louis, Missouri
April 20, 2001, except for note 16, which is as of June 21, 2001, and for note
17, which is as of June 22, 2001.

                                        30
<PAGE>   31

                       TALX CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
             (IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)

<TABLE>
<CAPTION>
                                                                 MARCH 31,
                                                             ------------------
                                                              2000       2001
                                                             -------    -------
<S>                                                          <C>        <C>
ASSETS
Current assets:
  Cash and cash equivalents................................. $ 3,276    $ 5,167
  Short-term investments....................................   3,015      4,558
  Accounts receivable, net..................................   7,980      7,407
  Inventories...............................................     832        627
  Work in progress, less progress billings..................   2,684      2,905
  Prepaid expenses and other current assets.................   2,404      2,313
  Deferred tax assets, net..................................     624        159
                                                             -------    -------
     Total current assets...................................  20,815     23,136
Property and equipment, net.................................   5,777      5,160
Capitalized software development costs, net of amortization
  of $4,762 in 2000 and $5,620 in 2001......................   3,401      4,007
Other assets................................................     140      1,692
                                                             -------    -------
                                                             $30,133    $33,995
                                                             =======    =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable.......................................... $   803    $   495
  Accrued expenses and other liabilities....................   2,737      4,670
  Dividends payable.........................................      --        282
  Income taxes payable......................................      87         24
  Progress billings in excess of work in progress...........     931        403
  Deferred revenue..........................................   1,099        875
                                                             -------    -------
     Total current liabilities..............................   5,657      6,749
Deferred tax liabilities, net...............................   1,168      1,101
                                                             -------    -------
     Total liabilities......................................   6,825      7,850
                                                             -------    -------
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,
     2000 and 2001..........................................      --         --
  Common stock, $0.01 par value; authorized 30,000,000
     shares, issued and outstanding 5,616,448 shares at
     March 31, 2000 and 9,404,439 shares at March 31,
     2001...................................................      56         94
  Additional paid-in capital................................  23,978     34,288
  Accumulated deficit.......................................    (726)    (8,205)
Accumulated other comprehensive income:
  Unrealized gain on securities classified as available for
     sale, net of tax of $22................................      --         35
  Treasury stock, at cost, no shares at March 31, 2000 and
     3,251 shares at March 31, 2001.........................      --        (67)
                                                             -------    -------
     Total shareholders' equity.............................  23,308     26,145
                                                             -------    -------
                                                             $30,133    $33,995
                                                             =======    =======
</TABLE>

See accompanying notes to consolidated financial statements.

                                        31
<PAGE>   32

                       TALX CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
             (IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)

<TABLE>
<CAPTION>
                                                                        YEARS ENDED MARCH 31,
                                                                --------------------------------------
                                                                   1999          2000          2001
                                                                ----------    ----------    ----------
<S>                                                             <C>           <C>           <C>
Revenues:
  The Work Number services..................................    $    9,109    $   12,328    $   19,094
  Human resources and benefits application services.........         5,126         7,993        10,694
  Customer premises systems.................................        10,948        10,835         6,882
  Maintenance and support...................................         4,920         4,876         4,417
                                                                ----------    ----------    ----------
    Total revenues..........................................        30,103        36,032        41,087
                                                                ----------    ----------    ----------
Cost of revenues:
  The Work Number services..................................         3,138         3,973         6,179
  Human resources and benefits application services.........         3,225         4,460         6,956
  Customer premises systems.................................         7,874         8,388         5,790
  Maintenance and support...................................         1,545         1,367         1,275
                                                                ----------    ----------    ----------
    Total cost of revenues..................................        15,782        18,188        20,200
                                                                ----------    ----------    ----------
    Gross margin............................................        14,321        17,844        20,887
                                                                ----------    ----------    ----------
Operating expenses:
  Selling and marketing.....................................         8,339         7,820         8,542
  General and administrative................................         4,853         5,477         5,609
  Restructuring charge......................................           496            --            --
                                                                ----------    ----------    ----------
    Total operating expenses................................        13,688        13,297        14,151
                                                                ----------    ----------    ----------
    Operating income........................................           633         4,547         6,736
                                                                ----------    ----------    ----------
Other income, net:
  Interest income...........................................            55            85           539
  Interest expense..........................................           (57)           (4)           --
  Other, net................................................            10             1            23
                                                                ----------    ----------    ----------
    Total other income, net.................................             8            82           562
                                                                ----------    ----------    ----------
    Earnings from continuing operations before income tax
      expense...............................................           641         4,629         7,298
Income tax expense..........................................           239         1,862         2,990
                                                                ----------    ----------    ----------
  Earnings from continuing operations.......................           402         2,767         4,308
                                                                ----------    ----------    ----------
Discontinued operations:
  Gain on disposal of discontinued operations, net..........            --           117            37
                                                                ----------    ----------    ----------
  Net earnings..............................................    $      402    $    2,884    $    4,345
                                                                ==========    ==========    ==========
Basic earnings per share:
  Earnings from continuing operations.......................    $     0.05    $     0.30    $     0.46
  Gain on disposal of discontinued operations, net..........            --          0.01          0.01
                                                                ----------    ----------    ----------
    Net earnings............................................    $     0.05    $     0.31    $     0.47
                                                                ==========    ==========    ==========
Diluted earnings per share:
  Earnings from continuing operations.......................    $     0.04    $     0.30    $     0.45
  Gain on disposal of discontinued operations, net..........            --          0.01            --
                                                                ----------    ----------    ----------
    Net earnings............................................    $     0.04    $     0.31    $     0.45
                                                                ==========    ==========    ==========
Weighted average number of common shares outstanding:
  Basic.....................................................     8,912,219     9,173,954     9,323,571
  Diluted...................................................     9,107,067     9,335,059     9,570,156
</TABLE>

See accompanying notes to consolidated financial statements.
                                        32
<PAGE>   33

                       TALX CORPORATION AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                   YEARS ENDED MARCH 31, 1999, 2000, AND 2001
             (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, 1998..........   $53      $23,225       $(3,770)         $--        $    --                       $19,508
Net earnings and total
  comprehensive income.............    --           --           402           --             --       $  402              402
                                                                                                       ======
Repurchase of 41,587 shares of
  common stock.....................    --           --            --           --           (234)                         (234)
Issuance of 40,033 shares of common
  stock and 10,855 shares of
  treasury stock upon exercise of
  stock options....................     1          134           (44)          --             56                           147
Issuance of 31,470 shares of common
  stock and 29,784 shares of
  treasury stock under employee
  stock purchase plan..............    --          120           (20)          --            172                           272
Issuance of 117,482 shares of
  common stock upon exercise of
  warrants.........................     1           (1)           --           --             --                            --
                                      ---      -------       -------          ---        -------                       -------
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.......................    --           --         4,345           --             --       $4,345            4,345
Net unrealized gain on marketable
  equity securities................    --           --            --           35             --           35               35
                                      ---      -------       -------          ---        -------       ------          -------
Total comprehensive income.........                                                                    $4,380
                                                                                                       ======
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       $(8,205)         $35        $   (67)                      $26,145
                                      ===      =======       =======          ===        =======                       =======
</TABLE>

See accompanying notes to consolidated financial statements.

                                        33
<PAGE>   34

                       TALX CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                   YEARS ENDED MARCH 31,
                                                                ---------------------------
                                                                 1999       2000      2001
                                                                -------    ------    ------
<S>                                                             <C>        <C>       <C>
Cash flows from operating activities:
  Net earnings..............................................    $   402    $2,884    $4,345
  Adjustments to reconcile net earnings to net cash provided
     by operating activities:
     Depreciation and amortization..........................      3,071     4,145     4,615
     Discontinued operations, net...........................        298       859        --
     Deferred taxes.........................................        239     1,800       398
     Change in assets and liabilities:
       Accounts receivable..................................        (50)   (1,428)      573
       Inventories..........................................        190       430       205
       Work in progress, less progress billings.............     (1,250)      486      (221)
       Prepaid expenses and other current assets............       (531)   (1,105)       91
       Other assets.........................................        (66)      (68)   (1,552)
       Accounts payable.....................................       (703)     (272)     (308)
       Accrued expenses and other liabilities...............        (21)    1,056     1,933
       Income taxes payable.................................         --        87       (18)
       Progress billings in excess of work in progress......        412       343      (528)
       Deferred revenue.....................................        168       (26)     (224)
                                                                -------    ------    ------
          Net cash provided by operating activities.........      2,159     9,191     9,309
                                                                -------    ------    ------
Cash flows from investing activities:
  Additions to property and equipment.......................     (3,399)   (1,678)   (1,819)
  Capitalized software development costs....................     (1,557)   (1,818)   (2,766)
  Proceeds from maturity of short-term investments..........         --        --     3,000
  Purchases of short-term investments.......................         --    (3,015)   (4,505)
                                                                -------    ------    ------
          Net cash used in investing activities.............     (4,956)   (6,511)   (6,090)
                                                                -------    ------    ------
Cash flows from financing activities:
  Dividends paid............................................         --        --      (472)
  Issuance of common stock..................................        419       810     1,072
  Repurchase of common stock................................       (234)     (481)   (1,928)
                                                                -------    ------    ------
          Net cash provided by (used in) financing
            activities......................................        185       329    (1,328)
                                                                -------    ------    ------
          Net increase (decrease) in cash and cash
            equivalents.....................................     (2,612)    3,009     1,891
Cash and cash equivalents at beginning of year..............      2,879       267     3,276
                                                                -------    ------    ------
Cash and cash equivalents at end of year....................    $   267    $3,276    $5,167
                                                                =======    ======    ======
</TABLE>

See accompanying notes to consolidated financial statements.

                                        34
<PAGE>   35

                       TALX CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            MARCH 31, 2000 AND 2001

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (a) Description of Business

TALX Corporation is the leading provider of automated employment and income
verification services and a leader in providing outsourced employee self-service
applications. We use interactive web and interactive voice response software and
other technologies to enable an organization's employees, managers and other
authorized users to access, input and update payroll, benefits and other
employment-related information. Our services and software 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. Our clients are typically large
organizations, including approximately 150 of the Fortune 500 and 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, 2000 and 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, 2000 and 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.
Amortization of capitalized software development costs starts when the product
is available for general release to clients.

                                        35
<PAGE>   36
                       TALX CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                            MARCH 31, 2000 AND 2001

     (h) Revenue Recognition, Work in Progress and Progress Billings

Revenues from The Work Number are recognized from fees charged to users for
verifications of employment history and income, and from maintenance and
employer conversion fees. We recognize hardware and software license revenue
upon shipment based on vendor-specific objective evidence. Revenues for
customization services 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. Application services revenue is recognized
as the services are provided. Revenue from maintenance contracts is deferred and
recognized ratably over the maintenance period. Deferred maintenance revenue
represents the unearned portion of maintenance fees.

     (i) Concentration of Credit Risk

We sell our services and software in a variety of industries. No client
represented over 10% of revenues in fiscal 1999, 2000 or 2001. 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.

     (j) 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.

     (k) 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.

     (l) 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 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.

     (m) Management's Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles 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.

                                        36
<PAGE>   37
                       TALX CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                            MARCH 31, 2000 AND 2001

     (n) 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.

     (o) Reclassifications

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

(2) RESTRUCTURING CHARGE

During the quarter ended December 31, 1998, we reorganized our sales and
delivery operations and refocused our product line related to our customer
premises systems business. In conjunction with the reorganization, we reduced
our workforce by approximately 8% and closed certain regional sales offices. As
a result of these actions, we incurred restructuring charges of $318,000 related
to employee severance costs and $178,000 of other costs. These items are
reflected in the line item "restructuring charge" on the statement of operations
for the year ended March 31, 1999 and no amounts remain on the balance sheets at
March 31, 2000 and 2001.

(3) 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, 1999, 2000 and 2001 were as follows:

<TABLE>
<CAPTION>
                                                              MARCH 31,
                                                       ------------------------
                                                        1999      2000     2001
                                                       ------    ------    ----
                                                            (IN THOUSANDS)
<S>                                                    <C>       <C>       <C>
Revenues...........................................    $4,075    $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 and 2001 there were no assets or liabilities related to the
database business on the balance sheets.

                                        37
<PAGE>   38
                       TALX CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                            MARCH 31, 2000 AND 2001

(4) ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:

<TABLE>
<CAPTION>
                                                                 MARCH 31,
                                                              ----------------
                                                               2000      2001
                                                              ------    ------
                                                               (IN THOUSANDS)
<S>                                                           <C>       <C>
Accounts receivable.......................................    $8,350    $7,632
Less allowance for doubtful accounts......................       370       225
                                                              ------    ------
                                                              $7,980    $7,407
                                                              ======    ======
</TABLE>

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

(5) PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                  RANGE OF
                                                 ESTIMATED          MARCH 31,
                                                USEFUL LIVES    ------------------
                                                 (IN YEARS)      2000       2001
                                                ------------    -------    -------
                                                                  (IN THOUSANDS)
<S>                                             <C>             <C>        <C>
Computer equipment..........................      3-5           $ 6,510    $ 5,611
Office furniture and equipment..............      5-10            1,339        970
External software...........................      3-5             1,128      1,303
Leasehold improvements......................      3-10            3,206      3,667
                                                                -------    -------
                                                                 12,183     11,551
Less accumulated depreciation and
  amortization..............................                      6,406      6,391
                                                                -------    -------
                                                                $ 5,777    $ 5,160
                                                                =======    =======
</TABLE>

(6) PRODUCT DEVELOPMENT AND CAPITALIZED SOFTWARE DEVELOPMENT COSTS

Product development costs and amortization of capitalized software development
costs for the years ended March 31, 1999, 2000 and 2001 were as follows:

<TABLE>
<CAPTION>
                                                             MARCH 31,
                                                     --------------------------
                                                      1999      2000      2001
                                                     ------    ------    ------
                                                           (IN THOUSANDS)
<S>                                                  <C>       <C>       <C>
Product development costs charged to general and
  administrative expenses........................    $  462    $  369    $  405
                                                     ======    ======    ======
Amortization of capitalized software development
  costs charged to cost of revenues..............    $1,573    $2,239    $2,159
                                                     ======    ======    ======
</TABLE>

                                        38
<PAGE>   39
                       TALX CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                            MARCH 31, 2000 AND 2001

(7) ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities for the years ended March 31, 2000 and
2001 consist of the following:

<TABLE>
<CAPTION>
                                                                 MARCH 31,
                                                              ---------------
                                                               2000     2001
                                                              ------   ------
                                                              (IN THOUSANDS)
<S>                                                           <C>      <C>
Accrued compensation and benefits...........................  $1,864   $2,500
Accrued license costs.......................................      --    1,512
Other.......................................................     873      658
                                                              ------   ------
                                                              $2,737   $4,670
                                                              ======   ======
</TABLE>

(8) FINANCING ARRANGEMENTS

We have a $5,000,000 line of credit facility with a commercial bank. Outstanding
borrowings, if any, will bear interest at LIBOR plus 2.25% and are secured by
accounts receivable and inventory. During fiscal year ended March 31, 2000, the
average outstanding borrowings under this facility were $51,000, with a maximum
balance outstanding of $471,000. During the fiscal year ended March 31, 2001
there were no borrowings against this facility. There were no outstanding
balances at March 31, 2000 and 2001.

(9) LEASES

We have non-cancelable operating leases, primarily for office space and office
equipment, that expire through fiscal 2006 and provide for purchase or renewal
options. Total rent expense for operating leases, including contingent rentals,
was $932,000, $1,063,000 and $1,360,000 in 1999, 2000 and 2001, respectively.

Future minimum lease payments under non-cancelable operating leases as of March
31, 2001 are as follows:

<TABLE>
<CAPTION>
                                                              (IN THOUSANDS)
<S>                                                           <C>
Fiscal Year:
  2002......................................................      $1,390
  2003......................................................         968
  2004......................................................         382
  2005......................................................         251
  2006......................................................          95
                                                                  ------
     Total minimum lease payments...........................      $3,086
                                                                  ======
</TABLE>

                                        39
<PAGE>   40
                       TALX CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                            MARCH 31, 2000 AND 2001

(10) INCOME TAXES

Income tax expense consists of the following:

<TABLE>
<CAPTION>
                                                             MARCH 31,
                                                      ------------------------
                                                      1999     2000      2001
                                                      ----    ------    ------
                                                           (IN THOUSANDS)
<S>                                                   <C>     <C>       <C>
Current:
  Federal.........................................    $ --    $   52    $2,188
  State and local.................................      --        11       404
Deferred:
  Federal.........................................     209     1,510       336
  State and local.................................      30       289        62
                                                      ----    ------    ------
     Income tax expense before discontinued
       operations.................................     239     1,862     2,990
Discontinued operations...........................      --        70        24
                                                      ----    ------    ------
       Total income tax expense...................    $239    $1,932    $3,014
                                                      ====    ======    ======
</TABLE>

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,
                                                      ------------------------
                                                      1999     2000      2001
                                                      ----    ------    ------
                                                           (IN THOUSANDS)
<S>                                                   <C>     <C>       <C>
Computed "expected" tax expense...................    $218    $1,574    $2,481
Increase (decrease) in income taxes resulting
  from:
  State and local income taxes, net of federal
     income tax benefit...........................      20       198       308
  Travel and entertainment........................      28        29        30
  Other, net......................................     (27)       61       171
                                                      ----    ------    ------
                                                      $239    $1,862    $2,990
                                                      ====    ======    ======
</TABLE>

                                        40
<PAGE>   41
                       TALX CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                            MARCH 31, 2000 AND 2001

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at March 31, 2000 and
2001 are presented below:

<TABLE>
<CAPTION>
                                                                 MARCH 31,
                                                              ----------------
                                                               2000      2001
                                                              ------    ------
                                                               (IN THOUSANDS)
<S>                                                           <C>       <C>
Deferred tax assets:
  Allowance for doubtful accounts.........................    $  142    $   87
  Valuation allowance on inventory........................        65        24
  Accrual for compensated absences........................        49        71
  Differences in expense recognition methods..............       139        --
  Differences in depreciation and amortization............       142       442
  Tax credit carryforwards................................       240       176
                                                              ------    ------
     Total deferred tax assets............................       777       800
                                                              ------    ------
Deferred tax liabilities:
  Differences in capitalized software development cost
     methods..............................................     1,310     1,543
  Differences in expense recognition methods..............        11       199
                                                              ------    ------
     Total deferred tax liabilities.......................     1,321     1,742
                                                              ------    ------
     Net deferred tax liabilities.........................    $ (544)   $ (942)
                                                              ======    ======
</TABLE>

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. Our taxable income for
the years ended March 31, 1999, 2000 and 2001 was $624,000, $5,860,000 and
$6,400,000, respectively. 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.

(11) SHAREHOLDERS' EQUITY

TALX has adopted a stock option plan for employees that provides for the
issuance of a maximum of 2,772,000 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 132,000 shares of common stock. Options are granted in
the amount of 1,500 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
29,700 and 39,600 at March 31, 2000 and 2001, respectively.

                                        41
<PAGE>   42
                       TALX CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                            MARCH 31, 2000 AND 2001

Activity under the plans for the three years ended March 31, 2001 is as follows:

<TABLE>
<CAPTION>
                                                                       WEIGHTED
                                                                       AVERAGE
                                                        SHARES      EXERCISE PRICE
                                                       ---------    --------------
<S>                                                    <C>          <C>
Outstanding at March 31, 1998......................      591,461        $2.86
Granted -- 1999....................................      526,350         3.37
Cancelled -- 1999..................................     (121,297)        3.33
Exercised -- 1999..................................      (88,677)        2.13
                                                       ---------
Outstanding at March 31, 1999......................      907,837         3.16
Granted -- 2000....................................      312,180         5.07
Cancelled -- 2000..................................      (58,027)        4.04
Exercised -- 2000..................................     (164,683)        2.70
                                                       ---------
Outstanding at March 31, 2000......................      997,307         3.77
Granted -- 2001....................................      292,094         9.36
Cancelled -- 2001..................................      (51,689)        5.89
Exercised -- 2001..................................     (208,250)        2.82
                                                       ---------
Outstanding at March 31, 2001......................    1,029,462         5.44
                                                       =========
</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 1999, net earnings would be reduced by $235,000 or $0.02 per
share, based on the weighted average fair value of options granted of $3.37 per
option. The effect for fiscal 2000 would be to reduce net earnings by $156,000
or $0.02 per share, based on the weighted average fair value of options granted
of $5.07 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 $9.36 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 1999, 2000 and 2001 is
estimated on the date of the grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions: expected volatility of 65%, 86%
and 62% in fiscal 1999, 2000 and 2001, respectively; risk-free interest rate of
5.00%, 6.00% and 4.91% in fiscal 1999, 2000 and 2001, respectively; expected
life of 4.5, 4.5 and 5.0 years in fiscal 1999, 2000 and 2001, respectively; and
an expected dividend yield of 0.0%, 0.0% and 3.5% in fiscal 1999, 2000 and 2001,
respectively.

                                        42
<PAGE>   43
                       TALX CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                            MARCH 31, 2000 AND 2001

<TABLE>
<CAPTION>
                                   OPTIONS OUTSTANDING                    OPTIONS EXERCISABLE
                      ---------------------------------------------   ---------------------------
                                  WEIGHTED AVERAGE
                                     REMAINING          WEIGHTED                      WEIGHTED
 RANGE OF EXERCISE    NUMBER OF   CONTRACTUAL LIFE      AVERAGE       NUMBER OF       AVERAGE
       PRICE           SHARES         (YEARS)        EXERCISE PRICE    SHARES      EXERCISE PRICE
 -----------------    ---------   ----------------   --------------   ---------    --------------
<C>    <C> <S>        <C>         <C>                <C>              <C>          <C>
$ 2.14 --  4.28         510,935         6.1              $ 3.47        218,209         $3.56
  4.28 --  6.41         207,459         7.8                4.79         39,157          4.78
  6.41 --  8.55          29,700         8.6                6.91          5,940          6.91
  8.55 --  10.69        267,718         9.1                9.12          1,650          8.71
 10.69 --  12.83          9,900         5.0               11.52             --            --
 12.83 --  21.38          3,750         9.9               21.38             --            --
                      ---------                                        -------
                      1,029,462                                        264,956
                      =========                                        =======
</TABLE>

During fiscal 1997, shareholders approved the TALX Corporation 1996 Employee
Stock Purchase Plan (ESPP), which was amended in 1998 and 2000. The ESPP allows
eligible employees the right to purchase 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 825,000 shares of common stock shares reserved for the
ESPP, there were 538,041 shares remaining at March 31, 2001.

(12) 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.

(13) 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, 1999, 2000 and 2001 was $197,000, $219,000 and $305,000,
respectively.

(14) COMMITMENTS AND CONTINGENCIES

From time to time we are involved in certain litigation matters arising in the
normal course of business. In the opinion of management, these matters will not
have a material adverse effect on the accompanying consolidated financial
statements.

(15) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid during the year for interest totaled $57,000, $4,000 and $0 for the
years ended March 31, 1999, 2000 and 2001, respectively. Cash paid during the
year for income taxes totaled $11,000, $13,000 and $2,653,000 for the years
ended March 31, 1999, 2000 and 2001, respectively.

(16) SUBSEQUENT EVENT -- ACQUISITION

As of June 21, 2001, we entered into a merger agreement pursuant to which we
will acquire all of Ti3, Inc.'s (Ti3) outstanding shares of common and preferred
stock for approximately $11,800,000 plus possible additional consideration based
on performance targets tied to results of Ti3's operations for the year
following the closing of the acquisition. Ti3 shareholders will receive our
shares based upon a pre-established formula.

                                        43
<PAGE>   44
                       TALX CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                            MARCH 31, 2000 AND 2001

(17) SUBSEQUENT EVENT -- REGISTRATION STATEMENT

On June 22, 2001, we filed a registration statement with the Securities and
Exchange Commission relating to the proposed public offering of 2,740,000 shares
of our common stock, including 240,000 shares of selling shareholders. We also
intend to grant an over-allotment option to the underwriters covering 411,000
shares. We intend to use the proceeds of the offering, which are estimated to be
approximately $86 million, for general corporate purposes, which may include
potential acquisitions. The registration statement has not yet become effective,
and we may not sell, nor may we accept offers to buy, the securities prior to
the time the registration statement becomes effective.

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

Not Applicable.

                                        44
<PAGE>   45

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Our executive officers and directors and their ages as of June 1, 2001 are as
follows:

<TABLE>
<CAPTION>
                    NAME                         AGE                      POSITION
                    ----                         ---    ---------------------------------------------
<S>                                              <C>    <C>
William W. Canfield..........................    62     Chairman of the Board, President and Chief
                                                        Executive Officer
Craig N. Cohen...............................    42     Vice President -- Application Services and
                                                        Software, and Chief Financial Officer
Michael E. Smith.............................    57     Vice President -- Business Development
Richard F. Ford..............................    64     Director
Craig E. LaBarge.............................    50     Director
Eugene M. Toombs.............................    59     Director
M. Stephen Yoakum............................    48     Director
</TABLE>

Each individual has served in his principal occupation for the last five fiscal
years, unless otherwise indicated.

William W. Canfield has been our President and Chief Executive Officer and a
director since 1987, with his current term scheduled to expire in 2002, and has
been Chairman of the Board of Directors since 1988. Mr. Canfield holds a
Bachelor of Science degree in Electrical Engineering from Purdue University and
an M.B.A. degree from Washington University.

Craig N. Cohen has been our Chief Financial Officer since 1994, Secretary since
1996 and Vice President -- Application Services and Software since 1999.
Previously, Mr. Cohen spent 12 years with KPMG LLP in a variety of positions,
most recently as a Senior Manager in the Audit Department. Mr. Cohen holds a
Bachelor of Science in Accountancy and a Masters of Accountancy from the
University of Missouri -- Columbia.

Michael E. Smith has been our Vice President -- Business Development since 1994.
His primary responsibility is managing our relationships with our strategic
marketing alliances. Previously, from 1989 to 1994, Mr. Smith had product
responsibility for our minicomputer-based interactive voice response system. Mr.
Smith holds a Bachelor of Science degree in Mathematics from Southeast Missouri
State University.

Richard F. Ford has been a director since 1988, with his current term scheduled
to expire in 2002. Mr. Ford is General Partner of Gateway Associates L.P., a
venture capital partnership he formed in 1984. Mr. Ford is a director of
CompuCom Systems, Inc., D&K Healthcare Resources, Inc. and Stifel Financial
Corp. Mr. Ford holds a Bachelor of Arts degree in Economics from Princeton
University.

Craig E. LaBarge joined our board of directors in 1994, with his current term
scheduled to expire in 2001. Mr. LaBarge is Chief Executive Officer and
President and a director of LaBarge, Inc., a publicly-held company, engaged in
the contract engineering and manufacture of sophisticated electronic products.
Mr. LaBarge has held the position of Chief Executive Officer and President since
1991. Mr. LaBarge is a director of Young Innovations, Inc. Mr. LaBarge holds a
Bachelor of Science degree from St. Louis University.

Eugene M. Toombs has been a director since 1994, with his current term scheduled
to expire in 2003. Mr. Toombs is Chairman, President and Chief Executive Officer
and a director of MiTek, Inc., which is a global provider of fastening devices,
software and engineering services to the building components industry. Mr.
Toombs has held the position of Chief Executive Officer since January 1, 1993.
Mr. Toombs holds a Bachelor of Science Degree from Fairleigh Dickinson
University and an Executive Education Degree from Harvard Business School.

M. Stephen Yoakum joined our board of directors in 1991, with his current term
scheduled to expire in 2003. Mr. Yoakum is the Executive Director of The Public
School Retirement System of Missouri, a position he has held since June 1, 2001.
From April 1997 through May 2001, he was the Chief Operating Officer and
managing partner of Rockwood Capital Advisors, L.L.C., a fixed income investment
management firm

                                        45
<PAGE>   46

managing tax exempt assets. From 1994 through March 1997, he was Executive
Director of The Public School Retirement System of Missouri. Mr. Yoakum holds a
Bachelor of Science degree in Public Administration from the University of
Missouri -- Columbia.

The board of directors is divided into three classes, with the terms of office
of each class ending in successive years. At each annual meeting of
shareholders, one class of directors is elected for a term expiring in three
years, or until their respective successors have been elected and qualified.
Officers are generally appointed for one year terms. There are no family
relationships among any of the executive officers and directors.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our directors and executive officers,
persons who beneficially own more than ten percent of a registered class of our
equity securities and certain other persons, to file reports of ownership and
changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange
Commission. Directors, executive officers, greater than 10 percent beneficial
shareholders and such other persons are required by Securities and Exchange
Commission regulation to furnish us with copies of all Forms 3, 4 and 5 they
file.

Based solely on our review of the copies of such forms we have received, or
written representations from certain reporting persons that no Forms 5 were
required for these persons, we believe that all our directors, executive
officers, greater than ten percent beneficial owners and such other persons
complied with all filing requirements applicable to them with respect to
transactions during our fiscal year ended March 31, 2001, except for L. Keith
Graves, our managing director of finance and controller, who filed three forms
relating to 11 transactions late.

ITEM 11. EXECUTIVE COMPENSATION

COMPENSATION SUMMARY

The following table sets forth certain summary information for the fiscal years
ended March 31, 2001, 2000 and 1999 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................  2001   $287,500     $108,750         --             33,000        $38,202
  Chairman, President and Chief      2000    257,000      156,000         --             41,250         40,432
  Executive Officer                  1999    234,038           --         --            165,000         32,151
Craig N. Cohen.....................  2001   $158,750     $ 40,000         --             16,500        $ 3,624
  Vice President -- Application      2000    145,000       72,500         --             24,750          2,933
  Services and Software, Chief       1999    109,419        1,200         --             33,000          2,212
  Financial Officer and Secretary
Michael E. Smith...................  2001   $120,000     $ 25,200         --              6,600        $ 4,151
  Vice President -- Business         2000    113,000       28,476         --              6,600          2,434
  Development                        1999    110,763       10,554         --             16,500          2,426
</TABLE>

---------------
(1) Includes bonuses earned in 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) We have not included in the Summary Compensation Table the value of
    incidental personal perquisites furnished by us to the Named Executives,
    since such value did not exceed the lesser of $50,000 or ten percent of the
    total of annual salary and bonus reported for any of such Named Executives.

                                        46
<PAGE>   47

(3) All amounts have been adjusted to give effect to a ten percent stock
    dividend in October 2000 and a 3-for-2 stock split in January 2001.

(4) Represents contributions made by us on behalf of the Named Executives under
    our 401(k) Plan and $35,304 in 2001 for Mr. Canfield's premiums paid by us
    on his life insurance policies.

STOCK OPTION AWARDS

The following table presents certain information concerning stock options
granted during fiscal 2001 to each of the Named Executives. All amounts have
been adjusted to give effect to a 10% stock dividend in October 2000 and a
3-for-2 stock split in January 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)                              POTENTIAL REALIZABLE
                                  -----------------------------------------                    $ VALUE AT ASSUMED
                                  NUMBER OF      % OF TOTAL                                  ANNUAL RATES OF STOCK
                                    SHARES        OPTIONS                                    PRICE APPRECIATION FOR
                                  UNDERLYING     GRANTED TO                                      OPTION TERM(2)
                                   OPTIONS      EMPLOYEES IN     EXERCISE      EXPIRATION    ----------------------
             NAME                  GRANTED      FISCAL YEAR     PRICE($/SH)       DATE          5%           10%
             ----                 ----------    ------------    -----------    ----------       --           ---
<S>                               <C>           <C>             <C>            <C>           <C>          <C>
William W. Canfield...........      33,000         12.7%           $9.92        5/10/10      $157,431     $444,627
Craig N. Cohen................      16,500          6.4%            9.02        5/10/10        93,598      237,197
Michael E. Smith..............       6,600          2.5%            9.02        5/10/10        37,439       94,879
</TABLE>

---------------
(1) Represents incentive stock options granted pursuant to our 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 2001, 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 a 10% stock dividend in October 2000 and a 3-for-2 stock split in January
2001.

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

<TABLE>
<CAPTION>
                         NUMBER OF                        NUMBER OF SHARES                        VALUE OF UNEXERCISED
                          SHARES                       UNDERLYING UNEXERCISED                     IN-THE-MONEY OPTIONS
                         ACQUIRED     VALUE          OPTIONS AT FISCAL YEAR END                  AT FISCAL YEAR-END(2)
                            ON       REALIZED   -------------------------------------   ----------------------------------------
         NAME            EXERCISE      $(1)     EXERCISABLE   UNEXERCISABLE    TOTAL    EXERCISABLE   UNEXERCISABLE     TOTAL
         ----            ---------   --------   -----------   -------------    -----    -----------   -------------     -----
<S>                      <C>         <C>        <C>           <C>             <C>       <C>           <C>             <C>
William W. Canfield....       --           --     161,700        77,550       239,250   $3,292,031     $1,623,204     $4,915,235
Craig N. Cohen.........   17,325     $284,750      22,714        45,408        68,122      453,350        872,660      1,326,010
Michael E. Smith.......   23,571      145,433      26,117        13,365        39,482      548,464        251,749        800,213
</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 $24.69 per share,
    which was the closing price of the common stock on March 31, 2001.

                                        47
<PAGE>   48

BENEFIT PLANS

1994 Stock Option Plan.  On August 31, 1994, we 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").
Under the 1994 Stock Option Plan, the board of directors may from time to time
grant options to purchase up to 2,772,000 shares (after giving effect to a 10%
stock dividend in October 2000 and a 3-for-2 stock split in January 2001) of
common stock to certain key employees, who will be designated by a committee
selected to administer the Plan; 1,147,609 shares are available for future
grants as of June 1, 2001. 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 us 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, we established the 1996
Employee Stock Purchase Plan which was amended in September 1998 and September
2000 (the "1996 Employee Stock Purchase Plan" or "ESPP"), to provide our
employees 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, 2001. A total of 825,000 shares (after giving effect to
a 10% stock dividend in October 2000 and a 3-for-2 stock split in January 2001)
of common stock were reserved for issuance under the ESPP, and 286,959 shares of
such shares have been issued under the ESPP as of June 1, 2001. The ESPP is
intended to qualify as an employee stock purchase plan within the meaning of
Section 423 of the Internal Revenue Code.

We generally make 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 may not exceed 15% of the compensation such
employee receives during each offering period, but not more than $25,000 in
value of stock per year. Amounts withheld from payroll are applied at the end of
each offering period to purchase shares of common stock. Participants may
withdraw their contributions at any time before stock is purchased, and in the
event of withdrawal such contributions will be returned to the participants
without interest. 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. We will pay all expenses incurred in connection with the
implementation and administration of the ESPP.

In addition, we have established a stock option plan for our outside directors.
See "Director Compensation" below.

DIRECTOR COMPENSATION

We pay each director a $2,000 fee for each Board meeting attended and a $250 fee
for each Committee meeting attended, plus expenses. Our officers do not receive
any additional compensation for serving us 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, each non-employee director receives on
April 1 of each year an option to purchase 1,500 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
                                        48
<PAGE>   49

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 one of our directors,
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 132,000 shares of common stock
have been authorized for issuance under the Outside Directors' Plan (after
giving effect to a 10% stock dividend in October 2000 and a 3-for-2 stock split
in January 2001) and 6,000 options were issued pursuant to the Outside
Directors' Plan on each of April 1, 1999, 2000 and 2001. A total of 45,600
options have been issued as of June 1, 2001, after giving effect to the stock
dividend and stock split. Unless earlier terminated by the Board of Directors,
the Outside Directors' Plan will terminate on July 15, 2006.

EMPLOYMENT AGREEMENTS

In September 1996, we entered into employment agreements with William W.
Canfield (36 months; $315,000 per year), Craig N. Cohen (12 months; $180,000 per
year) and Michael E. Smith (12 months; $132,000 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. Additionally, each employment
agreement will automatically be extended annually for an additional one-year
period unless prior written notice is delivered to the employee or us 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 we terminate the employment agreement without "cause" (as defined in the
agreement, but including, without limitation, breach by the employee of the
employment agreement) or the employee terminates the employment agreement for
"good reason" (as defined in the agreement, but including, without limitation,
breach of the employment agreement by us, the reduction of salary, benefits or
other perquisites provided to employee under the agreement and our failure to
agree to an extension of such employee's employment agreement), we 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, which we
refer to as 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 us 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 us 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 and (b) in the case
of Mr. Smith and Mr. Cohen, each will be entitled to (i) a lump-sum cash payment
equal to 100% of their respective annual base salaries plus, (ii) a lump sum
cash payment equal to their anticipated annual bonus (based on their 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, we have 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.

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
                                        49
<PAGE>   50

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 our 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 our Board of Directors 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 our shareholders of a reorganization, merger, or
consolidation, in each case, with respect to which persons who were our
shareholders 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 our liquidation or
dissolution or the sale of all or substantially all of our assets. The
employment agreements contain an arbitration provision.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mr. Canfield is our Chairman, President and Chief Executive Officer. 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.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth specified information regarding the beneficial
ownership of our common stock as of June 1, 2001, held by:

     - each of our directors who owns common stock;

     - each of our executive officers who owns common stock; and

     - all of our executive officers and directors as a group.

Unless otherwise indicated, each person has sole voting and dispositive power
with respect to such shares. The number of shares of common stock outstanding
for each listed person includes any shares the individual has the right to
acquire within 60 days of June 1, 2001. These shares, however, are not deemed
outstanding for the purposes of computing the percentage ownership of each other
person. Percentage of ownership is based on 9,450,438 shares of common stock
outstanding on June 1, 2001. The table does not reflect the shares to be issued
in connection with the Ti3 acquisition.

<TABLE>
<CAPTION>
                                                               SHARES BENEFICIALLY
                                                                      OWNED
                                                             -----------------------
            EXECUTIVE OFFICERS AND DIRECTORS                  SHARES      PERCENT(1)
            --------------------------------                  ------      ----------
<S>                                                          <C>          <C>
William W. Canfield(2)...................................      987,139       10.3%
Craig N. Cohen(3)........................................       44,710          *
Michael E. Smith(4)......................................       49,130          *
Richard F. Ford(5).......................................       28,050          *
Craig E. LaBarge(6)......................................       12,375          *
Eugene M. Toombs(7)......................................       35,697          *
M. Stephen Yoakum(8).....................................       10,728          *
All executive officers and directors as a group(9).......    1,167,829       12.0%
</TABLE>

---------------
 *  Represents beneficial ownership of less than one percent.

(1) Percentages are determined in accordance with Rule 13d-3 under the
    Securities Exchange Act of 1934, as amended.

(2) Includes 14,850 shares owned by Mr. Canfield's spouse and 161,700 shares
    that Mr. Canfield may acquire upon exercise of options within 60 days after
    June 1, 2001. Mr. Canfield's address is 1850 Borman Court, St. Louis,
    Missouri 63146.

                                        50
<PAGE>   51

(3) Includes 22,714 shares that Mr. Cohen may acquire upon exercise of options
    within 60 days after June 1, 2001.

(4) Includes 22,345 shares that Mr. Smith may acquire upon the exercise of
    options within 60 days after June 1, 2001.

(5) Includes 6,600 shares owned by Mr. Ford's spouse and 9,900 shares that Mr.
    Ford may acquire upon exercise of options within 60 days after June 1, 2001.

(6) Includes 9,900 shares that Mr. LaBarge may acquire upon the exercise of
    options within 60 days after June 1, 2001.

(7) Includes 9,900 shares that Mr. Toombs may acquire upon the exercise of
    options within 60 days after June 1, 2001.

(8) Includes 9,900 shares that Mr. Yoakum may acquire upon the exercise of
    options within 60 days after June 1, 2001.

(9) Includes 250,131 shares that may be acquired upon exercise of options within
    60 days after June 1, 2001.

COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth certain information with respect to each person
known to us to be the beneficial owner of more than 5% of our outstanding common
stock as of June 1, 2001:

<TABLE>
<CAPTION>
                                                                AMOUNT AND NATURE OF      PERCENT
            NAME AND ADDRESS OF BENEFICIAL OWNER                BENEFICIAL OWNERSHIP    OF CLASS(1)
            ------------------------------------                --------------------    -----------
<S>                                                             <C>                     <C>
William W. Canfield(2)......................................          987,139              10.3%
JP Morgan Chase & Co.(3)....................................          544,157               5.8%
</TABLE>

---------------
(1) Percentages are determined in accordance with Rule 13d-3 under the Exchange
    Act.

(2) Includes 14,850 shares owned by Mr. Canfield's spouse and 161,700 shares
    that Mr. Canfield may acquire upon exercise of options within 60 days after
    June 1, 2001. Mr. Canfield's address is 1850 Borman Court, St. Louis,
    Missouri 63146.

(3) Based on Schedule 13G filed with the SEC on February 9, 2001. The address of
    J.P. Morgan Chase & Co., 270 Park Avenue, New York, NY 10071.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Subsequent to the end of fiscal year 2001, we filed a registration statement
with the Securities and Exchange Commission relating to the proposed public
offering of 2,740,000 shares of our common stock, including 200,000 shares by
William W. Canfield, our Chairman, President and Chief Executive Officer, and
40,000 shares by another selling shareholder. Pursuant to registration rights
granted to Mr. Canfield, we will generally pay the expenses of the registration
of his shares, other than underwriting discounts or commissions applicable to
such shares. We also intend to grant an over-allotment option to the
underwriters covering 411,000 shares. The registration statement has not yet
become effective, and we may not sell, nor may we accept offers to buy, the
securities prior to the time the registration statement becomes effective. This
document shall not constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of these securities in any State in which
such offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State. When available, a
written prospectus pertaining to the offering may be obtained from CIBC World
Markets, One World Financial Center, 200 Liberty Street, New York, New York,
10281 or from Adams, Harkness & Hill, Inc., 60 State Street, Boston,
Massachusetts 02109. We cannot assure you that such offering will be completed
on favorable terms, if at all.

                                        51
<PAGE>   52

                                    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

     No reports on Form 8-K were filed by the Registrant during the fiscal
     quarter ended March 31, 2001.

                                        52
<PAGE>   53

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
                                          TALX CORPORATION
                                              /s/ WILLIAM W. CANFIELD
                                          By:
                                          --------------------------------------

                                            Chairman, President and Chief
                                            Executive Officer

Date: June 28, 2001

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

<TABLE>
<S>                                            <C>                                       <C>
/s/ WILLIAM W. CANFIELD                        Chairman, President,                      June 28, 2001
---------------------------------------------  Chief Executive Officer and Director
William W. Canfield                            (Principal Executive Officer)

/s/ RICHARD F. FORD                            Director                                  June 28, 2001
---------------------------------------------
Richard F. Ford

/s/ CRAIG E. LABARGE                           Director                                  June 28, 2001
---------------------------------------------
Craig E. LaBarge

/s/ EUGENE M. TOOMBS                           Director                                  June 28, 2001
---------------------------------------------
Eugene M. Toombs

/s/ M. STEVE YOAKUM                            Director                                  June 28, 2001
---------------------------------------------
M. Steve Yoakum

/s/ CRAIG N. COHEN                             Vice President -- Application Services    June 28, 2001
---------------------------------------------  and Software, Chief Financial Officer
Craig N. Cohen                                 and Secretary (Principal Financial
                                               Officer)

/s/ L. KEITH GRAVES                            Managing Director of Finance and          June 28, 2001
---------------------------------------------  Controller (Principal Accounting
L. Keith Graves                                Officer)
</TABLE>

                                        53
<PAGE>   54

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
<C>      <S>
 2.1     Agreement and Plan of Merger, dated as of June 21, 2001, by
         and among TALX Corporation, TALXSUBI, Inc. Ti3, Inc. and the
         shareholders of Ti3, Inc.+
 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)
 3.3     Bylaws of TALX Corporation, incorporated by reference to
         Exhibit 3.3 to our Registration Statement on Form S-1 (File
         No. 333-10969)
 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     Intentionally omitted
10.2     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)++
10.3     TALX Corporation Amended and Restated 1994 Stock Option
         Plan++
10.4     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)++
10.6     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)++
10.7     Form of Director Stock Option Agreement, incorporated by
         reference to Exhibit 10.7 to our Annual Report on Form 10-K
         for the year ended March 31, 1998 (File No. 000-21465)++
10.10    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)
10.11    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)
10.12    Intentionally omitted
10.13    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)
10.14    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)
10.15    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)
</TABLE>

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<PAGE>   55

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
<C>      <S>
10.19    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)
10.21    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)++
10.23    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)++
10.24    Employment Agreement between TALX Corporation and Mr. Cohen,
         incorporated by reference to Exhibit 10.24 to Amendment No.
         2 to our Registration Statement on Form S-1 (File No.
         333-10969)++
10.25    Southwest Bank Line of Credit Note
10.26    License Agreement by and between A2D, L.P. and TALX
         Corporation, dated as of April 1, 2001*
11.1     Statement regarding computation of Per Share Earnings
23.1     Consent of KPMG LLP
</TABLE>

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

+  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.

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